Sumitomo Realty & Development Co., Ltd.
Integrated Report 2020

Shinjuku NS Building, 4-1, Nishi-Shinjuku 2-chome,
Shinjuku-ku, Tokyo 163-0820, Japan
http://www.sumitomo-rd.co.jp/english/

Integrated Report

2020

Printed in Japan

005_0316087912010.indd

1-3

2020/10/23

1:46:12

Continue creating
new valuewith "Integrity and Innovation"
Placing top priority on Integrity, we will go beyond

simple development and relentlessly

pursue value creation through our innovative andchallenging spirit.

Contents
2 Sustainable Growth as Tokyo’s No.1 Office Owner

History of Corporate Value Creation by "Land Innovation"
		

4
8
14
16

Our Strengths
A Message from the Management
At a Glance
Business activities to support value creation

		
16
		
20
		
22
		
24
		
25

LEASINGSALESCONSTRUCTIONBROKERAGEGROUP COMPANIES26 Sustainability
		
26

		
28
		
30
		
32
		
34
		
36
		
38
		
40
		
42
		
44
		
45

Addressing Social Issues through Business Activities
Feature The Reborn Project of Shinjuku Sumitomo Building and “Sankaku Hiroba”
Highlight 1 Sustainable Urban Redevelopment—Osaki Garden City—
Highlight 2 Remodeling—Shinchiku Sokkurisan
For Disaster-Resistant Community Development
For Environmentally Friendly Community Development
Urban Development that Contributes to the Community
Human Rights and Diversity
Health and Safety
Together with the Stakeholders
COVID-19 Prevention Measures

46 Corporate Governance
		
46
		
48
		
50
		
51
		
52

Board of Directors and Statutory Auditors
Matters concerning Corporate Governance
Other Information concerning GovernanceRisk Management
Business Risks

54		 Financial Section
		54
		56
		58
		60
		61
		62
		63
		83

Eleven-year Financial Summary
Management’s Discussion and Analysis
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Independent Auditor’s Report86		 Company Information
		86

Corporate Data/Investor Information

		87

History

Sumitomo’s Business Philosophy

Fundamental Mission

Editorial Policy

The Sumitomo Realty Group, as the heir of Sumitomo Honsha, Ltd., has“Create even better social assets for the next generation.”disclosure framework of the International Integrated Reporting Council (IIRC).

developed into a comprehensive real estate enterprise of the Sumitomo

We have set forth our fundamental mission as to “create evenGroup with a history of 400 years. The business philosophy—“Placing prime

better social assets for the next generation” through ourimportance on integrity and sound management in the conduct of its

businesses closely associated with people’s daily lives. Based on

business” and “Under no circumstances, shall it pursue easy gains”—which

this fundamental stance, the Sumitomo Realty Group ishave been handed down as a guiding principle throughout the Sumitomo’s

engaging in business with the aim of creating cities and urban

history, live on in the form of our corporate slogan, “Integrity andspaces that are resilient to disasters, friendly to people and theInnovation.”environment, and harmonious with history and culture.

This report was compiled based on this focus with consideration paid to the

Cautionary Statement with Respect to Forward-looking Statements
Statements made in this annual report with respect to plans, targets andfuture performance that are not historical fact are forward-looking
statements. These statements are based on management’s assumptions andbeliefs in light of the information currently available. Sumitomo Realty &Development Co., Ltd. cautions that a number of factors could cause actual
results to differ materially from those discussed in the forward-looking
statements. Such factors include but are not limited to macroeconomic
conditions, supply and demand in the real estate market and interest rate
trends.
Published: October 2020

A

Photo by Sumitomo
Historical
Archives
Photographby Sumitomo
Historical
Archives

Integrated Report 2020

Sumitomo Realty & Development Co., Ltd.

1

Sustainable Growth as Tokyo’s No.1 Office Owner

Gross Floor
Area(1,000m2)

Ordinary
Profit(Billions of yen)

5,000

250

4,000

200

3,000

150

2,000

100

1,000

50

0

0

History of Corporate Value Creation by "Land Innovation"
The real estate leasing business primarily involving office buildings in central Tokyo has been the driving force of our growth to date.
Accounting for nearly 70% of the Company’s operating income overall, the leasing business is clearly the main pillar of the Company’s
operations and the core of its corporate value.
We have been expanding our business platform by promoting development of office buildings with a specific focus on central Tokyo
over roughly half a century since the early 1970s. Despite various changes in the business environment, we have consistently persisted withrespect to unwaveringly adhering to the management policies based on a long-term perspective, such that, (i) the Company will not pursue
temporary gains by selling assets; (ii) the Company will hold ownerships of buildings constructed on sites it has developed; and (iii) the
Company will generate stable leasing income over the long term by owning and leasing such buildings.
As a result, we have grown to become Tokyo’s No. 1 office building owner with more than 230 buildings for lease in central Tokyo.
Acquisition of development sites is the most important aspect of the office building leasing business. We have been redeveloping sites, inother words innovating land, through purchasing and assembling land by coordinating rights and interests of landowners. These capabilitiesof "Land Innovation" constitute our greatest strength and are the source of corporate value creation.
Capitalizing on the capabilities of "Land Innovation" as well as the management foundation and other strengths we have cultivatedso far, we intend to further expand our earnings base and increase corporate value.

1998
Shibuya Infoss Tower

1974
Shinjuku Sumitomo
Building

2002
Izumi Garden Tower

2004
Shiodome Sumitomo
Building

2015
Tokyo Nihombashi Tower

2016
Sumitomo Fudosan
Roppongi Grand Tower

2018
Sumitomo Fudosan
Osaki Garden Tower

2011
Sumitomo Fudosan
Shinjuku Grand Tower

Ordinary Profit /Gross Floor Area
■ Ordinary Profit ● Gross Floor Area
Non-consolidated figures(Years ended / ending March 31)

8th Plan1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Listed on the Tokyo Stock Exchange and Osaka Securities Exchange.

Major Building Development Projects

1998
Chiyoda First Building
East

2

Integrated Report 2020

2000
Sumitomo Fudosan
Iidabashi First Building

2000
Sumitomo Fudosan
Shibakoen First Building

2003
Shinjuku Oak Tower

2004
Chiyoda First
Building West

2005
Tokyo Shiodome
Building

2006
2009
2010
Sumitomo Fudosan Sumitomo Fudosan Shinjuku Central Park City
Mita Twin Building Aobadai Tower
West

2010
Sumitomo Fudosan
Iidabashi First Tower

2012
Sumitomo Fudosan
Shibuya Garden Tower

2016
Sumitomo Fudosan
Shinjuku Garden Tower

2019
Sumitomo Fudosan
Shinjuku Central Park
Tower

Sumitomo Realty & Development Co., Ltd.

3

Our Strengths
Capabilities of "Land Innovation"
Unlike our competitors, we did not own real property in Tokyo when we started our business, and we had to purchase landfor developing buildings. Therefore, instead of reconstructing buildings we owned or purchasing sites through competitive
bidding and constructing new buildings, which tends to be expensive, we focused on redevelopment by integrating multiple
small parcels of land into a larger scale through persistent, long-term efforts to maximize the site value. In this way, we
continued to develop superior assets and enhance our corporate value.
The capabilities of "Land Innovation" that we cultivated through engagement in redevelopment over many years
are our greatest strength. They are also the driving force enabling us to undertake many large development projects incentral Tokyo, an area where it is difficult to acquire excellent large sites.
We have an industry-leading track record in urban redevelopment in central Tokyo, including Roppongi,
Nishishinjuku, and Iidabashi, pursuant to the Urban Renewal Act, which involves achieving an agreement with many
landowners and consultation with the authorities. Through redevelopment, we are improving central Tokyo’s infrastructure,including enhancement of disaster prevention, such as eliminating densely built-up areas of wooden houses and widening
narrow streets, and are contributing significantly to vitalization of communities. As a result, our projects enjoy benefits ofderegulation, such as increased floor-area ratios, which contributes to greater profitability.

Urban Redevelopment
under the Urban Renewal Act of Japan

After

Completion

March 2000

April 2010

Gross floor area

63,000 m2

78,400 m2

Office, residence, retail

Office, residence, retail, multipurpose hall

Through the conversion of the rights of the rights holders,

Building

X

Buildings

E
B

C

B

C
A

A
E

D

D
B

D

C

Example 2

A B C D X
Land

X: Developer

Major Flagship Buildings Mainly Comprising Redevelopment Projects

Izumi Garden Tower
Sumitomo Fudosan Roppongi Grand Tower
Sumitomo Fudosan Osaki Garden Tower
Shinjuku Sumitomo Building
Sumitomo Fudosan Shinjuku Grand Tower
Sumitomo Fudosan Shinjuku Garden Tower
Shinjuku Central Park City
Shinjuku Oak City
Tokyo Nihombashi Tower
Shiodome Sumitomo Building
Sumitomo Fudosan Mita Twin Building WestTokyo Shiodome Building
Shinjuku NS Building
Sumitomo Fudosan Iidabashi First Tower
Sumitomo Fudosan Shibakoen First Building
Chiyoda First Building West
Sumitomo Fudosan Shinjuku Central Park Tower
Sumitomo Fudosan Shibuya Garden Tower
Sumitomo Fudosan Aobadai Tower
Sumitomo Fudosan Iidabashi First Building
Redevelopment projects * Tokyo CBD(Central Business District)

4

Integrated Report 2020

Refer to page 38.

After redevelopment

ABCD: Rights holders
E: TenantsName

Izumi Garden(two major redevelopment buildings, Izumi Garden Tower and Sumitomo Fudosan Roppongi Grand Tower)

Before redevelopment

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.

(two major redevelopment buildings, Sumitomo Fudosan Iidabashi First Building and Sumitomo Fudosan Iidabashi First Tower)

Sumitomo Fudosan
Iidabashi First Tower

Purposes

Land

Iidabashi Redevelopment Project

Sumitomo Fudosan
Iidabashi First Building

Equal value exchangesites can be acquired with equal value exchanges.

BeforeExample 1

Location (Tokyo CBD*)
Minato Ward
Minato Ward
Shinagawa Ward
Shinjuku Ward
Shinjuku Ward
Shinjuku Ward
Shinjuku Ward
Shinjuku Ward
Chuo Ward
Minato Ward
Minato Ward
Minato Ward
Shinjuku Ward
Bunkyo Ward
Minato Ward
Chiyoda Ward
Shinjuku Ward
Shibuya Ward
Meguro Ward
Bunkyo Ward

As of March 31, 2020

No. of floors(above ground/
below ground)

Completion

Gross floorarea (m2)

43/4
43/2
24/2
52/4
40/3
37/2
44/2
38/2
35/4
25/3
43/2
37/4
30/3
34/3
35/2
32/2
33/2
24/3
33/3
14/2

Oct 2002
Oct 2016
Jan 2018
Mar 1974
Dec 2011
Mar 2016
Feb 2010
Jan 2003
Apr 2015
Jul 2004
Sep 2006
Jan 2005
Sep 1982
Apr 2010
Jun 2000
Jan 2004
Aug 2019
Jun 2012
Aug 2009
Mar 2000

204,536
202,630
201,925
177,467
168,407
143,372
130,741
117,606
105,837
99,91398,33895,12875,046
68,682
63,822
61,27460,09359,41755,77353,587

Izumi Garden Tower

Sumitomo Fudosan
Roppongi Grand Tower

Completion

October 2002

October 2016

Gross floor area

208,400 m2

210,500 m2

Office, residence, hotel,
retail, museum, multipurpose
hall, conference room

Office, residence, retailPurposes

Note: Figures for gross floor area indicate the area managed by Sumitomo Realty.

Sumitomo Realty & Development Co., Ltd.

5

Our Strengths

Leasing Portfolio that Meets Diverse Needs

Our Portfolio’s Strengths (As of March 31, 2020)
Sumitomo Realty's leasing portfolio is highly competitive in terms ofthe three distinct features of being "central, newest and large" thatmeet diverse tenants' needs. Going forward, we will endeavor tomaintain and enhance our competitive strengths by focusing on
providing high-quality office buildings with these qualities.

Tokyo’s No.1 office building owner, managing more than
230 buildings in central Tokyo’s major office districts

Tokyo
CBD

CentralDiversified throughout major business areas
Our leasing portfolio emphasizes on locations in central Tokyo; 95% of our portfolio is inTokyo’s 23 wards, and 83% is in the Tokyo CBD (Central Business District)*. Proximity toother office buildings and major train and subway stations is a key condition for a prime
property, and having been located in such areas is one of our portfolio’s competitive
strengths. In particular, the Tokyo CBD is designed as a district with a high concentrationof office buildings, and strong and stable demand is expected in this district going
forward. Therefore, we will work to enhance our competitive strengths by continuing toacquire development sites in this district.

Ikebukuro

Ueno

Takadanobaba

NakanoTokyo CBD*

23 Wards

83%

95%* Tokyo CBD (Central Business District): 7 wards, comprising Chiyoda, Minato, Chuo, Shinjuku, Shibuya, Shinagawa and Bunkyo

Iidabashi
Shinjuku
Kojimachi

Akihabara

NewestNihombashi

Buildings with Excellent BCP Compliance
The average age of the buildings in our portfolio is 16 years, the lowest figure amongmajor Japanese real estate companies. New buildings are capable of generating strong
demand by meeting tenants’ needs for facilities and design to name a few, making therelative age of the buildings in a portfolio a key factor affecting the leasing business.
As shown in the table below, our buildings are equipped with the latest facilities andfeatures, and are popular among tenants for their functionality, comfort and safety in theevent of a major disaster. 99% of our portfolio meets or exceeds earthquake-resistancestandards that took effect in 1981, which are a key yardstick for earthquake safety.
Further, approximately 80% of the buildings we own are structured with a seismic
isolation system and/or a damping system. In recent years, emergency generators thatprovide electricity in the event of a power outage have also become a feature sought bytenants as a part of their business continuity planning (BCP). Thus, emergency generators
are installed in about 70% of the buildings we own, which include all newly completedbuildings after 2001.

Tokyo Station

ShibuyaRoppongi

New Quake-resistant*1 Structure

Shiodome

Mita

99%
Seismic Isolation
and/or Damping System
Construction

Emergency
Power
Generators

80%

70%

*2

*2

*1 New standards that took effect in 1981 *2 Approx.

Tokyo CBD*

83%

Minato28%
Shinjuku 20%
Chiyoda 11%
Chuo
8%
Shibuya7%
Shinagawa 7%
Bunkyo3%
Other wards
in Tokyo 11%
Others5%Integrated Report 2020

1981 and earlier

1982–1996

1997 and after

Previous quake-resistant structure

New quake-resistant structure

Anti-sway structure

Ceiling height*
Floor load

Shinagawa
Station
Percentage

Major flagshipbuildings

Large-scalebuildings

Otherbuildings

Osaki* Tokyo CBD (Central Business District): 7 wards, comprising Chiyoda,
Minato, Chuo, Shinjuku, Shibuya, Shinagawa and Bunkyo

6

State-of-the-art Facilities
Earthquake protection

Buildings
developmentin progress* Only office buildings ownedby the Company are shownon this map.

Air-conditioning

2.5 m

2.7 m

2.9–3.3 m

300 kg/m2

300–500 kg/m2

500–1,000 kg/m2

Central air-conditioning system

Climate control zones

Separate climate control systems* Includes raised floors

Large
Large-scale Buildings with large amounts of floor space per floor
Large-scale buildings with gross floor area of at least 10,000 square meters make up
88% of our portfolio. Consolidating multiple offices of a business on one floor helps tofacilitate internal communication and reduce space redundancies, making operations
more efficient. These types of needs are behind the increased demand in recent years forlarge-scale buildings with large amounts of floor space per floor. Being able to offer such
spaces is definitely one of our strengths.

Over 10,000 m2(gross floor area)

88%

Sumitomo Realty & Development Co., Ltd.

7

A Message from the Management
Business Results for the Fiscal Year
Results for the fiscal year ended March 31, 2020 are as shown in the tablebelow. Although the hotels and multipurpose halls businesses were directly
affected by the unexpected spread of coronavirus disease (COVID-19) toward
the end of the fiscal year, the mainstay office building leasing business, which
accounts for two-thirds of operating income, was buoyed by a tight market,
with office building vacancy rates remaining in the 1% range in Tokyo. With
results steadily exceeding targets, supported by higher rent for existingbuildings and contribution of the full-year operation of buildings completed
in the previous year, ordinary profit reached ¥220 billion and profit amounted
to ¥140 billion, both in line with the initial targets. We were thus able toachieve record-high results for the seventh consecutive year.

We have been operating under the Eighth Management Plan, launchedin April 2019. In the fiscal year ended March 31, 2020, the initial year of theplan, we were able to achieve record-high results for the seventh consecutive
year, as stated above. As a result, as shown in the table below, revenue fromoperations, operating income and ordinary profit all reached about one-thirdof their respective cumulative target levels set for the three-year period of the
management plan, appearing to place us on a path to once again renew therecord highs for the said period. However, the spread of COVID-19 hastriggered stagnancy in the current economic activity, making the outlook very
uncertain.

Results for the Fiscal Year Ended March 31, 2020Three-year cumulative earnings targets

Revenue from operations
Operating income
Ordinary profit
Profit

FY ’18 Results
1,012.2
219.4
203.2
130.1

FY ’19 Results
1,013.5
234.3
220.5
141.0

(Billions of yen)

YoY change
+1.3
+14.9
+17.3
+10.9

(Billions of yen)Three-year cumulative
earnings targets*

Revenue from operations
Operating income
Ordinary profit(Apr 2019 – Mar 2022)

FY ’19Results

Progress

3,100.0
740.0
700.0

1,013.5
234.3
220.5

33%
32%
32%

* Announced on May 16, 2019

Outlook for the Next Fiscal YearIn May 2020, we announced our business forecasts for the fiscal year
ending March 31, 2021. In incorporating potential impact of COVID-19
on our earnings in these figures, we assumed that economic activity
would gradually go back onto a recovery path starting from the second
quarter but would not return to the previous year’s level by the end of
the fiscal year.

Forecast for the Fiscal Year Ending March 31, 2021
Performance targets

Positioning redevelopment andleasing of office buildings in central
Tokyo as growth drivers, we willcontinue creating new value.
Kojun Nishima
President
8

Integrated Report 2020

Revenue from operations
Operating income
Ordinary profit
Profit

FY ’19 Results
1,013.5
234.3
220.5
141.0

(Billions of yen)

FY ’20 Forecast* YoY change
880.0(133.5)204.0(30.3)
190.0(30.5)
130.0(11.0)

Specifically, we expect both revenue and profit to continue
increasing for the core office building business as the market remains
tight currently and we have long-term contracts with tenants. We also
expect the condominium sales business, our second mainstay, to achieve
forecast levels for the next fiscal year, as sale contracts for 80% of theunits for which we expect to book sales in the year were already signed
at the beginning of the fiscal year. On the other hand, we incorporated a
total negative impact of about ¥30 billion on profit in the forecasts forthe hotels and multipurpose halls businesses, which were affected bysignificant restrictions on people’s movement and gathering, and theShinchiku Sokkurisan remodeling, custom-home construction andbrokerage businesses, which suffered from restrictions on customerattracting events and face-to-face marketing activities. As we expect thebuilding and condominium businesses to remain solid, we intend toachieve at least ¥190 billion in ordinary profit by all means.

* Announced on May 14, 2020

Policy for Shareholder Returns
Our dividend policy is to prioritize allocations to investment in buildings
for lease with an aim to strengthen the earnings base over a long term,
and based on the mottoes of “stable dividends and dividend increases
reflecting sustainable growth” and “no decrease in dividends even if
profit decreases.” This remains unchanged.
As shown in the graph, we maintained dividends of ¥20 per shareeven when our profit decreased temporarily amid the Global Financial
Crisis.
For the next fiscal year, we forecast profit to decrease, if temporarily,
as it is difficult to estimate the impact of COVID-19. But we plan tomaintain ¥19 per share each for interim and year-end dividends, for a
total annual dividend of ¥38 per share, up ¥3 over the previous year.
Depending on how business may recover from the COVID-19 impact, wehope to consider a ¥5 increase in annual dividends, as we did in theprevious year.

Cash Dividends ■ Ordinary Profit ● Cash Dividends (right scale)Billions of yen
400

Yen

38 40
35
30

300

20

200

14
100

0

9
6

10

18

21 22

24

27

30

20

10

0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
(Forecast)(Years ended/ending March 31)

Sumitomo Realty & Development Co., Ltd.

9

A Message from the Management

Continued Promotion of Investment in Leasing Office Assets
Our mainstay is the office building business in central Tokyo. Tokyo is notjust a place for work but an attractive city rich in culture, food, wellness,
to name a few. That is why the number of office workers is growing
there. In Tokyo, there is a stock of 28 million tsubo (one tsubo is roughly
3.3m2) in office floor area, but most buildings are old and do not havesufficient specifications, thus more new buildings are needed with highspecifications such as high-level earthquakes resistance and emergency
power supply features, as the buildings we have developed. The spreadof COVID-19 has caused office usage and work styles to diversify, asbusinesses introduce telecommuting and satellite offices to distributerisks. As our strength is in the diversity of our portfolio, which includes
230 buildings in varied locations and sizes, we see opportunities in thecurrent situation, assuming we will make the right proposals.
Therefore, although we are by no means overly optimistic, and willdefinitely remain cautious about the ongoing impact of COVID-19, we
will continue investment in leasing office assets in central Tokyo of over
800 thousand tsubo in gross floor area, equivalent to over 50% of thegross floor area for leasing currently available, as projected in the EighthManagement Plan aiming to strengthen the earnings base to securesustainable growth in the future.

Pace of Gross Floor Area Development from the Eighth Management Plan (announced on May 16, 2019)*1 tsubo ≈ 3.3 m2

Thousands of tsubo
3,000(Thousands of tsubo)

2,500

Gross
Floor
Area

5th Plan

6th Plan

7th Plan

8th Plan

+150

+110

+210

+230

More than+800

thousands of tsubo

+230

2,000

1,524

thousandsof tsubo

thousandsof tsubo

1,500

Consolidated Operating Income and Gross Floor Area
Billions of yen
250

Thousands of tsubo*1
2,500

1,000

234
219

Gross Floor Area
operated in Leasing Business(right scale)

200

500

2,000

Global Financial Crisis(Rehman Crisis)

0

2001

2004

2007

2010

2013

2016

2019

155
150

1,500

Burst of Japan’s
bubble economy
100

1,000
77

0

500

Operating Income from
Leasing Business1978 1980
1985(Years ended March 31)

1990

1995

2000

2005

2010

2015

*1 1 tsubo ≈ 3.3 m2*2 Segment information has been disclosed since the March 1991 fiscal year
* The Company changed its accounting policy (revenue recognition standards of Sumitomo Real Estate Sales) from the beginning of the fiscal year ended March 31, 2020.
The figures provided for the fiscal year ended March 31, 2019 are those after retroactive application.

2025 –

2020

0

Tokyo Mita Redevelopment Project
Expected Completion: Jan 2023

Principal New Office Building Projects
Location

Gross Floor Area
(Tsubo*)Expected
Completion

Sumitomo Fudosan Shinjuku Central Park Tower

Shinjuku Ward

18,200Aug 2019

Sumitomo Fudosan Akihabara Ekimae Building

Chiyoda Ward

7,800

Aug 2019

Sumitomo Fudosan Ikebukuro Higashi Building

Toshima Ward

5,000

Sep 2019

Sumitomo Fudosan Akihabara First Building

Chiyoda Ward

8,200

Oct 2019

Haneda Airport Garden (Commercial Complex)

Ota Ward

27,700Mar 2020

Ariake Garden (Commercial Complex)

Koto Ward

60,100Mar 2020

Sumitomo Fudosan Kojimachi Garden Tower

Chiyoda Ward

14,500

May 2020

Sumitomo Fudosan Ochanomizu Building

Bunkyo Ward

3,800

Jan 2021

Sumitomo Fudosan Tamachi Building East

Minato Ward

3,900

Apr 2021

Sumitomo Fudosan Kanda Izumicho Building

Chiyoda Ward

3,000

Aug 2021

Osaki Higashi Project

Shinagawa Ward

14,400Jan 2022

Project Name

50

2022

(Years ended/ending March 31)

Others45,100

8th Plan Total

211,700

Tokyo Mita Redevelopment Project (Mita 3- and 4-chome Project)

Minato Ward

60,400Jan 2023

Nishi-shinjuku 5-chome Kita Project

Shinjuku Ward

41,300Mar 2023

Nakano 2-chome Project

Nakano Ward

30,000Feb 2024* 1 Tsubo ≈ 3.3m

2

10Integrated Report 2020

Sumitomo Realty & Development Co., Ltd.

11

A Message from the Management

Major New Building Development Projects

Sumitomo Fudosan Shinjuku Central Park Tower
Completion: Aug 2019

Sumitomo Fudosan Kojimachi Garden Tower
Completion: May 2020

Haneda Airport Garden
Completion: Mar 2020

12

Integrated Report 2020

Sumitomo Fudosan Akihabara Ekimae Building
Completion: Aug 2019

Nishi-shinjuku 5-Chome Kita Project
Expected Completion: Mar 2023

Ariake Garden
Completion: Mar 2020

Addressing Social Issues through Business Activities

Sumitomo Fudosan
Ikebukuro Higashi Building
Completion: Sep 2019

Sumitomo Fudosan Akihabara First Building
Completion: Oct 2019

We have been working to contribute to solving social issues through ourbusiness activities under our fundamental mission of “create even bettersocial assets for the next generation.”
The themes we have tackled in this endeavor are diverse, including“disaster prevention,” one of the major social issues for the Japanesesociety, “environmental protection,” such as climate-change
countermeasures and waste reduction, and “vitalization ofcommunities” in city development efforts.
In our mainstay office and home redevelopment business, we havehelped improve regional disaster prevention significantly by turning
wooden houses in areas overcrowded with them into sturdy, fireproof
structures and working with local governments to make such areas into
disaster-prevention bases. In the Shinchiku Sokkurisan remodelingbusiness, we have actively worked to promote safe and secure homes
since its launch in 1996, by including earthquake-reinforcement work as
a standard specification of the remodeling service, at the same time
significantly reducing the amount of waste compared to rebuildinghome.
In June 2020, a large-scale renovation project of the Shinjuku
Sumitomo Building, one of the early skyscrapers in Japan, wascompleted, creating the “Sankaku Hiroba” (triangular plaza) all-weather
atrium. The facility not just adds to the vibrancy of the Shinjuku district,a major center of business, commerce and culture, but contributes to theregion as a disaster-prevention base, providing shelter for people unable
to return home when a disaster hits. We expect this project to become amodel for efforts to work with local communities to realize sustainableurban development.
In recent years, companies have come to be evaluated from a longterm viewpoint, hence the increased awareness for SDGs and ESG. The
Sumitomo Realty Group, which carries on the business philosophy of the“Sumitomo” brand whose history goes back 400 years, has been
growing under a slogan of “Integrity and Innovation.” We have strived,
and will continue to strive, to further increase corporate value by actively
committing to “addressing social issues through business activities.”
We would like to thank our stakeholders, including customers andbusiness partners, for their continued support and understanding.

Nakano 2-chome Project
Expected Completion: Feb 2024

The Sumitomo Realty Group will redouble our efforts to reach the targets set out in the Eighth Management Plan and continue moving forward toachieve sustainable growth. We would like to express our gratitude to our shareholders, investors and all our stakeholders, and ask for their continuous,
long-term support.
June, 2020

Sumitomo Realty & Development Co., Ltd.

13

At a Glance
LEASING Refer to page 16.
Office building, condominium and otherproperty leasing and management andrelated activities

Sumitomo Fudosan Villa Fontaine Co., Ltd.
Sumitomo Fudosan Bellesalle Co., Ltd.

Refer to page 20.

Leased property
management
consignment

Outsourced management
consignment(after sale)

SALES

Mid- and high-rise condominium, detachedhouse and housing lot development andsales and related activities

Significantly Driving Growth with the Leasing Business■ LEASING ■ SALES ■ CONSTRUCTION ■ BROKERAGE ■ OTHERS

1%

Sumitomo Fudosan Tatemono Service Co., Ltd.
Refer to page 22.

Sumitomo Realty &Development Co., Ltd.

7%

CONSTRUCTION

7%

39%

Custom home construction and remodeling and related
activities

66%

Sumitomo Fudosan Syscon Co., Ltd.
Refer to page 24.

OTHERS Refer to page 25.

BROKERAGE

21%

8%

Brokerage and sales on consignment of real estate and related
activities by Sumitomo Real Estate Sales Co., Ltd.

Sumitomo Fudosan Esforta Co., Ltd.
Izumi Restaurant Co., Ltd.

1%

Revenue fromOperations

Sumitomo Real Estate Sales Co., Ltd.

Operating
IncomeBusiness Portfolio
CapitalLEASING
High level of capital,
low level ofhuman capital

32%

SALES
CONSTRUCTION

Relatively high level ofcapital, relatively highlevel of human capital

Relatively low level ofcapital, relatively highlevel of human capital

BROKERAGE
Low level of capital,
high level ofhuman capital

Operating Income (Years ended March 31)
Human Capital

LEASING Unique Features and Competitive Advantages

CONSTRUCTION Unique Features and Competitive Advantages

Vigorous promotion of redevelopment projects in central Tokyo and an extensive
track record● No.1 office building owner in Tokyo with a portfolio of over 230 high-performancebuildings with cutting-edge exterior, equipped with latest facilities andspecifications, characterized by newest, large-scale, and location in central Tokyo● Strong market competitiveness due to a portfolio with buildings in various sizes,
distributed in areas with excellent transportation convenience, which flexibly
meets diverse needs of tenants● Active promotion of BCP compliance through introduction of seismic isolation/
vibration control structures at 80% of the buildings we own as well as byimplementing uninterrupted power supply systems implementing uninterrupted
power supply systems

Remodeling—Shinchiku Sokkurisan● No.1 in the industry with an innovative “full remodeling package” system fordetached houses, with 50-70% of the rebuilding cost, worry-free fixed pricing
system, and seismic reinforcement for houses of all ages
● Featuring a system in which a dedicated sales engineer manages the entire
project and a dedicated master carpenter with proven knowledge and skills
oversees the construction● No.1 for six consecutive years nationwide in the industry of skeleton reform for
exclusively owned areas of condominiums●

SALES Unique Features and Competitive Advantages
No.1 supplier of condominiums units for six consecutive years both nationwide andin the Tokyo metropolitan area
● Operating in major cities throughout Japan. Stable supply with 80% of theportfolio in the Tokyo metropolitan area
● Strong product planning to maintain the future asset value, such as signature
stylish exteriors, elegant entrances, rich array of facilities in common areas,
standardized disaster-resistant high specifications, and latest household appliances● Operating Grand Mansion Gallery that offers wide-ranging information on
selecting condominiums and enables customers to review all the properties
available at a single location●

14

Integrated Report 202018%

Custom Homes
Model home exhibitions at 123 locations primarily in major cities throughout
Japan (As of March 31, 2020)● Offering advanced functional homes with attractive design utilizing expertise incondominium development● Emphasizing product planning to enhance safety of homes, including developmentof proprietary earthquake-resistant technologies, such as “seismic control
systems” and “power panels” (patented)●

BROKERAGE Unique Features and Competitive Advantages
A network of 276 directly operated brokerage offices nationwide with a leading
track record in the industry (As of March 31, 2020)● Sales system rooted in the community based on the customer-first principle● Operating Mansion Plaza, a brokerage office specialized in premium
condominiums, strengthening initiatives to capture new needs in the expanding
market for pre-owned condominiums margins — It expanded from 5 locations lastyear to 21 locations involving Tokyo and Kansai areas (As of March 31, 2020)

Billions of yen■ LEASING ■ SALES ■ CONSTRUCTION ■ BROKERAGE

180

160

140

120

100

80

60

40

20

●

0

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

* The Company changed its accounting policy (revenue recognition standards of Sumitomo Real Estate Sales) from the beginning of the fiscal year ended March 31, 2020.
The figures provided for the composition of business portfolios and the fiscal year ended March 31, 2019 are those after retroactive application.
* From the beginning of March 2021 fiscal year, the business segments for revenue and income from Sumitomo Real Estate Sales have been changed, from the allocation to “Sales”, “Brokerage” and“Adjustments (not presented in the document)”, to be consolidated into “Brokerage”. Financial results for March 2020 fiscal year have been adjusted retroactively.

Sumitomo Realty & Development Co., Ltd.

15

Topics

Business activities to support value creation
Our major new building development projects under way

Review of Operations

LEASING
No.1 office buildings owner in Tokyo with more than 230 buildings
Sumitomo Realty made its full-scale entry into the office building leasing business in the latter half of the 1970s. Ever since, we havecontinued to develop excellent office buildings focusing on redevelopment projects in central Tokyo. We weathered the bursting of Japan’s
economic bubble in the 1990s and The Global Financial Crisis in the 2000s without selling off buildings we own and steadily increased thenumber of buildings. As a result, Sumitomo Realty has become the No.1 owner of office buildings in Tokyo with more than 230 building in
the central Tokyo.

Revenue from Operations
Billions of yen

400
289.1

313.3

300

337.5

395.6

381.8

353.9

390.0

200

100

0

2016

2017

2018

2019

2020

2021

(Forecast)

Operating Income and Operating Margin
Billions of yen

%

200

100
169.4

150
126.2

139.4

163.0

149.9

75

111.3
100

1 Tokyo Mita Redevelopment Project: It is located at the core of themetropolitan area, centering on a large office tower with 42 floors above groundand 4 floors below ground, 215m in height and 60,400 tsubo in gross floor area. It
is designed for multiple uses, including office, home, commerce, education andculture. The facility will provide a comfortable environment with a rich green spaceof 15,000m2 by designing to give it a continuity with squares and green tracts
located in the adjacent facility we own. It also bolsters disaster-prevention functions
and improve disaster preparedness of the area, and provides spaces for relaxationand communal events for local residents to revitalize the local community.
2 Nishi-Shinjuku 5-chome Kita Project: The district is designated as a disasterprevention and redevelopment district, where rebuilding of aged wooden homes
and improvement of their disaster resistance, as well as enhancing their living
environment are called for. In this project, we aim to improve disaster resistance andenhance living convenience by developing a safe and comfortable urban district thathas multiple functions as home, work and commerce, designed to harmonize withthe local environment, achieve effective use of resources and energy conservation,and to control the heat island phenomenon.
3 Nakano 2-chome Project: It aims to revitalize the southern side of Nakano
Station through simultaneous execution of an urban-redevelopment and a landreadjustment projects, developing and expanding a station square, developing trafficroutes to encourage movements of people around the station, and creating a spacefor people to relax and socialize.

2
Nishi-Shinjuku 5-chome Kita Project(Expected completion: Mar 2023)
Location: Shinjuku Ward, Tokyo
Gross floor area: 41,300 tsubo
No. of floors: 33 above / 2 below ground1
Tokyo Mita Redevelopment Project(Expected completion: Jan 2023)
Location: Minato Ward, Tokyo
Gross floor area: 60,400 tsubo
No. of floors: 42 above / 4 below ground

Overview of the Fiscal Year

OutlookIn the Tokyo office building market, where more than 90% of our leasing portfolio is concentrated,strong demand continued. Vacancy rates remained at record-low levels, while rent levels of both
new and renewed contracts remained on an uptrend.
Under the favorable circumstances, the segment was able to increase both revenue and profit,
driven by lower vacancy rates for existing buildings and higher rent, and as Sumitomo Fudosan
Onarimon Tower and Sumitomo Fudosan Kojimachi First Building started to contribute to earnings
for the full fiscal year after their completion in the previous year. The segment’s revenue fromoperations and operating income both reached record highs for the fifth consecutive year.
Vacancy rate of existing buildings was 1.4%, falling year-on-year once again, from 2.8% at theend of the previous fiscal year. Tenant-seeking activity for new buildings proceeded briskly, withmost available units being occupied in buildings to be completed in the fiscal year, including
Sumitomo Fudosan Shinjuku Central Park Tower and Sumitomo Fudosan Akihabara First Building,as well as those planned to be completed in the next fiscal year or later, including Sumitomo
Fudosan Kojimachi Garden Tower and Sumitomo Fudosan Tamachi Building East. Nearly all units
have already been occupied for the buildings to be completed this fiscal year, while about 90% of
the units of those scheduled to be completed in the next fiscal year have found tenants.

For the fiscal year ending March 2021, we expect revenue from operations to total ¥390.0 billion, a
1.4% decrease year on year, while operating income will come to ¥163.0 billion, a 3.8% decrease
year on year.
The mainstay office building business is expected to increase both revenue and profit, supported
by revenue growth on existing buildings, due to lower vacancy rates and higher rents, and withfull-year contribution from Sumitomo Fudosan Shinjuku Central Park Tower and Sumitomo Fudosan
Akihabara First Building completed in the year ended March 2020.
However, as people’s movement and gathering was significantly restricted following declarationof the state of emergency prompted by spread of new coronavirus infections, revenue fromoperations dropped sharply from previous-year levels for the hotel and multipurpose hall businesses.
Furthermore, we were compelled to postpone opening of the Ariake Garden and the Haneda Airport
Garden, commercial complexes completed in March 2020 (refer to page 19). Earnings forecast for
the leasing business, including the office building business, incorporates expected impact fromfalling sales of the divisions operating these facilities.

3
Nakano 2-chome Project(Expected completion: Feb 2024)
Location: Nakano Ward, Tokyo
Gross floor area: 30,000 tsubo
No. of floors: 37 above / 2 below ground

50

0

2016

39.4

37.4

35.5

50

2017

41.8

42.8

39.3

25

2018

2019

2020

■ Operating Income ● Operating Margin (right)

2021

0

(Forecast)Gross Floor Area
Thousands of m2

6,000

4,500

3,000

902

3,493

817

820

3,790

4,026

811

4,226

828

4,633

1,500

0

(Completion: Oct 2019)
Location: Chiyoda Ward, Tokyo
Gross floor area: 8,200 tsubo
No. of floors: 23 above / 1 below ground

Sumitomo Fudosan Shinjuku Central Park Tower
2016

2017

2018

■ Outright Ownership ■ Sub-lease16

Sumitomo Fudosan
Akihabara First Building

Integrated Report 2020

2019

2020

(Completion: Aug 2019)
Location: Shinjuku Ward, Tokyo
Gross floor area: 18,200 tsubo
No. of floors: 33 above / 2 below ground

Sumitomo Fudosan Ochanomizu
Building(Expected completion: Jan 2021)
Location: Bunkyo Ward, Tokyo
Gross floor area: 3,800 tsubo
No. of floors: 12 above / 1 below ground

Sumitomo Fudosan Tamachi Building East

Sumitomo Fudosan Kojimachi Garden Tower(Expected completion: Apr 2021)
Location: Minato Ward, Tokyo
Gross floor area: 3,900 tsubo
No. of floors: 8 above ground(Completion: May 2020)
Location: Chiyoda Ward, Tokyo
Gross floor area: 14,500 tsubo
No. of floors: 22 above ground

Sumitomo Realty & Development Co., Ltd.

17

Business activities to support value creation
Review of Operations

LEASING

Condominium Leasing La Tour series
We manage and operated about 5,300 condominium units for leasing primarily in the 23
wards of Tokyo. Of these, 3,400 units of 25 buildings are the La Tour series of premium
residences for leasing in central Tokyo, such as Daikanyama, Roppongi, Shibuya andShinjuku. Offering good views, high-grade specifications and facilities, hotel-style bilingual
concierge services, and advanced security systems, the La Tour series is well received byaffluent clients worldwide. (As of March 31, 2020)
In 2019, La Tour Kyoto Higashiyama received Good Design Awards by Japan Instituteof Design Promotion.

Ariake Garden A large complex consisting of retail, a hotel, a hall, residences, and a theater, etc.

Hotels Sumitomo Fudosan Villa Fontaine Co.,Ltd.
The Villa Fontaine series is our high grade business hotels at prime locations that offer
larger guest rooms with spacious beds and bathrooms, and stylish interiors. We operate
a total of 17 hotels / 2,749 rooms, including 13 Villa Fontaine hotels in central Tokyoand one each in Osaka and Kobe, and 2 Village series hotels in Izukogen and Kyoto
targeting resort customers and tourists. (As of March 31, 2020)
In August 2020, we opened Villa Fontaine Grand Tokyo Ariake with 749 rooms,
reaching 18 hotels / 3,498 rooms in total.

Hotel

SPA

Garden and Event Space

Shopping Center

Multipurpose Hall

The Ariake Garden complex opened in June 2020, on a vast 10.7 hectare tract incentral Ariake district along the Tokyo Bay.
SPASPA etc.
etc.
The integrated facility aims at revitalizing the local community by enhancing
living, improving convenience of visiting and creating liveliness in this region. It is
Shopping Center
HotelHotel
Shopping Center
Multipurpose
comprised of a large shopping mall with over 200 tenants, a multipurpose hall with
Event HallHall
capacity of about 8,000 people, a theater* for the Shiki Theatre Company, large spa
facility with a natural hot spring, a high-grade hotel with 749 rooms, and triple
high-rise condominiums with combined total of 1,539 units.
* Scheduled opening in 2021

Tower
Residence
Tower
Residence

Garden and
Garden andSports&Entertainment
Event Space
Area
Theater
Theater

Childcare
保育施設 Facility

Project outline
Location
Site area

Ariake 2-chome, Koto Ward, Tokyo
Approx. 107,000 m2
Commercial district:approx. 172,500 m2
Gross floor area
Residential district:approx. 161,000 m2
Open
June 2020

No. of floors Commercial building:Annex:
Hotel:Hall:
Residential towers:

5 above ground, 1 below ground
6 above ground, 1 below ground
16 above ground, 1 below ground
5 above ground, 1 below ground
33 above ground, 1 below ground

Multipurpose Halls Sumitomo Fudosan Bellesalle Co., Ltd.
We operate 29 event halls/conference centers mainly in central Tokyo. Customers canselect from a wide choice of venues and packages according to their purpose andpreferences. All our venues are easily accessible and have an array of equipment andfixture to meet diverse needs of events ranging from large events such as exhibitions andentertainment, seminars such as academic conferences and lectures, to outdoor events.
We also operate 8 belle salles LOUNGEs, which offer shared office spaces available from15 minutes. With many private rooms suitable for web conferences, they also cater for
remote working. (As of March 31, 2020)
In June 2020, Tokyo Garden Theater opened in Ariake Garden, and Shinjuku
Sumitomo Hall in Shinjuku reopened after renovation.

Haneda Airport Garden
The Haneda Airport Garden is a complex consisting of a hotel, retail, abus terminal, a spa, and other facilities with direct access to Haneda
Airport International Terminal, the gateway to Japan. With 1,717 rooms,
this will be one of the largest* airport hotels in Japan, meeting thediverse needs of inbound and outbound tourists and business people aswell as VIPs.
On the top floor of the hotel, travelers will be able to relieve theirfatigue at a natural hot spring offering a view of Mt. Fuji, the first such
facility at an airport hotel in Japan.
* The number of rooms, 1,717 rooms, is thelargest among hotels located within airport
sites in Japan (as of January 2019, based on
research by Sumitomo Realty)

Project outline
Location
Site area
Gross floor area
Completion

Haneda Airport 2-chome, Ota ward, Tokyo
43,035 m2
91,680 m2
March 2020 (opening postponed*)*As of August 202018

Integrated Report 2020

Sumitomo Realty & Development Co., Ltd.

19

Topics

Business activities to support value creation
Key condominium projects

Review of Operations(delivery planned in years ending March 2022 or later)

SALES

In 2019, Sumitomo Realty renewed its position as the No.1
supplier of condominium units both nationwide and in theTokyo Metropolitan area for the 6th consecutive year. In
addition to the condominiums scheduled to be delivered
this fiscal year, more projects are scheduled for the coming
fiscal years, including City Tower Musashi Koyama, City
House Shimomeguro, Grand Hills Minamiaoyama, City
house Koganei Koen, City Tower Osaka Honmachi, andCity Terrace Yokohama.

Grand Hills Minami Aoyama

City Tower Musashi-koyama City Tower Osaka Honmachi

Location: Minato Ward, Tokyo
No. of units for sale: 105
No. of floors: 18 above / 2 below ground

Location: Shinagawa Ward, Tokyo
No. of units for sale: 318
No. of floors: 41 above / 2 below ground

Location: Osaka City, Osaka,
No. of units for sale: 855
No. of floors: 48 above / 1 below groundNo.1 supplier of condominiums in Japan for 6 consecutive years
Having entered the condominium sales business in the first half of the 1960s, Sumitomo Realty is a pioneer in the domestic market for
condominium development and sales. We have become a leading company for condominium sales in Japan by staying ahead of ourcompetitors, strategically focusing on city centers and proactively developing large, high-rise properties. We have been the No.1 supplier ofcondominium units both nationwide and in the Tokyo Metropolitan area for six consecutive years.

Overview of the Fiscal Year

Revenue from Operations
Billions of yen

400

314.3
300

311.2

331.8

In the condominium sale market, which represents at least 90% of the segment, the sales
environment continued to be favorable with low interest rates, whether in urban or suburban
areas, as supply of new properties was limited and sales prices remained stable.
Under such an environment, condominiums, including City Tower Ginza Higashi, City Tower
Ebisu and City Towers Tokyo Bay, started handing over units to buyers in the fiscal year underreview, recording sales for a total of 5,431 units (including condominium units, detached houses
and land lots), down 539 from the previous year. While the segment’s revenue decreased due to afall in the number of units delivered, it successfully increased operating income to a record high forthe sixth consecutive year by improving margins.
The number of condominium units sold totalled 4,865, down 246 year-on-year, but the figure

324.9

274.8

270.0

200

100

0

2016

2017

2018

2019

2020

2021

(Forecast)

City House Shimomeguro

City House Koganei Koen

City Terrace Yokohama

Location: Meguro Ward, Tokyo
No. of units for sale: 195
No. of floors: 5 above ground

Location: Kodaira City, Tokyo
No. of units for sale: 740
No. of floors: 9 above ground

Location: Yokohama City, Kanagawa
No. of units for sale: 313
No. of floors: North-10 / South-15 above ground

was in line with the target as contracts were signed for about 80% of the units at the beginning of
the year (vs. about 80% a year earlier) vis-a-vis the 4,500 units whose sales are expected to bebooked in the next fiscal year.

Outlook
Although sales activity was restricted after the state of emergency was declared in early April 2020,
about 80% of the 4,500 units planned to be delivered in the year ending March 2021 were sold by
the end of March 2020. We expect revenue from operations to fall 16.9% year on year to ¥270.0
billion as the number of delivered units will fall, but operating income to increase 1.3% to ¥48.0
billion, largely in line with the level in the previous year, as margins are expected to improve.

Operating Income and Operating Margin
Billions of yen

%

60

40

44.2

45

46.2

46.8

47.1

47.0

46.5

30

30

20
16.1

15

0

2016

14.7

2017

15.1

2018

14.2

2019

■ Operating Income ● Operating Margin (right)

14.3

17.4
10

2020

2021

0

(Forecast)

Units Delivered (Including condominium units, detached houses and land lots)
Units

8,000

5,716

6,000

5,881

5,970

4,996

5,431
4,500

4,000

2,000

0

2016

2017

2018

2019

2020

2021

(Forecast)

City Tower Ebisu (Delivery from Apr 2019)
Location: Shibuya Ward, Tokyo
No. of units for sale: 310
No. of floors: 23 above / 2 below ground

City Tower Ginza Higashi (Delivery from Jun 2019)
Location: Chuo Ward, Tokyo
No. of units for sale: 492
No. of floors: 22 above / 1 floor below ground* From the beginning of March 2021 fiscal year, the business segments for revenue and income from Sumitomo Real Estate Sales have been changed, from the allocation to “Sales”, “Brokerage” and “Adjustments(not presented in the document)”, to be consolidated into “Brokerage”. Financial results for March 2020 fiscal year and financial forecasts for March 2021 fiscal year have been adjusted retroactively.

20

Integrated Report 2020

City Tower Aoi (Scheduled delivery from Mar 2021)

City Tower Tokorozawa Classy

Location: Nagoya City, Aichi
No. of units for sale: 354
No. of floors: 20 above ground(Scheduled delivery from Jan 2021)
Location: Tokorozawa City, Saitama
No. of units for sale: 277
No. of floors: 29 above / 2 below ground

City Tower Oimachi (Delivery from Apr 2020)
Location: Shinagawa Ward, Tokyo
No. of units for sale: 493
No. of floors: 29 above / 1 below ground
Sumitomo Realty & Development Co., Ltd.

21

Topics

Business activities to support value creation
Solution to Rapid Increase in Disused Detached Houses: Remodeling for Repurposing

Review of Operations

As an initiative to address the issue of a rapid increase of disused detached houses, Sumitomo Realty started in February 2020 to accept orders for aremodeling service aimed at repurposing existing homes to be used as social welfare facilities (group homes), dormitories (shared houses) and lodging
facilities (vacation rental facilities), at Shinchiku Sokkurisan offices located in Tokyo and all prefectures except for Okinawa.
A survey by the Ministry of Land, Infrastructure, Transport and Tourism estimates there are about 480,000 vacant and abandoned disused homes
across Japan that are located within 1 kilometer from their nearest stations and require only minor repairs or renovation to be used for meaningful
purposes. There are concerns that even these homes, if left disused for many years, may pose the risk of undermining surrounding living environment,
exposing nearby residents to the danger of potential collapse, threatening significantly deteriorated hygiene or undermining scenic integrity of their areas.
To create safe and sustainable towns, we support efforts to utilize existing properties, which are part of social infrastructure, by demonstrating that suchdisused homes can be utilized in variable ways other than just renting them.

CONSTRUCTION

A Project the Company has undertaken
A 64-year-old Japanese-style house remodeled into avacation rental facility

Remodeling—Shinchiku Sokkurisan

Custom Homes

Sumitomo Realty launched the Shinchiku Sokkurisan, an innovative,
first-of-its-kind full remodeling package in the industry, in 1996. Rolled
out nationwide step-by-step, it has become the top brand in the market
with a cumulative total of more than 140,000 units contracted.
Furthermore, we started skeleton renovation business forcondominiums in 2000, ahead of industry peers, and have been No. 1 inrevenue from condominium remodeling six years running.

In 1972 Sumitomo Realty established a subsidiary in the U.S. where
platform wood-frame construction is widely used, subsequently
introducing technology cultivated in the U.S. to a business in Japan. We
launched American Comfort custom home construction business in
1995, followed by the debut of J∙URBAN urban-style housing series in
2003, and their urban exteriors were well received. Aiming for further
expansion of the business, we added the “wood panel method” to our
lineup in 2014 to strengthen the appeal of our products.

Revenue from Operations
Billions of yen

240

199.1

189.0

203.6

209.4

221.7

219.0

180

170.0

120

60

0

2015

2016

2017

2018

2019

2020

Billions of yen

The number of units contracted decreased for both the Shinchiku Sokkurisan remodeling and customhome construction businesses in the fiscal year under review as economic sentiment somewhat
stagnated in the second half of the fiscal year, in which consumption tax was raised. However, boththe number of units delivered and revenue from operations for the Shinchiku Sokkurisan remodelingservice reached record highs, thanks to the revenue contribution from back orders accumulated in aperiod of solid demand that lasted until the previous fiscal year.
The segment’s revenue decreased due to a fall in the number of custom-home construction units
delivered, but it successfully increased operating income to a record high through improved margins.

For the next fiscal year, we expect revenue from operations to total ¥170.0 billion, a 22.3% decrease year on year, while operating income will come to¥10.0 billion, a 51.4% decrease year on year.
In the construction business, we significantly restricted solicitation activity for new customer orders or purchase contracts after the state of emergency
was declared. Measures included cancellation of a large event held annually during the long holiday and introduction of a requirement for customers tomake prior reservation for meetings with sales personnel at model houses. We incorporated expected impact from this and expect both revenue andprofit to fall due to a drop in the number of orders for homes.

Custom Homes

25
20.6

20.4

20
15.3

20

16.1
15

13.9
10.0

10
7.7

0

Outlook

%

25

5

After

Remodeling-Shinchiku Sokkurisan

Operating Income and Operating Margin

15

After

Overview of the Fiscal Year

2021

(Forecast)

Before

2016

6.8

2017

9.2

7.7

2018

2019

■ Operating Income ● Operating Margin (right)

9.4

2020

10

5.9

5
0

2021

(Forecast)

BeforeAfter

BeforeAfter

J・URBANJ・URBANPREMIUM・J

Shinchiku Sokkurisan and Custom Home Units Contracted
Units
12,000

Units
4,000

9,000 8,454

8,770
2,882

10,4499,350 2,990
2,761

3,077

3,000

7,506

6,000

2,160
6,000

3,000

0

1,000

2016

2017

2018

2019

■ Shinchiku Sokkurisan ■ Custom Homes (right)

22

2,000

1,700

Integrated Report 2020

2020

2021

0

PREMIUM・J

J・RESIDENCE

J・RESIDENCE(Forecast)

Sumitomo Realty & Development Co., Ltd.

23

GROUP COMPANIESBusiness activities to support value creation

Review of Operations

BROKERAGE

Sumitomo Fudosan Tatemono Service Co., Ltd.
Sumitomo Fudosan Tatemono Service Co., Ltd. conducts property
management for about 173,000 units nationwide centering on
Sumitomo Realty's condominiums. In pursuit of comfortable, safe andsecure living environments for customers, offering services ranging fromdaily building management to concierge services (consultancy for minor
repair of rooms and equipment replacement, introduction of special
benefits available from the Sumitomo Group’s businesses), the company
responds to various customer needs based on abundant know-how andsolid technological capabilities. Residents of condominiums managed by
the company can use professional housecleaning services, housekeeping
services, and other useful lifestyle-related services and benefits.

Sumitomo Fudosan Syscon Co., Ltd.
Sumitomo Fudosan Syscon Co., Ltd. sells interiors to mainly Sumitomo
Realty's customers of their condominiums, custom homes, andremodeling. The company’s interior concierges propose interiors
according to customers’ requests from among the products of over 300
manufacturers in Japan and overseas. The company also constructs
Mansion Gallery and carries out interior design and finishing for hotels
and commercial facilities, as well as offers proposals for effective landuse, such as car park operation.

Sumitomo Real Estate Sales Co., Ltd. was established in 1975 to conduct sales of condominiums developed by Sumitomo Realty. Sumitomo
Real Estate Sales entered the real estate brokerage sector in 1979, gaining a listing on the Tokyo Stock Exchange in 1998 and achieving
significant success. To achieve further growth as the Sumitomo Realty Group, Sumitomo Real Estate Sales delisted in 2017 and became awholly owned subsidiary of Sumitomo Realty. We will strive to use our sales network more effectively so as to further increase market share.

Revenue from Operations

Overview of the Fiscal Year

Billions of yen

In the existing home market, the number of purchase contracts signed for existing condominium
units remained at high levels in the Tokyo metropolitan area.
Under such an environment, the segment achieved a record high number of transactions forthe fifth consecutive year, with 37,715, up 72 from the previous year as the brokerage business saw
existing condominium transactions increase, thanks in part to the opening of Mansion Plaza
brokerage offices, which exclusively handle premium condominiums in central Tokyo. On the other
hand, both revenue and profit of the segment decreased as a result of a total transaction value
decrease due mainly to a decline in land transactions.
The number of directly operated brokerage offices increased by six, bringing the nationwide
total to 276 at the end of the fiscal year.

80

58.5

60

71.9

69.2

66.7

61.5

71.2

50.0
40

20

0

2015

2016

2017

2018

2019

2020

2021

(Forecast)

Outlook
Operating Income and Operating Margin
Billions of yen

%

24

60

21.5
19.1

17.7

18

21.0
45
14.6

12

28.8

28.7

30

31.0
29.2

20.5

6

15

5.0

For the next fiscal year, we expect revenue from operations to decrease 27.9% year on year to¥50.0 billion and operating income to decrease 48.3% to ¥10.0 billion.
Incorporating the impact from restricted sales activity and other significant restrictions due tothe spread of new coronavirus infections, we expect revenue to decrease due to a fall in thenumber of contracts.

276 directly managed stores

0

2016

2017

2018

2019

2020

2021

0

(Forecast)Kansai Area

71 stores
7 stores

Billions of yen

1,200

80,0001,193.0

1,257.5

Mansion Plazas

1,326.4 1,287.5
60,0001,065.7920.0

800

40,00035,987 36,108 37,058 37,648

37,715 27,000
20,000

400

0

2016

2017

2018

2019

2020

■ Transaction Value ● Number of Transactions (right)

24

Kyushu area

Transactions

1,600

2021

(Forecast)0

Tohoku area

5 stores

Capital Area

Chugoku area

Number of Transactions and Transaction Value

8 stores

Sumitomo Fudosan Esforta Co., Ltd. directly manages six ésforta fitness
clubs, primarily in Tokyo. Based on the concept of “assigned instructor
system,” at each outlet instructors propose comprehensive fitness
menus according to the member’s needs by combining gym, pool,studio, and nutritional programs and provide support. The company also
operates a golf academy and fitness studios primarily offering yoga anddance programs. In addition, utilizing the know-how cultivated throughoperation of a wide range of facilities, the company is contracted byeight municipalities to operate and manage public sports facilities (as ofApril 1, 2020).

161 stores

Tokai area

6 stores18 stores

TopicsSince June 2019, Sumitomo Real Estate Sales Co., Ltd. has opened
Mansion Plaza brokerage offices focused on premium condominiums thathave high asset value in terms of location, scale, management, etc. The
number of Mansion Plaza grew from 5 locations in central Tokyo to 21
locations in various cities in the Capital area and the Kansai area. (As of
March 31, 2020)
These offices are staffed by professionals with the Mansion Expert in-house qualification for their excellent
track record and experience in premium condominium transactions and superior knowledge of condominium
structures, equipment, market and transactions. We trained them to acquire thorough knowledge of areas andproperties so that they can offer brokerage services based on precise assessment of asset value of properties.

* From the beginning of March 2021 fiscal year, the business segments for revenue and income from Sumitomo Real Estate Sales have been changed, from the allocation to “Sales”, “Brokerage” and “Adjustments(not presented in the document)”, to be consolidated into “Brokerage”. Financial results for March 2020 fiscal year and financial forecasts for March 2021 fiscal year have been adjusted retroactively.
* The Company changed its accounting policy (revenue recognition standards of Sumitomo Real Estate Sales) from the beginning of the fiscal year ended March 31, 2020. The figures provided for the fiscal year
ended March 31, 2019 are those after retroactive application.

Integrated Report 2020

Sumitomo Fudosan Esforta Co., Ltd.

Izumi Restaurant Co., Ltd. provides catering services for social gatheringsand various parties. It runs several restaurants such as Azabu Tansumachi
Tenryoan (Japanese restaurant) and DELTAZURE (cafeteria). It also runs
Rieven House convenience stores within Sumitomo Realty’s officebuildings in Tokyo, offering a product mix geared to the needs of office
workers.

(As of March 31, 2020)

10.0■ Operating Income ● Operating Margin (right)

Hokkaido area

Izumi Restaurant Co., Ltd.

Sumitomo Realty & Development CA., Inc.
Sumitomo Realty &Development CA., Inc. owns
and manages InterContinental
Los Angeles Century City, aluxury hotel that boasts
excellent quality.

Izumi Country Club
Izumi Country Club is a golf club with convenient access, located about
50 km, or a one-hour drive, away from central Tokyo. Taking advantageof the flat landscape, the refined layout with effectively placed ponds
and greens as well as the scenery replete with seasonal plants andflowers are enjoyed by players.

Sumitomo Fudosan Villa Fontaine Co., Ltd.
Sumitomo Fudosan Bellesalle Co., Ltd.
Refer to page 18.

Sumitomo Realty & Development Co., Ltd.

25

Sustainability

Addressing Social Issues through Business Activities
The Sumitomo Realty Group is engaged in a range of businesses, closely related to people's daily lives, such as
office buildings, condominiums, remodeling, custom homes and brokerage. Thus, to achieve sustainable
development of the Group, it is indispensable to create even better social assets and pass them down to thenext generation through these businesses.
By accurately responding to changes in the social environment, we are committed to development ofsafe and secure communities that will continue to deliver value far into the future and contribute to theattainment of SDGs.

Our Mission:“Create even better social
assets for the next
generation”
Our initiatives

Social Issues
Earthquakes
Aging population andpopulation decline
Healthy life expectancy
Environmental problems
Human rights issues
etc...

26

Integrated Report 2020

DisasterResistant
Sumitomo Realty’s
Community
Development

Environment
Friendly

Community
Revitalization

FeatureThe Reborn Project of Shinjuku
Sumitomo Building and“Sankaku Hiroba”........................p.28
Highlight 1
Sustainable Urban Redevelopment—Osaki Garden City—...................p.30
Highlight 2
Remodeling—Shinchiku Sokkurisan..p.32

Development of safe
and secure communities
that will continue todeliver value far into
the future

For Disaster-Resistant Community
Development.........................................p.34
For Environmentally Friendly Community
Development.........................................p.36
Urban Development that Contributes to
the Community.......................................p.38
Human Rights and Diversity......................p.40
Health and Safety...................................p.42
Together with the Stakeholders.................p.44
COVID-19 Prevention Measures.................p.45

Sumitomo Realty & Development Co., Ltd.

27

The Reborn Project ofShinjuku Sumitomo Building and “Sankaku Hiroba”

FeatureRelevant SDGs

Sumitomo Realty implemented an extensive renovation of Shinjuku Sumitomo Building, an office-use skyscraper
originally completed in 1974, in a period from September 2017 to June 2020, and opened a large space forpublic events, “Sankaku Hiroba” (triangular plaza), on July 1, 2020. Sankaku Hiroba is an all-weather atrium
created by building a gigantic glass roof over an open public space incorporated into the building’s design. Not
only does it add liveliness to Shinjuku area, where wide-ranging functions are highly concentrated, the facility
provides disaster preparedness function as an emergency shelter in case of large-scale disasters. Having beenrenovated using a method that does not require rebuilding, it serves as a model embodying how an officebuilding can achieve sustainability.

An exterior view of Shinjuku Sumitomo Building

Cross-section of Sankaku Hiroba

25m

Sankaku Hiroba(22 m effective height)

Shinjuku Sumitomo
Building

Shop & Restaurant

Shinjuku Sumitomo Hall

Before the renovation

Chronology
1974 Construction of Shinjuku Sumitomo Building completed
2016 Designated as national strategic special zone; city planning of specified district changed
2017 Large-scale renovation started – certified private-sector city revitalization project plan2020 Large-scale remodeling work completed – “Sankaku Hiroba” opened
Gross floor area: 180,195.16m² / atrium area: approx. 6,500m²

28

An event on the street in front of Shinjuku Sumitomo Building

Integrated Report 2020

Interior view of “Sankaku Hiroba,” one of the largest all-weather event spaces in Japan

Shinjuku’s new hub for livelinessCounter-disaster facility for the district

The Nishishinjuku district, where Shinjuku Sumitomo Building is located, wasdeveloped on the former Yodobashi water purification plant ground underan extensive city planning after Shinjuku was designated a subcenter ofTokyo in 1958. It is not only a business center where approximately 200,000
people work, but also an area where there is high concentration of a variety
of functions, including large hotels, commercial facilities, universities,
hospitals and residential areas on the periphery. On the other hand,a two-layered structure and open spaces representing 80% of the district’s
area interrupted continuity of the city scape and flow of pedestrians anddispersed locations of liveliness.
The local community and the government place a high expectations for
the Sankaku Hiroba project, as a major joint public-private project, toenhance the function of the district as a whole, rather than a single building,and increase liveliness in the district by hosting a variety of events in one of
the largest all-weather event spaces in Japan with a capacity of about 2,000
people and taking advantage of the adjoining Shinjuku Sumitomo Hall,
which is equipped to host international conferences.

In 2011, while the project was under way, the Great East Japan Earthquake
inflicted unprecedented damage to areas across Japan. As the damage
highlighted the importance of disaster preparedness in urban areas, we
designed Sankaku Hiroba so that it can shelter temporarily up to 2,850
stranded commuters after disasters, such as earthquakes, taking advantage
of its vast space measuring about 3,250 m² with a roof up to 25 m highprotecting them from rain or winds.
In the remodeling work to the main building, which was carried out
during the construction of the new large roof, we enhanced measures forbusiness continuity planning (BCP) for the further safety of tenants including
reinforcement to quake-absorption functions to enhance earthquake
resistance, improvement to earthquake resistance of elevators and escalators,
and expansion of oil tanks and generators.

A model embodying how an office building
can achieve sustainability
Shinjuku Sumitomo Building has been adored by the public and nicknamed“Sankaku Biru” (triangular building) for its shape for nearly half a century
since 1974 in a period when skyscrapers started to be built in Japan. Insteadof tearing down Sankaku Biru, a key landmark in the district, the project
created a sophisticated interior space as fresh as a newly constructed building
through an extensive remodeling work, which introduced cutting-edge
equipment and designs but left the triangular outward appearance intact.
By choosing not to tear down and reconstruct the building, we
significantly reduced the amount of industrial waste, such as construction
materials and used resources more effectively. We also introduced watersaving equipment and lighting system satisfying standards on a par withthose for new buildings to reduce environmental load. Furthermore, theremodeled building enhances barrier-free feature of the region by designingpedestrian routes that resolves height gaps in surrounding areas.
The project has become a model that embodies efforts to achieve“sustainability of an office-use skyscraper that coexists with the local
community.”

A lively view of the west area of “Sankaku Hiroba”

An exterior view of the entrance to Shinjuku Sumitomo Building

Sumitomo Realty & Development Co., Ltd.

29

Sustainability

Relevant SDGs

Highlight 1

Sustainable Urban Redevelopment -Osaki Garden CityOsaki Garden City, completed in October 2018, is a large complex development project with a total floor area of
about 220,000 m2 consisting of an office tower, a residential tower, and spacious green open public spaces. The
site used to be characterized by a densely built-up area with wooden houses, an elevated land creating steep
slopes, and narrow streets preventing emergency vehicles from approaching. In addition to these challenges fordisaster response, the area had no linkage with the downtown area adjacent to Osaki Station. The completionof Osaki Garden City improved the area’s linkage with the downtown area adjacent to the station and helped
to tackle the challenges it had faced, contributing to development of the community and enhancing its disasterprevention.

Redevelopment project that coexists with the local community

Ceremony for planting cherry trees from Washington D.C.

Osaki Garden City Cherry Blossom Festival

Revitalizing the local community after the building’s completion is an
important aspect of a redevelopment project. Osaki Garden Tower hosts
wide-ranging events, taking advantage of its vast open space. The first Osaki
Garden City Cherry Blossom Festival, which took place in March 2019,provided an opportunity for people from the local community to socialize
while enjoying the cherry blossoms. As part of the event, home-coming
cherry trees from Washington D.C., which have historic significance inthe area, were planted as additions to the existing cherry trees.

City development to tackle the challenges facing the community
Enhancement of disaster prevention by eliminating the area overcrowdedwith wooden houses and of narrow streets
Block A

Block B

Principal purpose

Office, retail, etc.

Residence (423 units), office,etc.

Site area(30,080 m2)

19,927 m2

10,153 m2

Gross floor area
(219,565 m2)

178,141 m2

41,424 m2

Floor area ratio

Approx. 780%

Approx. 250%

No. of floors

24 above ground2 below ground

22 above ground2 below ground1

Promotion of universal design of the area by eliminating a large
difference in elevation

2

Key points of the Osaki Garden City Redevelopment Project
Formulation of urban functions and a complex urban area to promote development of the area around the station
Development of a safe and secure community with enhanced disaster-prevention functions, including elimination of a densely
built-up area of wooden houses and widening of narrow streets● Promotion of universal design of the community, including elimination of the large difference in elevation of the site
● Spacious green open public spaces covering some 8,000 m2 to facilitate community building and serve as a disaster-prevention base
● Widen and improve a transportation route connecting Shinagawa City Hall, which will serve as the disaster control center in theevent of a major disaster, with the surrounding area (roads to be cleared in the event of an emergency)●

Integrated Report 2020

The site used to have a difference in elevation as large as eight meters andexperienced land collapse. The project created a landscape design with gentle
undulations and eliminated the large difference in elevation. It also built stairs
and installed elevators connecting the area with the surrounding downtown
area and the station to allow everyone to move easily.

Widening sidewalks to ensure pedestrian safety●30This area used to be a densely built-up area with wooden houses exposed tohigh risk of fire and the streets were narrow, making it difficult for emergency
vehicles to enter the area. As a result of the redevelopment project, roads
around the site were improved and a fireproof condominium building wasconstructed, realizing a safe and secure community.

3

Sidewalks in the area, indispensable infrastructure for daily activities ofresidents, used to be so narrow that safety of pedestrians was at risk. The
project widened sidewalks in the area and ensured that pedestrians can walkwithout fear.

Sumitomo Realty & Development Co., Ltd.

31

Sustainability

Relevant SDGs

Highlight 2

Remodeling—Shinchiku Sokkurisan

Social issues concerning houses in JapanThe Shinchiku Sokkurisan remodeling business based on our concept of safe and secure housing has theindustry’s foremost track record for full remodeling with seismic reinforcement as a standard package. It was
launched in 1996 after the Great Hanshin Awaji Earthquake of 1995, with the desire to renovate houses withseismic reinforcement without high cost of rebuilding. In addition to providing highly sustainable houses inwhich people can live for longer period of time in comfort, it also addresses various social issues concerning
houses in Japan, by increasing earthquake-resistant houses, extending lives of houses in Japan, which are
typically much shorter than those in Europe and the U.S., realizing efficient utilization of limited resources, aswell as reducing industrial waste due to demolition and reconstruction of houses.

Although the penetration rate of earthquake resistant house in Japan is increasing every year, there are still many houses with low earthquake resistance. Moreover,the lives of houses in Japan are relatively short compared with those in Europe and the U.S. and the short rebuilding cycle has emerged as an issue in contemporary
Japan. Waste from demolition of houses accounts for a large share of waste discharged by the construction industry. It is called for that lives of houses should be
extended to facilitate the shift to stock type society where houses could be used by successive generations.
Earthquake-resistance of housing stock*1
Without earthquake
resistanceApprox.
9 million units

100
80

From 1982
onwardWith earthquake
resistanceApprox.
6 million units

With earthquake
resistanceApprox.
37 million units

International comparison of the average age ofhouses*2
Years

100
80

From 1982
onwardWith earthquake
resistanceApprox.
6 million units

60
40

With earthquake
resistanceApprox.
37 million units

1981
or earlier

66.6

20

80.6

32.1

0

60

Seismic reinforcement

Japan

US

Conventional
remodeling

Principally remodeling certain
parts of the house

Remodeling—Shinchiku Sokkurisan
New system: neither conventional remodeling
nor rebuilding
Full remodeling with a price roughly 50% of rebuilding

Years

80

Demolition
Houses: 7,750

From 1982
onward60
With earthquake
resistance40
Approx.
Shinchiku
6 million
units Sokkurisan has met with a positive response among customers 66.6
With earthquakewith its remodeling proposals corresponding
20 of individual
resistanceto the lifestyles
32.1
1981households as well as fixed-price system
Approx.
based on floor area and Sumitomo
or earlier
37 million units
0Japan from US
Realty’s unique business model of appointing dedicated sales engineer

the first consultation to delivery. The cumulative total of units contracted forShinchiku Sokkurisan reached 140,000 units (as of March 31, 2020).

Seismic reinforcement byremodeling not considered

Seismic reinforcement as standard specificationunclear pricing

Clear fixed-price system

Cumulative total of units contracted for Shinchiku Sokkurisan

Additional charges incurred due to
unexpected circumstances

No additional charges

150

Thousand units

120

80.6

UK

(51% of the discharged
waste throughdemolition)

Building Work/
Renovation
Private Sector
Civil Engineering

15,12012,950Total:
72,700 40,540

32.1

30

32

Integrated Report 2020

After

0

3,520

3,520

Public Sector
Civil Engineering

3,520

Sources:*1 “Progress of Earthquake Proofing of Houses”
Ministry of Land, Infrastructure, Transport and Tourism (data as of 2013)*2 “International Comparison of the Average Age of Houses Deregistered in
2018” Ministry of Land, Infrastructure, Transport and Tourism*3 Reference Material 7 of “Residential Land Session, Panel on Infrastructure
Development (36th)” Ministry of Land, Infrastructure, Transport and Tourism

In Shinchiku Sokkurisan remodeling, the life of the house is extended through earthquake
resistance reinforcement while the principal structural elements of the house are retained, thus
minimizing industrial waste discharge, CO2 emissions, and waste of resources.
Moreover, customers can continue living in the house while remodeling work is executed,
therefore reducing waste from packing for moving to temporary accommodation.

People friendly
Another aspect of Shinchiku Sokkurisan is people-friendly remodeling.
Thermal insulation, waterproofing, and barrier-free design, in addition
to seismic reinforcement, offer comfort to the residents. Furthermore, in
response to change of family structures and aging population, we offer
solutions customized for the lifestyles without rebuilding, such as layoutchange, extension, downsizing, transformation of a two-story house toa one-story house, or to a two-family house.

60%

70%

The cost of Shinchiku Sokkurisan
Renovation
remodeling is about 50-70% of that
Full
remodelingof rebuilding. Responding toRebuilding
Partial reform
100%
0%customers’ various needs, lifestyles,
and budgets, in addition toTypes of remodeling Shinchiku Sokkurisan covers
conventional “partial reform”, we
Resolve all your problems
Your dream comes true as if building
with your current housea custom-built houseoffer “full remodeling” to transform the houseinto earthquake-resistantone
Full remodeling
Renovation
while utilizing the existing structures and “renovation”
tocompletely
refurbish
Transform the house into an
Complete renovation of both the interior
earthquake-resistant one with peace ofand the exterior with great flexibility inmind while
utilizing the layout
existing structural
both the interior and the exterior enablingflexiblechange.terms of change of the layout
elements as much as possible

60

Public Sector
Civil Engineering

Sector
without incurring the high cost of rebuilding. Private
This idea
was prompted
Civil Engineering
UK houses in the Great Hanshin Awaji
by theJapan
collapse ofUSmany aged
Earthquake of 1995. We introduced a clear fixed-price system with aprice roughly 50% of that of normal rebuilding and seismic
reinforcement based on earthquake resistance diagnosis as a standard
specification.
Repair 570
Subsequently, in the Kumamoto Earthquake of 2016, a series of
15,120Demolitionpowerful tremors caused collapse of houses previously considered notneed seismic reinforcement. In view of such circumstances, weHouses: to7,750(51% of the discharged
Total: method to counter such series of powerfuldeveloped a proprietary
waste through72,700 40,540
demolition)
tremors.12,950
With the addition of this
newSector
method, we now offer seismic
PublicCivil Engineering
Building Work/
Renovationreinforcement and damping plans suitable for houses of all ages.

50%

BeforeBuilding Work/0

Lower cost than rebuilding

90

Total:
72,700 40,540

Environmentally friendly

Unit: thousand tons

Repair 570

100(51% of the discharged
waste throughdemolition)

The launch of Shinchiku
Sokkurisan remodeling is the expressionof our12,95066.6

Private Sector
Civil Engineering

UK

Demolition
Houses: 7,750

earthquake resistance
20desire to renovate houses, endowing them withRenovation

Industrial waste discharged (construction industry)*3
Without earthquake
resistanceApprox.
9 million units

80.6

40

1981
or earlier

Without earthquake
resistanceApprox.
9 million units

Repair 570 concerning
Shinchiku Sokkurisan initiativessocial issues 15,120

Years

Solution for rapidly increasing disused houses
The high number of disused detached houses has become a social
issue in Japan. By remodeling, turning them into social welfare
centers, share-houses, travelers’ inns etc., we contribute to utilize
existing stock of houses and support safe and sustainable city.

BeforeAfter1997.3 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Sumitomo Realty & Development Co., Ltd.

33

Sustainability

Relevant SDGs

For Disaster-Resistant Community Development
PolicyDisaster-resistant community development

The Sumitomo Realty Group considers that creating social assets, such as office buildings and condominiums, andsurely handing them over to the next generation are central to the fulfillment of our mission. We aspire to develop
safe and secure communities, not only for the residents but also for everyone in the neighborhood, through our
focus on buildings that can prevent or withstand damage in the event of disaster, such as a fire or an earthquake,as well as on regional disaster preparedness as a communal function.

Disaster-prevention for office buildings
Business Continuity Planning (BCP) support through multiple safely measures
Seismic isolation and damping systems

Support of commuters stranded after disasters

Sumitomo Realty was an early adopter of earthquake-resistant features,promptly introducing the seismic isolation structure in its office buildings
after the Great Hanshin Awaji Earthquake of 1995. Approximately 80%of the buildings we own are structured with a seismic isolation system
and/or a damping
system. Highly safe
structures, which can
The seismic base-isolation
protect people
structure absorbs the shaking
working in offices andfrom the groundassets by reducing
tremors, increase thefeeling of safety
among tenants.

When a large disaster hits, public transportation is often paralyzed and alarge number of commuters are left stranded.
Sumitomo Realty’s office buildings are equipped with facilities toshelter people unable to return home, taking advantage of their highly
disaster-resistant features and large spaces incorporated in their designs.
For example, Sumitomo Fudosan Akihabara First Building andSumitomo Fudosan Akihabara First Terrace, which were completed in
2019, have spaces where stranded commuters can temporarily takeshelter after a disaster, aiming to address shortage of such facilities.
Measuring 670m2 in combined total area, these spaces are equippedwith free wi-fi connection to provide evacuees with a means ofcommunication. The entrance hall of the office section can provide
shelter for people unable to return home.

Disaster prevention for condominiums

Disaster prevention for construction

Sumitomo Realty’s condominiums feature seismic isolation/control
structures to prevent deformation of buildings and alleviate shaking
during an earthquake. In addition, various disaster countermeasures are
implemented, such as installation of emergency power generators,
elevator safety functions, storerooms for emergency supplies, andemergency wells.

Sumitomo Realty’s custom home construction and Shinchiku Sokkurisan
remodeling maintain high safety standards and introduce multiple
earthquake-resistant technologies according to customer needs. The
Company’s custom homes have a standard specification that uses
platform wood-frame construction qualifying for earthquake resistance
grade 3, which satisfies the long-life quality housing standard.

Key disaster countermeasure (City Towers Tokyo Bay)

Earthquake-Resistant Technologies
New Power Column (Patent No.4875721)

Basic structure
Seismic isolation structure

Absorb seismic energy

Conventional structure

City Towers Tokyo Bay
StrongshakingSlowshaking

Seismic
isolation
devices

Violent horizontal vibration
is caused.
Higher floors shake
more strongly.

Uninterrupted power supply

Earthquake motion Because seismic isolation devices
absorb seismic energy,(horizontal vibration)

the building shakes slowly andless deformation occurs.

(Conceptual diagram)

Risk of power outages is mitigated by the use of a 2-line power receiving
system where an auxiliary line continues to supply power when the main
Main Line
Break in powerline is disrupted (❶), as well as by a three-layer backup systemusing gastransmission Accident
Width of earthquakeand oil tanks (❷ and ❸). The Company
vibration further strengthens measures for
Auxiliary Line
uninterrupted power supply, such as installing emergency power
Transformer
generators. Currently, about 70% of the buildings owned by theElectrical power
substationtransmission
Company, and 100% of those that have been completed since 2001,
have emergency power generators.
Medium-pressuregas

Main Line
Break in powertransmission Accident
Auxiliary Line

Electrical powertransmission

Transformer
substationPowergeneration

Dual-fuel gas
Medium-pressure
turbine3,000gaskVA 2 units Municipal
gasfacilityPowergeneration

3,000 kVA

34

2 units

Integrated Report 2020

Dual-fuel gas
turbineFuel oil

72-hour
supplyoil tank forgenerator

Fuel oil

Back: Sumitomo Fudosan Akihabara First
Building
Front: Sumitomo Fudosan Akihabara First
72-hourTerrace

Frame tends not to fracture
Deformation of door frames tends not to occur
Furniture tends not to topple overLighting equipment shakes lessFirm ground and piles

Robust pillars to increase earthquake resistance

110 piles installed

Welded closed hoops

For power supply in the event of power outage

Emergency power generator
Entrance hall of Sumitomo Fudosan AkihabaraFirst Building

supplyoil tank forgenerator

Other disaster countermeasures
Monitoring by Company employees around the clock
throughout the year
● Spaces for installing additional emergency power generators
serving tenant-occupied areas● Elevators that can automatically assess the situation after anearthquake and temporarily return to operation● All buildings in areas of flooding risk equipped with temporary
flood barriers●

Cracking of pillars and beams
Deformation of door frames tends to occur
Glass tends to shatter and fall
Concrete tends to fracture and fall
Lighting equipment tends to fall
Sashes tend to come off

Disaster countermeasures

Municipal gas
facility

New Power Column

New Power Cube (Patent No.5808689)

Width of earthquake
vibration

The seismic base-isolation
structure absorbs the shaking
from the ground

This construction method increases
the earthquake resistance of
platform wood-frame construction
by about 30% by installing a column
in each of the four corners of astructure to reinforce them. The
method was developed by Sumitomo
Realty with cooperation from
Kogakuin University professor
emeritus Kenji Miyazawa, Dr. Eng.,and Arup, a comprehensive
engineering consultancy.

Automatically stop at the closest floor in the event ofan earthquake

Elevator safety device
Water supply available even if the pump stops

Useful for extinguishing fireFire cistern

Water supply measures in theevent of a disaster

Securing water for domestic use, such as for a toilet

Available even in power outage

Emergency wells

Disaster-ready vending machines

Useful in the event of a disaster

Emergency toilets connectable toa manholeFor emergency rescue

In the event of an emergency, such as an earthquake
Emergency supplies

Provided to each household

First-aid kit

Emergency backpack

Long-life drinking water

Helicopter hovering space

In this method, building deformationis reduced by up to about 55% byattaching seismic control systems to
the upper part of L-shaped
reinforced concrete walls integrated
with the foundation and binding
them to the second story floor.

New Power Cube

Super Power Wall StructureThis construction method adds
single-ply walls to platform woodframe structures to increase
earthquake resistance performanceof outer walls by about 30%.

Seismic Control System
The system reduces tremor by about
50% by using rubber that has
unique viscoelasticity in dumpers toabsorb seismic energy without
resisting it. It also makes homes
sturdy against aftershocks.

External
wall panels
External wallfinishing material
Super Power Wall Structure

MAMORY Seismic Control Device
MAMORY is a seismic control device
for wooden homes used in aconstruction method jointly
developed by the Company and
Sumitomo Rubber Industries, Ltd. By
absorbing seismic energy instantly
through the use of special highdamping rubber, it makes homes
particularly resistant to a successionof strong earthquakes. It can beinstalled in pillars of existing homes
without damaging them to add aseismic control function to them.

Seismic Control System

MAMORY

Sumitomo Realty & Development Co., Ltd.

35

Sustainability

Relevant SDGs

For Environmentally Friendly Community Development
PolicyInitiatives to achieve ZEH and long-life houses

The Sumitomo Realty Group has been contributing to the solutions for social and environmental issues through its
businesses on the basis of its fundamental mission to “create even better social assets for the next generation.”
We recognize that environmental issues such as climate change caused by effects of greenhouse gases and resulting
increase of storms and floods, water shortage, environmental pollution, high-volume discharge of waste material andsquandering of resources, and destruction of ecosystem, constitute substantial social issues that must be given due
consideration when conducting business activities. As such, we take actions to address those issues, working in
conjunction with our stakeholders including suppliers and tenants.

In its construction businesses, Sumitomo Realty promotes greater prevalence of residences thathave a minimal environmental load. We have made the Net Zero Energy House (ZEH)*1 concept areality by curbing energy consumption with stringent specifications for thermal insulation andairtight design and installing equipment that generates energy such as Eco-Cute systems,
photovoltaic power generation facilities, and storage batteries. We also install home energy
management systems (HEMS)*2 that enable residents to visually monitor their power consumption.
Moreover, our buildings constructed under BREATH NEXT high-performance package plans
have been well-received by our customers given that they boast 1.5 times the thermal insulation
performance of that under ZEH standards (relative to the UA value*3; “BREATH NEXT”: 0.38 W/
m²K; ZEH standard: 0.6 W/m²K*4).
We keep working to achieve more sophisticated technologies going forward, in part throughparticipation as a member of the Investigation Committee of HEAT-20*5.
In addition, we use specification standards under the “long-life quality housing”*6 certification
standard (measures against deterioration grade 3, thermal insulation performance grade 4,
upkeep grade 3, earthquake resistance grade 3). We will help reduce industrial waste by extending
the rebuilding cycle as a result of supplying this highly durable housing.

Initiatives to achieve a low-carbon society
The total amount of energy consumed by Sumitomo Realty is increasing each year as it gains further asset holdings. On the other hand, we have reduced
our per-unit energy consumption (energy consumption per unit of leased floor area) by constructing new buildings featuring substantial environmental
performance and continuously improving environmental performance by renovating existing buildings after they reach a certain age. We strive to achieve
our targets through various actions as below.
Energy Consumption Volumes① Floor aream2

② Energy consumption (crude oil equivalent)㎘③ Per-unit energy consumption (②÷①)

㎘/m2④ Adjusted greenhouse gas emissions (derived from energy consumption (SCOPE1&2)

t-CO2

Adjusted greenhouse gas emissions (SCOPE1)
Adjusted greenhouse gas emissions (SCOPE2)⑤ Adjusted per-unit greenhouse gas emission (④÷①)

t-CO2
t-CO2
t-CO2/m2

2017
3,126,500
120,403
0.03851
244,330
17,487
226,8430.078152018
3,263,337
123,5160.03785
240,243
19,603
220,6400.073622019
3,616,572
135,3200.03742
254,276
18,806
235,4700.07031

Actions
LED lighting & brightness sensors● Adoption of gas co-generation systems● Roof greening● Photovoltaic power generation facilities● Visualmonitoring of energy consumption
through adoption of building energy
management systems (BEMS), etc.
●

* The scope of data collected for calculation for energy consumption and greenhouse gas emissions encompasses facilities for which report is required under the
Act on Rationalizing Energy Use.

TARGET

1. Reduce the per-unit energy consumption and per-unit greenhouse gas emissions by 1% per year or achieve the benchmark
2. Achieve 3% reduction by fiscal year 2021 in comparison with fiscal year 2018
Per-unit energy consumption reduced by more than 1% per year over the last 5 consecutive years (1.2% reduction in fiscal year 2018 YoY)
Per-unit energy consumption reduced by 25% in comparison with 2009 when we initially disclosed such information● Per-unit greenhouse gas emissions reduced by 4.4% (in fiscal year 2018 YoY)
● We gained S rank (excellent business operator) certification*, which is the highest ranking given for efforts taken to conserve energy under the Act
on Rationalizing Energy Use over the last 2 consecutive years (*The certification requires that an entity either maintain annual reductions in per-unit energy●*1 ZEH stands for Net Zero Energy House, which refers to a house that effectively consumes zero energy by
combining elements of energy savings with elements of energy generation.
*2 HEMS stands for Home Energy Management System, which is a management system that helps save energy
used in the home. Linking home appliances and electrical equipment to an HEMS enables users to visuallyobserve such devices using a video monitor that tracks consumption of electricity, gas and other energy
sources, and also enables users to automatically control home appliances.
*3 A “UA value” is the rate of average heat flow across a building’s envelope. It constitutes the average amountof heat that escapes from the inside of a house through its floor, outer walls, ceiling and roof, gaps, andelsewhere, to the outside across the entire building envelope.

2016
Building
EnergyEfficiency Act
Standard

ZEH
Standard

lowthermal insulation

HEAT
20
Standard

high

HEAT-20, exceeding ZEH standards

HEAT-20 is a new set of standards for next-generation
housing built with the aim of reducing energy
consumption by better insulating houses. The HEAT-20
thermal insulation standards exceed the Net Zero Energy
House (ZEH) standards proposed by the government.

*4 The ZEH standard of 0.6 W/m²K (watts per square meter per degree Kelvin) is used as a standard value inJapan’s Kanto region, which is the main geographic area where Sumitomo Realty supplies custom homes.
*5 HEAT-20 refers to the Investigation Committee of Hyper Enhanced Insulation and Advanced Technique for2020 houses. It aims at: developing advanced technologies for achieving high-performance thermal shelters forhousing while maintaining health and improving comfort of residents, and; raising awareness of assessment
methods and thermally insulated housing. To such ends it takes a long-term perspective to focusing on thermal
insulation and other architectural technologies geared to achieving further energy savings in homes.
*6 “Long-life quality housing” refers to a certification system operated by Japan’s Ministry of Land, Infrastructure,
Transport and Tourism (MLIT) pursuant to the Act on the Promotion of Popularization of Long-life Quality
Housing which aims at a transition to a “stock-type society.”

Acquisition of Green Building Certification
Including our flagship buildings granted Green Building Certification
listed below, Sumitomo Realty owns numerous buildings that maintainenvironmental performance at a level satisfying certification standards.

●

HIGHLIGHT

consumption amounting to at least 1% or otherwise achieve specified benchmark levels)

CASBEE top-grade “S”(Excellent) ranking(self-assessment)

Initiatives for conservation of water resources
Under the awareness of the value of water resources, we are taking action
to conserve water resources, working in conjunction with our respective
stakeholders including suppliers and tenants.
Water Consumption Volumes① Floor area
② Tap water consumption③ Per-unit water consumption
（②÷①）

m2
㎘
㎘/m2

2017
3,049,048
2,255,859
0.73992018
3,169,967
2,372,610
0.74852019
3,512,864
2,589,444
0.7371* The scope of data collected for calculation for water consumption encompasses in portions of office buildings
from among facilities for which report is required under the Act on Rationalizing Energy Use.

Waste Discharge Volumes① Floor area
② Total waste volume

Industrial waste
General waste③ Per unit waste volume
（②÷①）

m2
t
t
t
t/m2

2017
3,003,138
14,652
10,6703,983
0.00492018
3,112,276
15,428
11,1644,264
0.00502019
3,456,972
17,721
13,2094,512
0.0051* The scope of data collected for calculation for waste discharge volumes encompasses in portions of officebuildings from among facilities for which report is required under the Act on Rationalizing Energy Use.

Recycling Volumes
Volume of recycled waste
Total waste volume
Percentage of waste recycled

36

t
t
%

2017
7,819
14,652
53.4

2018
8,363
15,428
54.2

2019
9,289
17,721
52.4* Figures for volume of recycled waste include thermal recycling only if they are non-combustible materials.

Integrated Report 2020●

Tokyo Nihombashi Tower●

Sumitomo Fudosan Roppongi Grand Tower●

Sumitomo Fudosan Shinjuku Grand Tower●

Tokyo Nihombashi Tower●

Sumitomo Fudosan Roppongi Grand Tower●

Sumitomo Fudosan Osaki Garden Tower

Actions
Installation of water-saving toilets to reduce water used to flush
toilets (reducing from 13 liters to less than 6 liters in single flush,
compared to prevalent toilets installed around the year 2000)● Equipping washbasin faucets with water-saving devices●	Setting up sewage and rainwater reclamation facilities, mainly inlarge office buildings, that purify the water for use in flushing
toilets and watering plants, etc.

Tokyo Nihombashi
Tower

Sumitomo Fudosan
Shinjuku Grand Tower

Sumitomo Fudosan
Roppongi Grand
Tower

Sumitomo Fudosan
Osaki Garden Tower●

Initiatives for waste reduction
We are taking action geared to reducing waste, and making effective useof resources, working in conjunction with our respective stakeholders
including suppliers and tenants.

DBJ Green Building
Certification

Actions
Encouraging tenants to separate theirgarbage by using posters and othermeans●	Increasing the amount of recycling by
double-checking that garbage has
been appropriately separated inconjunction with cleaning
service providers● Recycling items such as batteries,
fluorescent lights, styrofoam, metals,
PET bottles, cans, glass bottles, andwaste paper in appropriate formats,etc.
●

Development that protects and makes the most ofvirgin forests

Contribution of CO2 emission credits

Urban development projects tend to involve the removal of mature treesthat are already on sites earmarked for development. In contrast,
Sumitomo Realty seeks to preserve such trees so that they can be utilized
as greenery to accomplish attractive urban development in harmony withnature. La Tour Sapporo Ito Garden was developed on the site formerly
occupied by Kairakuen, one of the first municipal parks in Japan. The site
includes a tract of virgin forest conserved since the time of Kairakuen andremains notable as a place where nature flourishes in an urban setting.

Sumitomo Realty has generated CO2 credits upon having reduced its CO2
emissions by more than the required volume under the Tokyo Cap-andTrade Program. In November 2019, we contributed 100,000 t-CO2 worthof such credits to the Tokyo Metropolitan Government, thereby
supporting Tokyo’s initiatives to achieve its environment conscious city
“Zero Emission Tokyo” aiming at eliminating carbon dioxide emissions.

La Tour Sapporo Ito Garden entrance hall (left) and exterior (right)

The appreciation certificate presentation ceremony by the Tokyo Metropolitan Government

Image of poster

Sumitomo Realty & Development Co., Ltd.

37

Sustainability

Relevant SDGs

Urban Development that Contributes to the Community
PolicyTown management of the Izumi Garden district

The business of developing and operating real estate properties can only be possible through cooperation with people in
the local community. In order to build solid, lasting relationships with local communities and contribute to thedevelopment of regions, the Sumitomo Realty Group engages in a variety of activities that contribute to local
communities and society through its business activity.

Sumitomo Realty is engaged in town management to make the Izumi Garden district attractive to workers, residents and visitors in each season toincrease the value of the district and give it a lively atmosphere. The initiatives have included events held jointly with operators of nearby buildings andthose held with TV Tokyo and BS Japan, which are our tenants.

Contributing to the society and community through redevelopment projects
Through our redevelopment projects, we contribute to revitalization and improvement of convenience for the community. IZUMI GARDEN redevelopment
project, which comprises two redevelopment areas, one surrounding Izumi Garden Tower and the other surrounding Sumitomo Fudosan Roppongi Grand
Tower, is one of such projects.

Overview of IZUMI GARDEN large urban block
Roppongi-itchome Station

Roppongi Grand Plaza

Cherry blossom Festival

Cherry blossom Festival

Disaster-Prevention Fair

Rokuichi Illumination Christmas

Summer Festival

Izumi Marché

Izumi Garden Residence

Commercial building

Art museum

Izumi Garden Tower
Office building

Office building

Sumitomo Fudosan Roppongi Grand Tower
Hotel

Residential building

Roppongi Grand Tower Residence

Other regional and social contribution activity
Previous “IZUMI GARDEN” district

Charity concert

New, expanded IZUMI GARDEN large urban block

Izumi Garden Tower Redevelopment
The western area of Roppongi 1-chome was not used as a business
district because of a lack of geographical continuity due to a height gap
reaching up to 20 meters.
This project realized flexible land use that takes account ofcharacteristics of each urban block and harmony with the surrounding
areas under the concept of an “open town development,” achieved
through discussions with about 100 landowners and administrative
officials from the Minato Ward and Tokyo metropolitan governments.

Roppongi Grand Tower Redevelopment
The urban block centered around Sumitomo Fudosan Roppongi Grand
Tower had been inconveniently situated without a train station exit
directly connected to it and had pedestrian safety concern due to narrowroads.
The Sumitomo Fudosan Roppongi Grand Tower Redevelopment
project solved these issues by redeveloping the district to make it an areain front of the station that is highly convenient with disaster-prevention
features.

Sumitomo Real Estate Sales Co., Ltd. has been hosting Step Concerts, aseries of classical concerts for families, since 1987, as part of its charity/
volunteer activity. The concerts, which have invited a cumulative total of
about 230,000 people, were designated a child welfare cultural asset
recommended by the Social Security Council of the Ministry of Health,Labour and Welfare in 1996, which recognized them as particularly
outstanding as a series of concerts for improving children’s welfare. The
concert also runs fundraising drives at its venues from which donations
have been made to the Japanese Red Cross Society to support
earthquake-affected regions across Japan and the Japan Service Dog
Association to raise service dogs.

Support of open innovation projects between
startups and large companies
In recent years, there are increasing
moves of open innovation in whichlarge companies and startups work
together to create new value. In
December 2019, Sumitomo Realty
and Sumitomo Mitsui Banking
Corporation jointly held an open
innovation event named Reverse Pitch.
The event’s biggest feature is the
adoption of a reverse approach where large corporations stimulate
startups with information, contributing to promoting innovation throughsupport of startups.

Shinjuku Creators’ Festa
Key points of the Izumi Garden Tower Redevelopment Project● Providing spaces for community members to encounter greenery and culture incentral Tokyo● By including the Roppongi-itchome station to the development area, it created a
spacious underground square, conveniently connected to the subway station● A terrace square utilizing the difference in elevation and placing characteristic shops,
where people can feel liveliness of the city

38

Integrated Report 2020

Solution for the challenges facing the community
The project has improved pedestrian flows in the area by redeveloping the district andthe area in front of the station together, and created a west exit to the station.
Convenience was enhanced through a new station square measuring 1,280m2 and theintroduction of a commercial complex.
● Multiple elevators installed to address height gaps and as a barrier-free measure● A new 2,400m2 square rich in greenery created with a walkway allowing
pedestrians to enjoy greenery even in central Tokyo● Widening the sidewalks from 6m to 12m, and underground installation of
power transmission cables, to ensure that pedestrians can walk safely and comfortably

Tokyo’s Shinjuku Ward office annually holds a Shinjuku Creators’ Festa
for the goal of making the ward more attractive through art, performing
a makeover, giving it additional liveliness and revitalizing it. In support ofthis goal, the Company has supported the event as a member of its
executive committee since 2016. In this event, many artists put theirwork on show in wide-ranging art events held in public spaces andfacilities, as well as privately owned facilities, surrounding Shinjuku
Station. In the fiscal year 2019, the Company posted a huge picture of
the “Shinjuku Ward tourism ambassador Chibi Godzilla” mascot on thesurface of Shinjuku Sumitomo Building.

Local hiring activity
The Sumitomo Realty Group is actively hiring employees locally. Especiallyin the Shinchiku Sokkurisan remodeling business, our offices across thecountry hire many local residents, as well as use business partners who
understand the characteristics of their respective regions so that they can
improve customer satisfaction by offering products and services best
suited to the region.
Sumitomo Realty & Development Co., Ltd.

39

Sustainability

Relevant SDGs

Human Rights and Diversity
PolicyPromoting diversity

The Sumitomo Realty Group believes that the realization of diversity based on the protection of human rights isessential for the sustainable growth of businesses. We strive to achieve diversity, working together with business
partners, tenants and other stakeholders.

Structure for Risk Management Related to Human Rights and Diversity
We have a Risk Management Committee chaired by the President. The Internal Control Meeting under it monitors different aspects of our compliancepromotion activities, such as human rights, labor standards and anti-corruption such as bribery. Risks are monitored and addressed by relevant divisions
and subsidiaries, while important matters are discussed and determined at principal meetings, including the Board of Directors and other management
meetings.

Human Rights
We have established the Sustainable Procurement Guidelines on humanrights, which are especially important for its business, to make all
employees and business partners aware of the issue.

Basic Policy of Human Rights●

We endorse and respect international standards on human rights
and labor, including the International Human Rights Charter, theInternational Labour Organization Declaration on Fundamental
Principles and Rights at Work, and the Guiding Principles on
Business and Human Rights, etc.

We prohibit discrimination or harassment based on any of thefollowing aspects and respect rights: race, nationality, religion,
gender, sexual orientation/identity, disability, social status, age, or
medical history.
We do not engage in child labor or forced labor.
We manage working hours within appropriate limits and prevent
overwork.
● We respect the freedom of association and rights to collective
bargaining.
● We pay wages above the minimum wage standard set by eachcountry and work to stabilize employees’ lives.
● We take measures and raise employee awareness to prevent
occupational accidents.

Efforts to prevent child labor and forced labor
The Sumitomo Realty Group works to prevent child labor or forced laborby respecting the Children’s Rights and Business Principles and making
sure all employees are aware of its basic policy on human rights.

Payment of wages above minimum wages
The Sumitomo Realty Group pays wages above minimum wages.

Providing fair employment opportunities
Sumitomo Realty offers internship programs for students aspiring towork for us upon graduation. In hiring, we provide fair employment
opportunities without discriminating individuals based on race, religion,
creed, sexual orientation, origin, region, etc.

●

Expanding Women’s Roles

Child/nursing care support

We formulated an action plan in accordance with the Act on Promotionof Women’s Participation and Advancement in the Workplace to increase
the ratio of women among new hires. Our target is to increase the ratioof women among new hires for sales and engineering positions, two job
categories with promising career opportunities for women, to 25% and
8%, respectively, in the period from April 2016 to March 2021. As
shown in the tables below, the ratio has improved every year, and weachieved the target as of March 31, 2019, ahead of the plan. We willcontinue our efforts to create a workplace where women areempowered.

Sumitomo Realty has various support programs to realize a workplaceenvironment that makes it easy to work for people who have family
situations, such as the need for childcare or nursing care of family
members, etc.

Number of employees
2017

2018

2019

Male

4,100

4,200

4,298

Female

1,460

1,532

1,543

Total

5,560

5,732

5,841

Percentage of nonregular employees

18.8%

18.4%

18.1%

* Non-consolidated figures at the end of each fiscal year

Percentage of female employees and female managers
Female employees

26% (as of the end of March 2019)

Female managers

3.8% (as of the end of March 2019)* Non-consolidated figures

2016

2017

2018

2019

Sales positions

17.9%

20.7%

23.7%

26.5%

Engineering positions

5.4%

8.2%

9.2%

9.2%

The Sumitomo Realty Group conducts training on human rights for all
new employees, distributes a compliance handbook and conducts
compliance training for all employees. In the fiscal year ended March 31,
2019, 7,440 employees, including those at Group companies,
participated in such training. The Group has a structure in which
violation of human rights are detected and addressed promptly throughan internal consultation desk and two whistleblowing desks operated by
the Internal Audit Division and an external attorney-at-law. Any report ofviolation is dealt with fairly and strictly, under strict legal protection of
the whistleblowers with their privacy maintained.
No incidents constituting human rights violation were found in thefiscal year ended March 31, 2019.

40

Integrated Report 2020

Compliance Handbook

Employment of people with disabilities

This booklet describes behaviors incompliance with laws and regulations under
given situations, with a goal to help
employees develop such behaviors. Its
content is updated as necessary.

We actively hire people with disabilities. In June 2019, 2.39% of our newhires were people with disabilities, exceeding the 2.2% required under
the system on employment rate of persons with disabilities. We currently
conduct local hiring and local assignments of people with disabilities inTokyo and 27 prefectures without discriminating age, gender or region.
In order to make workplaces comfortable to work in for people withdisabilities, we have installed multipurpose bathrooms and barrier-freeelevators.

Key subjects:
Human rights, corrupt practices such asbribery, regulations on advertisement

Number of employees working
shorter hours

60 (as of the end of March 2019)

Number of employees who took
nursing care leave

3 (as of the end of March 2019)

Number of employees who tookchildcare leave

130 (as of the end of March 2019)

Percentage of employees who
returned to work after taking
childcare leave

100% (results for the year ended March 31, 2019)* Non-consolidated figures

Expansion of opportunities for elderly workers
Sumitomo Realty is expanding opportunities for elderly employees to put
their rich experience to work by hiring new employees aged 60 or older
and rehiring retirees.

Promoting diversity in different businesses

Percentage of female employees in new hires●

Ensuring human rights protection

Childcare and nursing care support system and the result

We take the measures below to promote diversity in our office building,event hall and other businesses, not just in its own organization, but also
among our tenants, business partners and other users.

Example of our initiatives
Personal boxes, or small lockers for women to keep personal
belongings, installed at women’s bathrooms in new office buildings● Barrier-free elevators and slopes installed if deemed necessary toallow people with disabilities to move freely in all new officebuildings● Day care facilities set up in some offices● Floor maps and guides shown in multiple languages at large officebuildings and hotels●

Sumitomo Realty & Development Co., Ltd.

41

Sustainability

Relevant SDGs

Health and Safety
PolicyRealizing safe workplaces

The Sumitomo Realty Group believes it is important for a company’s sustainable growth to achieve the following
two goals in its working environment, and takes the following initiatives to realize them.
①To create an environment where employees can stay healthy, safe and lively, as well as maximize their potential②To develop human resources, which form the foundation for a company’s development, by actively working todevelop employee skills

Management Structure:
The Industrial Safety and Health Act requires a workplace with 50 employees or more to set up a safety and health committee. The Sumitomo Realty
Group has a stricter standard than this statutory standard, requiring each workplace with smaller numbers of employees to set up a safety and healthcommittee. The committee conducts surveys and deliberations on safety and health in a process attended by members recommended by employee
representatives.

Realizing healthy workplaces
Employees’ health

Measures to prevent overwork

In addition to financial support for employees receiving a comprehensive
medical checkup and free-of-charge influenza vaccination, we conduct
an annual health checkup of all employees.
Furthermore, employees can seek advice from medical specialists
free of charge about mental and physical health over the phone or face
to face. Employees’ working hours are strictly managed to prevent
excessively long hours of work and carefully manage employee health.
Employees who do more than a certain amount of overtime receive a
medical check and an interview by an industrial physician.
Also, as part of the initiatives to support employee health, Sumitomo
Realty is a corporate member of fitness clubs operated by Sumitomo
Fudosan Esforta and encourages employees’ use of those facilities.

We implement the following measures to prevent employee overwork:● Maximum overtime set at stricter levels than standard set by Labor
Standards Act● Employee PCs forced to shut down at 9 p.m.
● Requiring employees to obtain supervisor approval for use of PCs after
9 p.m. or on holidays● Warning about excessive overtime issued to employees and supervisors● Industrial physicians conduct health check-ups based on interview
sheets for employees taking certain amounts of overtime, and giveface-to-face health guidance, if necessary

Performance management regarding health andproductivity management

Sumitomo Realty held the “OFFICE MIRAI SUMMIT” event themed“creating offices that can retain talent,” with a focus on work-stylereforms. Representatives from five of our tenant companies that havesuccessfully secured viable personnel by creating cutting-edge offices
participated in a panel discussion, discussing the future of work andwhat is expected in next-generation offices. We aim to create further
opportunities to send messages in anticipation of the new shape ofbusiness in the future.

Sumitomo Realty manages employee health using third-party verificationand monitoring.
We manage performance using quantitative indicators and takemeasures such as having employees found to have issues through stresschecks receive interviews with industrial physicians.
Health and productivity management performance
2017

2018

2019

Percentage of employees who received
health check-ups

100%

100%

100%

Percentage of employees who received
stress checks*

90.8%

81.8%

89.5%

* Verified and monitored by SB Atwork Corp.

Work style proposals

Realizing safe workplaces
In order to realize safe workplaces, members of the staff dedicated tosafety management regularly patrol construction and management sites
throughout Japan to provide guidance or instruct corrections andconduct safety risk assessment for both existing and new operations asnecessary. Important findings from these visits are reported at the safety
conference attended by about 8,000 individuals, including all our staff
engaging in construction work and business partners, to alert them.
The Construction Safety Management Section works to maintainsafety, by recording numbers of occupational accidents per division andusing them as quantitative indicators, and analyzing their causes in detailto send notices and guidance to prevent recurrence in the event ofoccupational accidents or high-risk incidents. There has been no fatal
occupational accidents involving our employees, including contract
employees, or subcontractors for works we originally contracted over the
fiscal years 2017 to 2019.

Enhancing human resources
Hiring and performance evaluation systems fordiverse human resources
Sumitomo Realty hires diverse human resources with various distinctive
strengths, through recruitment of new graduates as well as mid-career
professionals with emphasis on their expertise and experience. Bonus
assessment is conducted on a uniform basis regardless of age andposition, promotion is not in accordance with the number of years ofservice so as to give young employees opportunities, and the progressive
performance-linked pay with high-percentage commissions, which isamong the highest in the industry. Within the framework of a flexible
personnel system focused on job descriptions and roles, we are working
to create a workplace environment where all employees can display theirfull potential.

Training
We work to expand the knowledge of employees by conducting training
programs in a variety of fields and inform them of a code of conduct
suitable for employees of the Sumitomo Realty Group and ensure theircompliance.
Amount of training programs held in the fiscal year ended March 31, 2019
Total hours spent on training

239,309 hour

Hours spent on training per person

41.2 hour/person

Total training costs¥75,834 thousand* Non-consolidated figures

Content of training programs held in the fiscal year ended March 31, 2019
Personnel training

Industrial hygiene, harassment

Management training

Harassment, labor management, compliance

Labor safety training

Technology guidance, risk assessment* Conducted jointly with Group companies and business partners

New employee training

Company history, business manners, human rights, compliance,industrial health and hygiene

Engineer training

Technology guidance, risk assessment, construction methods

Certification acquisition
training

Support on acquisition of certifications

Challenge system
The Sumitomo Realty Group provides a system in which its employees
can volunteer to take up the challenge of a new job. The system provides
opportunities for growth to highly motivated employees and helps assign
the right individuals to the right positions.

On-the-job training
We work to expand employee knowledge and experience throughinstructions by supervisors and communication with colleagues in theprocess of carrying out duties.

Support for obtaining certifications and attending
external seminars
We help employees improve professional skills by subsidizing the costs ofobtaining qualifications that are relevant to their duties, including realestate transaction agent, architect, chief electricity engineer, building
environment hygiene management engineer, urban renewal planner andenergy efficiency manager licenses, or participating in external seminars.

42

Integrated Report 2020

Sumitomo Realty & Development Co., Ltd.

43

Sustainability

Sustainability

Relevant SDGs

Together with the Stakeholders

COVID-19 Prevention Measures

PolicyPolicyThe Sumitomo Realty Group engages in business that is closely related to people’s daily lives encompassing leasing of
office buildings, sales and leasing of condominiums, real estate brokerage, custom homes, and remodeling. We recognizethat product safety and quality is one of the most important aspects of our business in terms of how it directly affects
people’s lives and property.
Therefore, we take on business initiatives that entail cooperation with our suppliers and business partners involved
in design, construction and building management, with the aim of further enhancing high levels of product safety andquality we have maintained thus far, underpinned by our fundamental mission to “create even better social assets for the
next generation” under the corporate slogan, “Integrity and Innovation.”Managing architectural quality in the contracting
business

Quality control of building management

Managing architectural quality in the condominium
sales businessIn the condominium sales business, we aim to offer premium
condominiums by engaging in the following initiatives.
Verifying initiatives involving quality control of design andconstruction companies● Ensuring that design and construction companies are familiar withand have a shared understanding of the Company’s quality
standards for design and construction work
● Front-loading*1 of design and construction for each phase of work,
based on past experience●*1 The term “front-loading” refers to the task of meticulously ensuring quality by verifying tasks
involved at each phase of work extending up to completion, acting in conjunction withdesign and construction companies at the initial phase of construction.

Integrated Report 2020

For our customers’ safety

Sumitomo Realty practices high-quality building management byleveraging the expertise it has accumulated as Tokyo’s No.1 officebuilding owner with more than 230 buildings in central Tokyo.
Employees of Sumitomo Realty directly oversee managerial affairs andotherwise keep issues in check by performing periodic maintenance andpreventative repairs on structures and facilities. The Company also
develops frameworks for uniformly improving management quality
whereby information regarding incidents occurring in individual buildings
is shared amongst all of the employees for other buildings.
When it comes to cleaning, managers of each building and cleaning
staff from the Company conduct cleaning inspections several times
annually. The Company takes concrete action to improve quality which
involves precisely scoring inspection results using an itemized pointsbased approach, clearly stating areas subject to improvement using
quantitative benchmarks, and revising cleaning schedules accordingly.

Quality control of condominium management
Sumitomo Fudosan Tatemono Service Co., Ltd. undertakes management
services entrusted to it by condominium management associations. It hasestablished a framework that enables it to quickly respond to the needsof management associations and residents through its 24-hour customer
center, as well as having its employees patrol facilities on a daily basis.
Moreover, we also strive to bring about uniform managerial
standards and improve those standards. To such ends, we maintain a
training center capable of holding workshops and facilitating casestudies, upon having developed a detailed manual of business
operations.
In addition, we have set up websites exclusively for residents, andoffer a swift support service for promptly addressing issues such as
repairs of tenant-owned areas of condominiums, a cleaning service, andhousekeeping services. These efforts to offer greater lifestyle
convenience and abundance have been well received by residents.

Customer feedback
In managing and operating its
buildings and condominiums,
Sumitomo Realty Group incorporates
opinions received from its customers
and opinions obtained through its
customer center in its productplanning and renovation work.

44●

Building management quality

Updating product lists in conjunction with suppliers, using products
and components that align with the Company’s product safety andquality standards as a general rule
● Engaging in construction quality control at each phase of work andinspection upon completion, on the basis of construction standards
for each business● Instructing design and construction contractors to take corrective
action as necessary● Performing periodic follow-up inspections after completion● Holding periodic meetings on sharing technology enlisting
participation of all construction managers● Implementing periodic technical training involving construction
contractors for the respective construction jobs

In order to protect our employees from infections while continuing our operations, we take the following
measures.
●

Architectural quality●

For our employees’ safety

Requiring to wear face masks at all times and measure temperature every morning
Requiring to refrain from taking business trips where possible, and actively use online conferencing● Requiring to adopt staggered working hours or telecommuting, and maintain social distance in workplaces

Initiatives for quality

In the contracting business, which includes the housing construction
business (custom homes and Shinchiku Sokkurisan remodeling) andinterior work for tenants, we aim to improve design and construction
quality acting as a prime contractor by engaging in the following
initiatives.

At the Sumitomo Realty Group, we prioritize health and safety of customers, business partners and employees andoperate business only after we take measures according to government policies and industry guidelines in each of ourbusinesses to ensure that customers can use our service without worries.

Voice ofthe customer

Feedback
meeting

In order to ensure that customers can feel safe while using our service, we take basic measures, such as requiring face masks and hand sanitizers in all ofour businesses. In addition, we take the following infection prevention measures designed to suit characteristics of each business area.
Business

MeasuresUrging users to maintain social distance in the elevators using posters
Suspending the use of air hand-dryers in bathrooms● Regular checks on ventilation efficiency and improvement, using results of air environment measurement●

Building leasing
Condominium Sales
Housing Construction
Real Estate Brokerage●●●

Introducing reservation-only system
Use of acrylic panels to prevent droplet infection at sales offices

Sanitization of rooms using ozone sterilizers and air purifiers set up in all rooms
Buffet meals replaced with menu-based orders● Requiring guests to fill out a medical questionnaire form at check-in●

Hotel management●

Providing rental of thermographic cameras
Proposal of layouts that maintain a certain distance between visitors● Measures to minimize contact between visitors at venues, including use of dedicated elevators andreserving of entire floors●

Multipurpose Hall●

Temperature measurement device with facial recognition installed
Limiting the number of lockers used and increasing the frequency of ventilation of each area
● Remote studio lessons●

Fitness club management

Topic

●

Remote Condominium Sale Service Started

As a new way of selling newly built condominium units during and after the coronavirus
pandemic, we introduced a remote condominium sale service for our sales business from
June 1, 2020, in which the entire purchase process is completed without having todirectly face sales staff, from a tour of the unit to its delivery.
The service allows customers to purchase condominiums safely, at their request, byavoiding directly facing sales staff in all phases of purchase, from the initial step ofcollecting information about a unit, tour of the model room, submission of application/
signing of the contract, briefing on important matters to delivery.

Example of services offered online
Introduction of unit; information on surrounding
environment● Video of the model rooms● Route from nearest station to the building (video)● Detailed financing plans; housing loan consultation● Questions and answers, etc.
●

Review ofmanagement,
sales, and after-sales
service systems

Review ofarchitecturaldesign criteria

Flow of remote condominium sale service
Web brochure and video presentation▼

Online tour▼

Application submitted (web)▼

Briefing on important matters using IT (web)*▼

Contract signed (by postal mail)▼Delivery (by postal mail)*A pilot experiment by the Ministry of Land, Infrastructure, Transport and Tourism
for briefing on important matters using IT (started from October 1, 2019).

Sumitomo Realty & Development Co., Ltd.

45

Corporate Governance
Board of Directors and Statutory Auditors (As of September 30, 2020)
Apr 1970 Joined the Company
Jun 1998 Director
Jun 2007 Director - President
Sept 2019 Director - Chairman of the		Board (present)

Outside Director

President

Outside Director

Kenichi Onodera

Kojun Nishima*

Yozo Izuhara

Nobuaki Takemura*Apr 1981 Joined the Company
Jun 2008 Director
Jun 2010 Representative Director(present)
Jun 2013 Director - Deputy President(present)
Mar 2016 Head of Management Division(present)(Significant concurrent positions outside
the Company)
Director of Sumitomo Real Estate Sales Co., Ltd.

Apr 1983 Joined the Company
Jun 2009 Director
Jun 2010 Representative Director(present)
Jun 2013 Director - Deputy President(present)
Nov 2017 Head of Residential Business
Division (present)

Apr 1985 Joined the Company
Sept 2016 Head of Urban Property
Development Division(present)
Jun 2018 Director (present)
Apr 2020 Senior Managing Executive
Officer (present)

Director/
Senior Managing Executive Officer

Hiroshi Kato

Hisatoshi Katayama
Apr 1985 Joined the Company
Jun 2011 Director (present)
Nov 2019 Head of Planning Division(present)
Apr 2020 Senior Managing Executive
Officer (present)

Director/
Senior Managing Executive
Officer

Koji ItoManaging Executive Officer

Executive Officer

Ryuzo Amemiya

Ichiro Wada
Hiroyuki Hashizume
Makoto Nakano
Takuji Iba

Integrated Report 2020

Nobumasa Kemori

Apr 1984 Joined the Company
Jun 2013 Director (present)
Apr 2019 Representative Director President of Sumitomo Real
Estate Sales Co., Ltd. (present)
Apr 2020 Senior Managing Executive
Officer (present)(Significant concurrent positions outside
the Company)
Representative Director - President of
Sumitomo Real Estate Sales Co., Ltd.

Sept 1980 Joined Sumitomo Metal
Mining Co., Ltd.
Jun 2007 President, Representative
Director
Jun 2013 Chairman, Representative
Director
Jun 2017 Executive Advisor (present)
Jun 2019 Director of the Company(present)(Significant concurrent positions outside
the Company)
Executive Advisor of Sumitomo Metal
Mining Co., Ltd.
Outside Director of NAGASE & CO., LTD.
Outside Director of JFE Holdings, Inc.

Statutory Auditors
Apr
Jun
Jun
Jun

1973 Joined the Company
2002 Director
2007 Executive Managing Director
2011 Statutory Auditor (present)

Apr 1983 Joined the Company
Jun 2013 Executive Managing Director- President of Sumitomo Real
Estate Sales Co., Ltd.
		
Director of the Company
Jun 2019 Statutory Auditor (present)

Masato Kobayashi*

Director/
Senior Managing Executive Officer

Yoshiyuki Odai

Outside Director

Deputy President

Apr 1984 Joined the Company
Jun 2013 Director (present)
Sept 2016 Head of Shinchiku - Sokkurisan
Remodeling Division (present)
Apr 2020 Senior Managing Executive
Officer (present)

Director/
Senior Managing Executive Officer

Apr 1962 Joined Nippon Sheet GlassCo., Ltd.
Jun 1998 Representative Director,
President
Jun 2004 Representative Director,
ChairmanJun 2010 Executive Advisor
Jun 2012 Honorary Senior Advisor
Jun 2014 Statutory Auditor of theCompany
Jun 2019 Director of the Company(present)

Apr 1984 Joined the Company
Jun 2009 Director
Jun 2010 Representative Director(present)
Jun 2013 Director - President (present)
May 2017 Head of Building Development
Division(present)

Chairman of the Board

Deputy President

46*Representative Director

Statutory Auditor

Statutory Auditor

Yoshifumi Nakamura

Toshikazu Tanaka

Outside Statutory Auditor

Yoshiyuki Norihisa

Apr 1969 Joined Sumitomo Construction
Co., Ltd.
Apr 2003 Managing Director of Sumitomo
Mitsui Construction Co., Ltd.
Apr 2010 Representative Director,
President & CEO
Apr 2015 Representative Director,
ChairmanJun 2018 Executive Advisor (present)
Jun 2019 Statutory Auditor of theCompany (present)

Outside Statutory Auditor

Chiyono Terada

Jun 1976 Founded Art Hikkoshi Center
Jun 1977 Established Art Hikkoshi Center
Co.,Ltd. (Currently, Art
Corporation), President and CEO
Apr 2018 President and CEO of Art Group
Holdings (present)
Dec 2019 Chairperson Emeritus of Art
Corporation (present)
Jun 2020 Statutory Auditor of theCompany (present)(Significant concurrent positions outside
the Company)
President and CEO of Art Group Holdings
Chairperson Emeritus of Art Corporation
External Board member of Daikin
Industries, Ltd.

Outside Directors and Auditors’ Relationship with the Company and Reasons for Appointment
Name

Designation as
Independent
Officer

Yozo
Izuhara○Nobumasa
Kemori○

Yoshiyuki
Norihisa○

ChiyonoTerada○Reasons for Appointment and Supplementary Explanation of the Relationship
Mr. Izuhara has a wealth of managerial experience at another company. In view of his personality, insight, experience, etc., the Company judges he is suitable andqualified to serve as an outside director and has appointed him to that position.
Mr. Izuhara previously worked for Nippon Sheet Glass Co., Ltd., with which the Company has some transactions, etc. Considering the scale and nature of suchtransactions, the Company judges it is unlikely the relationship would have any impact on decisions of shareholders and investors.
Mr. Kemori has a wealth of managerial experience at another company. In view of his personality, insight, experience, etc., the Company judges he is suitable andqualified to serve as an outside director and has appointed him to that position.
Mr. Kemori previously worked for Sumitomo Metal Mining Co., Ltd., with which the Company has some transactions, etc. Considering the scale and nature of suchtransactions, the Company judges it is unlikely the relationship would have any impact on decisions of shareholders and investors.
Mr. Norihisa has a wealth of managerial experience at another company. In view of his personality, insight, experience, etc., the Company judges he is suitable andqualified to serve as an outside statutory auditor and has appointed him to that position.
Mr. Norihisa previously worked for Sumitomo Mitsui Construction Co., Ltd., with which the Company has some transactions, etc. Considering the scale and nature ofsuch transactions, the Company judges it is unlikely the relationship would have any impact on decisions of shareholders and investors.
Ms.Terada has rich experience and wide discernment as a manager at another company. In view of her personality, insight, experience, etc. the Company judges she issuitable and qualified to serve as an outside statutory auditor and has appointed her to that position.
Ms. Terada currently serves as Chairperson Emeritus of Art Corporation, with which the Company has some transactions, etc. Considering the scale and nature of suchtransactions, which amounts to less than 0.1% of sales for either party based on the most recent fiscal year, the Company judges it is unlikely the relationship would
have any impact on decisions of shareholders and investors.

Sumitomo Realty & Development Co., Ltd.

47

Corporate GovernanceMatters concerning Corporate GovernanceCorporate Governance Overview
Fundamental approach to corporate governanceTo achieve sound management, Sumitomo Realty believes that it is important to share information on a companywide basis, ensure that everyone isaware of problems, enhance internal management supervision and achieve highly transparent management through appropriate information disclosure.
We have implemented a number of corporate governance initiatives to realize these practices efficiently.
Institutional design

Company with Auditors

Number of directors (ofwhom outside directors)

10 (2)

Number of statutory
auditors (of whom
outside statutory
auditors)

4 (2)Terms of office of
directors

2 years

Analysis and evaluationof effectiveness of theBoard of Directors

At the meeting of the Board of Directors held on March
30, 2020, analysis and evaluation of the structure andthe operational status of the Board of Directors were
performed, and it was confirmed that effectiveness of
the Board of Directors is secured appropriately.

Opportunities for outside
directors and statutory
auditors for gaining
information

The Company periodically briefs outside directors andstatutory auditors on the industry to which the Company
belongs, the Company’s history, business overview,
financial information, strategies, organizations, etc. andoffers all directors and statutory auditors opportunities
for gaining information necessary for them to fulfill theirroles and responsibilities.

Compensation system fordirectors and statutory
auditors

Performance-based compensation system

Auditing company

KPMG AZSA LLC

Corporate Governance Bodies
The Board of Directors consists of 10 directors, including two outside director. The
Board makes decisions on important Company matters and oversees the directors’
execution of duties. Furthermore, internal information, awareness of issues and othermatters are shared through the Board of Directors, internal meetings and otherforums, promoting quick and rational decision-making.
The Board of Directors as a whole has knowledge, experience, and capabilities
necessary for corporate management, and balance, diversity and scale are securedthat enable swift decision-making.
At the meeting of the Board of Directors held on March 30, 2020, analysis andevaluation of the structure and the operational status of the Board of Directors were
performed, and it was confirmed that effectiveness of the Board of Directors issecured appropriately.
The Company has introduced a system of executive officers comparable todirectors to enable the flexible appointment of officers necessary for the expansion ofbusiness.
The Board of Statutory Auditors has four members, including two outside
statutory auditors. To strengthen management oversight, we continue working toenhance outside auditing. The statutory auditors attend meetings of the Board of
Directors and other important meetings and track internal issues that are important
for robust auditing.
The two outside directors possess a wealth of management experience and were
nominated as a director in light of their appropriate personal character, knowledge
and judgment. The Company has appointed outside directors to further enhance
management efficiency and strengthen the corporate governance structure bycontributing points of view that are not bound by preconceived ideas of the realestate industry and advice from a global perspective. The professional history of the48

Integrated Report 2020

Corporate Governance Structure
General Meeting of Shareholders

Board ofDirectors

President

Departments,
Divisions, etc.

Board of
Statutory
Auditors

Independent
Auditors

Executive
Officers
Committee

Internal
Audit
Divisionoutside director is on page 47.
Both of the outside statutory auditors has abundant management experience atother companies, and they were nominated because their character and knowledge
were considered to be appropriate for the Company’s statutory auditors. The outside
statutory auditors fulfill their roles by expressing objective opinions on governancefrom an independent standpoint from the Company without being influenced byexecutives responsible for operational execution. They also work together to improveauditing by, for example, exchanging opinions as needed with other statutory
auditors, the Internal Audit Division and the independent auditors. At the same time,they provide timely advice and guidance to internal departments associated withinternal control.
Sumitomo Realty does not have standards or a policy regarding independence
from the Company for selecting outside directors and outside statutory auditors.
However, the Company does refer to the Tokyo Stock Exchange’s evaluation standards
regarding the independence of directors and corporate auditors when appointing
such individuals.
The Company periodically briefs outside directors and statutory auditors on theindustry to which the Company belongs, the Company’s history, business overview,
financial information, strategies, organizations, etc. The Company also offers all
directors and statutory auditors opportunities for gaining information necessary forthem to fulfill their roles and responsibilities.
The Internal Audit Division, which has 10 staff members, monitors theoperational execution of divisions throughout the Group and the operation of internal
control systems. The division also works to prevent misconduct and mistakes, andproposes operational improvements. Moreover, the division reports the results of its
audits to the statutory auditors and the independent auditors and exchanges opinionswith them in an appropriate manner. These activities help to improve the quality andefficiency of the audit work of the Internal Audit Division, the statutory auditors andthe independent auditors. At the same time, the Internal Audit Division, the statutory
auditors and the independent auditors provide timely advice and guidance to internal
departments that are associated with internal control.
At meetings with the independent auditor and by means of communications
with the independent auditor, as necessary, the statutory auditors receive information
about audits and reports on the audit plan, audit results, etc. from the independent
auditor, and exchange opinions with them, and moreover exchange necessary
information with them in an effort to achieve smooth and effective audits. The
statutory auditors also monitor and examine whether the independent auditor ismaintaining independence, and is executing appropriate audits.
Reasons for Adopting the Current Corporate Governance Structure
In addition to directors who are well-acquainted with the Company’s business, weestablished a structure in June 2015 for appointing two outside directors for further
enhancement of management efficiency and strengthening of the corporate
governance structure. To strengthen the management oversight system, we have also
adopted a structure for the Board of Statutory Auditors that includes two outside
statutory auditors, and we therefore believe that sufficient corporate governancefunctions are in place.
Although no voluntary committees have been established, the Company has
adopted the following system for strengthening independence and objectivity of thefunctions of the Board of Directors concerning nomination, compensation, etc. ofsenior executives and directors as well as accountability.
Regarding nomination of candidates for positions as senior executives anddirectors, persons with rich experience, high-level insight and sophisticated expertise
who will contribute to the Company’s sustainable growth and medium- to long-term
enhancement of corporate value are selected as candidates, and the candidates are
determined by the Board of Directors based on thorough deliberation, reflecting
independent and objective opinions of independent outside directors and outside
statutory auditors in addition to opinions of internal directors who are familiar with
the Company’s business.
Overview of Limited Liability Agreements
The Company has entered into a limited liability agreement with each of its alloutside directors and outside statutory auditors in accordance with laws andregulations and provisions of the articles of incorporation. Under the agreements,
their liabilities are limited to the minimum limit stipulated by laws and regulations.
Number of Directors
The number of directors of the Company shall be 12 or fewer as specified in thearticles of incorporation.
Requirements for a Resolution of Election of Directors
In the Company’s articles of incorporation, it is specified that a resolution for electionof Directors shall be adopted at a General Meeting of Shareholders by a majority voteof the shareholders in attendance who hold one-third (1/3) or more of the voting
rights of shareholders entitled to exercise voting rights, and the resolution shall not
be adopted by cumulative voting.
Purchase of Own Shares
By the resolution of the Ordinary General Meeting of Shareholders held on June 28,
2007, the Company partially amended the articles of incorporation, and in theamended articles of incorporation it is specified that the Company may purchase its
own shares through market transactions, etc. by a resolution of the Board of Directors.
The purpose is to enable flexible implementation of a capital policy in responseto change in the business environment and to diversify the means of returning profit
to shareholders.
Requirements for Special Resolutions of a General Meeting of Shareholders
In the Company’s articles of incorporation, it is specified that a resolution of a General
Meeting of Shareholders pursuant to Article 309, Paragraph 2 of the JapaneseCorporate Law shall be adopted by two-thirds (2/3) or more of the votes of theshareholders in attendance who hold one-third (1/3) or more of the voting rights ofshareholders entitled to exercise voting rights. The purpose is to ensure smooth
operation of a General Meeting of Shareholders by easing the quorum required forspecial resolutions of a General Meeting of Shareholders.
Interim Dividend
In the Company’s articles of incorporation, it is specified that the Company may pay
an interim dividend with the record date of September 30 of each year by a resolutionof the Board of Directors for flexibly returning profit to shareholders.
Exemptions of Liabilities of Directors and Statutory Auditors
In the Company’s articles of incorporation, it is specified that the Company may
exempt directors and statutory auditors from liability for damages to the Company
within the scope stipulated by laws and regulations by a resolution of the Board of
Directors so that directors and statutory auditors can fulfill the roles and functions
expected of them.
Independent Auditors
In accordance with the Japanese Corporate Law and the Financial Instruments andExchange Act, the Company has concluded an auditing contract with KPMG AZSA LLC
for the auditing of the Company’s accounts.
There are no conflicts of interest between Sumitomo Realty and the independent
auditing company or its employees.
Regarding election of the independent auditor, the Company makes acomprehensive judgment, taking into consideration the appropriateness of the quality
control system, independence of the auditing company, validity of the audit plan andaudit fees, etc.
The statutory auditors and the Board of Statutory Auditors deem that there are
no grounds for dismissal of or refusal to reappoint the independent auditor
concerning the status of independent auditor’s execution of duties, audit system,
independence, etc.
The fees paid to auditing certified public accountants, etc. during the year ended
March 31, 2020 amounted to ¥205 million.
Compensation etc. of Directors and Statutory Auditors
At the ordinary General Meeting of Shareholders held in June 2004, we introduced a
new performance-based compensation system for directors. Under this system, theannual compensation for directors is based on the Company’s performance. The new
system combines the three elements that made up the previous system—monthly
compensation, annual bonuses and retirement allowances.
Under the new system, total annual (July to June) compensation for directors is
set at just 1% of consolidated ordinary profit (The number of directors at the time of theresolution concerning the system was 12).
Allocation to individual directors is thoroughly deliberated at meetings of the Boardof Directors also attended by independent outside directors and outside statutory auditors
before being determined upon agreement by the Chairman of the Board andRepresentative Directors, in consideration of each director’s duties and level of contribution
to performance. The remainder is retained without fixing the amount per director. Upon the
introduction of the executive officer system on April 1, 2020, the Company has decided to
pay compensation for executive officers from the total annual amount of the current
compensation for directors as well.
Compensation of statutory auditors who are independent from businessexecution is in fixed amounts, and is determined to be within ¥6.5 million per monthin accordance with the resolution made at the ordinary general meeting ofshareholders held on June 29, 1999.
In the year under review, compensation for directors (excluding outside directors)
was ¥1,969 million, compensation for statutory auditors (excluding outside statutory
auditors) was ¥30 million and compensation for outside directors and outside
statutory auditors was ¥57 million.
The above-mentioned amount of compensation of directors is not paid to eachof the directors in whole in the year under review, but around 50% of the wholeamount is paid. Payment of the rest is reserved in preparation for retirement benefit
for directors, making up for possible decreases in directors’ compensation if theCompany’s financial performance deteriorates in the future, salaries to be paid topersons who will become advisors or counsellors of the Company after retirement,
etc. Regarding the reserved amount, the timing of payment and the amount for eachdirector or statutory auditor cannot be determined, and thus, the reserved amountwill become subject to calculation of compensation etc. of each director or statutory
auditor upon payment in the future or upon confirmation of future payment.
The total amounts of consolidated compensation, etc. respectively paid toindividuals whose total consolidated compensation, etc. exceeded ¥100 million were:¥2,259 million, including basic compensation of ¥65 million and retirement benefitsof ¥2,194 million, paid to Director Junji Takashima; ¥109 million paid to Director
Kenichi Onodera, and ¥120 million paid to Director Kojun Nishima, all of which werebasic compensation. The retirement benefits of ¥2,194 million was paid from funds
reserved from past fiscal years.
Sumitomo Realty & Development Co., Ltd.

49

Corporate Governance

Other Information concerning Governance
The policy on large-scale purchase of shares of the company (takeover defense measures)
The real estate leasing business primarily involving office buildings in central Tokyo
has been a driving force underpinning the Company’s growth thus far. Given that thisbusiness accounts for nearly 70% of the Company’s operating income overall, it
clearly forms the core aspect of its corporate value acting as a major pillar ofoperations.
The Eighth Management Plan cites as its secondary objective the notion ofsteadily promoting new building development plans in central Tokyo to achieve grossfloor area exceeding 800,000 tsubo (one tsubo is roughly 3.3m2), which constitutes
more than 50% of the 1,520,000 tsubo in gross floor area for leasing as of March
31, 2019. The Company aims to further expand its earnings base, increase its
corporate value and augment shareholder returns by successively completing suchdevelopments and putting them into operation.
Such large-scale development plans involve ultimately generating revenues fromthe substantial amount of cumulative upfront investment made thus far. The Company
has long managed to continuously expand its business platform by developing leasebuildings while avoiding exposure to vicissitudes of the real estate market andbusiness conditions, given that it has normally been buoyed by its leasing businesscash flows which have been a stable source of revenues. As such, the Company needs
to maintain and further expand its cash flows from the leasing business, which havegrown to around ¥200 billion, in order to confidently carry out such upfront
investment without having to continually resort to interest-bearing debt. Moreover, it
is likely to take another six or seven years before the Company achieves full
profitability given that the focus has been on large-scale redevelopment.
Meanwhile, if the Company adopts a short-term management policy to seek
temporary earnings and realizes latent gains by selling real estate holdings prior tohaving accomplished the objectives of the development plans formulated tocontribute to higher corporate value in the future, the leasing business cash flows thatact as a stable revenue source will decrease, thereby exposing the development plans
to financial risk. As such, the Company is unable to rule out a possible threat ofdamage to the foundations of the Company’s corporate value.
The Company’s management policy aims to steadily increase corporate value
based on a medium- to long-term outlook, and is consequently incompatible withsuch short-term goals. As such, if an investor seeking to orchestrate a takeover
emerges, the Company believes that it must seek a mandate from its shareholders
upon having ensured sufficient information and time for completing discussions, andthe Company deems that preliminary development of procedures through “the Policy
on Large-Scale Purchase of Shares of the Company (Takeover Defense Measures)”(hereinafter referred to as the “Policy”) aligns with the common interests ofshareholders. The Policy was adopted based on the decision of the meeting of its
Board of Directors dated May 17, 2007, was continued or renewed upon receiving
approval from shareholders at each of the shareholders’ meetings of the 74th fiscal
year dated June 28, 2007, the 77th fiscal year dated June 29, 2010, the 80th fiscal
year dated June 27, 2013, the 83rd fiscal year dated June 29, 2016, and the 86th

fiscal year dated June 27, 2019. The term of the Policy will expire upon the conclusionof the shareholders’ meeting of the 89th fiscal year scheduled to be held in June
2022.
The Company believes that if a large-scale purchase of the Company shares(“Large-Scale Purchase”) is initiated, the shareholders should decide to accept or
reject the Large-Scale Purchase. In order for the shareholders to correctly recognize
the effect on the corporate value and common interests of shareholders, however, it isnecessary that both the party making the Large-Scale Purchase (the “Large-Scale
Purchaser”) and the Board of Directors of our company provide to the shareholders
necessary and sufficient information, opinions, alternative proposals etc., andnecessary and sufficient time to consider the provided information, opinions,alternative proposals etc.
The Policy sets out rules on Large-Scale Purchases (hereinafter referred to as“Large-Scale Purchase Rules”) and requests the Large-Scale Purchaser to comply with
the Large-Scale Purchase Rules. The Large-Scale Purchase Rules state that the LargeScale Purchaser provide the Board of Directors of the Company necessary andsufficient information regarding the Large-Scale Purchase in advance, and only
commence the Large-Scale Purchase after a certain period of evaluation by the Boardof Directors of the Company has elapsed. The Board of Directors shall takecountermeasures that it deems necessary if the Large-Scale Purchaser does notcomply with the Large-Scale Purchase Rules, or even though the Large-Scale
Purchaser complies with the Large-Scale Purchase Rules, if it is clear that the LargeScale Purchase will cause unrecoverable damages to the Company or if the LargeScale Purchase significantly damages the corporate value and common interests ofshareholders.
Additionally, the Board of Directors of the Company shall consult with a Special
Committee consisting of external academic experts, lawyers, certified public
accountants, etc., and shall receive the recommendations of the Committee when
taking decisions as to whether or not the Large-Scale Purchaser complies with theLarge-Scale Purchase Rules, whether or not it is clear that the Large-Scale Purchasewill cause unrecoverable damages to the Company, whether or not the Large-Scale
Purchase will significantly damage the corporate value and common interests ofshareholders, and whether or not countermeasures should be taken. The Board of
Directors of the Company shall take the Special Committee’s recommendations into
the fullest account.
As stated above, the Policy stipulates rules to secure the necessary informationand time for shareholders to deliberate on the Large-Scale Purchase, as well as
countermeasures if the Large-Scale Purchaser does not comply with the Large-Scale
Purchase Rules or if it is clear that the Large-Scale Purchase will cause unrecoverable
damages to the Company. The purpose of the Policy is not to maintain the status of
the Company's officers but to contribute to the Company's corporate value and thecommon interests of its shareholders.

Timely and appropriate information disclosure and communication with shareholders and investors
The Company considers that it is important to ensure soundness and transparency ofmanagement by means of timely and appropriate information disclosure.
In accordance with this basic policy, the Company has put in place systems thatenable swift reporting to the responsible department at the head office andimplementation of appropriate information management measures, if a material factthat may have an impact on investors’ investment decisions arises at the Company’s
departments or at subsidiaries.
Upon emergence of a material fact and reporting thereof, the responsible
department, the General Affairs Department, the Finance and Accounting Department,
and other relevant departments, discuss whether there is need for timely disclosure,and if it is judged that disclosure is necessary, timely disclosure is performed without
delay following the necessary internal procedures. Subsequently, the disclosurematerials are posted on the Company’s website for thorough information disclosure.

50

Integrated Report 2020

The Company strives to provide explanation of the Company’s corporate
management and business activities through General Meetings of Shareholders,financial results briefing sessions, individual meetings, and other opportunities forcommunication with shareholders and investors.
If a shareholder requests a dialogue, the Company’s policy is that the department
responsible for IR or other departments respond to such request appropriately under
the supervision of the responsible director, etc. depending on the objective of the
dialogue, the method of communication, the number of shares held, the attributes,
etc.
Regarding dialogues with shareholders, the Company exercises due care
concerning the handling of insider information, and notifies, as necessary, important
meetings such as management meetings attended by directors and senior executives,of the details of the dialogues.

Risk Management
Risk Management Structure
Risk Management Committee

Chairman: President

BCP Subcommittee

Internal Control Meeting

Hosted by General Affairs Department

Hosted by Internal Audit Division•Implementation of internal auditing•Establishment of Internal Reporting Division

Systems for ensuring appropriateness of business operations
The Company considers that establishment of internal control systems is one of theimportant management issues concerning the enhancement of corporate value andsustainable development of the Company and its subsidiaries (hereinafter referred toas the “Group”) as a whole. With regard to the matters listed below, the Company
shall establish systems in which roles and responsibilities of the Group’s directors andemployees are clarified, and through operation and appropriate review of such
systems, the Company shall strive to establish appropriate systems for governance of
the Group’s directors and employees.
(1) Systems for ensuring that the execution of duties of the Group’s
directors and employees complies with laws and regulations and withthe articles of incorporation
In order to enhance and strengthen internal control of the Group, the Company has
established the Risk Management Committee chaired by the Company’s President.
The Internal Control Meeting (hosted by the Company’s Internal Audit Division),
which is a subordinate organization of the Risk Management Committee, monitors
compliance promotion activities of the Group, and reports the result to the Risk
Management Committee.
		 The Company’s Internal Audit Division performs internal audits including thoseof subsidiaries, and several contacts for whistleblowing are established within andoutside the Company to detect and prevent any misconduct or illegal acts.
(2) Systems for retention and management of information concerning theexecution of duties of the Company’s directors
Minutes of meetings of the Board of Directors of the Company, requests for
managerial decision, and other documents (including electromagnetic records) areprepared, and these documents are retained and managed by the respective
responsible departments in accordance with the Criteria for Document Retention
Periods and the Information Management Rules.
(3) Rules and other systems related to management of risks of losses of theGroup
Among the risks of the Group, the risks associated with the business, such as
investment risk and market risk, are monitored and addressed by the respective
departments and subsidiaries properly, and important matters are discussed anddetermined at meetings of the Company’s Board of Directors and other important
meetings such as management meetings. Moreover, in order to address risks oflarge-scale disasters, etc. affecting business continuity, the BCP Subcommittee(hosted by the Company’s General Affairs Department), a subordinate organizationof the Risk Management Committee, monitors the status of development ofbusiness continuity planning (BCP) by the Group, and reports the result to the Risk
Management Committee.
(4) Systems for ensuring that the execution of duties of the Group’s
directors is performed efficiently
The Group’s directors direct and supervise business operations of the respective
departments and subsidiaries in accordance with the Company’s management plan.
Moreover, the Group’s employees efficiently perform their duties under the direction
and supervision of the Board of Directors and heads of respective departments, etc.
(5) Systems for ensuring appropriateness of business operations of theGroup consisting of the Company and its subsidiaries and systems
related to reporting of matters concerning the execution of duties to
the Company
The Company periodically receives reports from each subsidiary on the execution ofduties, such as the status of business execution and financial conditions, andprovides advice and guidance concerning business operations properly, dependingon the nature of the matter in question.
		Moreover, the Company’s statutory auditors and the Company’s Internal Audit
Division audit each subsidiary, as necessary.
(6)

Particulars related to employees when the Company’s statutory
auditors request that employees be appointed to assist with the dutiesof the statutory auditors and particulars related to ensuring
independence of such employees from directors and effectiveness of
the instructions of the Company’s statutory auditors to the employees
If the Company’s statutory auditors make requests to personnel of the Company’s
Internal Audit Division concerning matters necessary for audit practices, such
personnel shall proactively offer cooperation. In such a case, the personnel who
provide assistance shall not be in the chain of command of directors or any otherpersonnel concerning the matters for which they are requested to provide
assistance.

(7) Systems for reporting to the Company’s statutory auditors by theGroup’s directors etc. and employees or by a person who received
reports from such persons and other systems related to reporting to theCompany’s statutory auditors
When the Group’s directors, etc. and employees or a person who received reports
from such persons report to the Company’s statutory auditors, or when they arerequested by the Company’s statutory auditors to report, necessary reports shall be
provided swiftly and persons who make reports shall not be treateddisadvantageously for reasons of making such reports. Moreover, the independent
auditor and the Company’s Internal Audit Office shall report to the Company’s
statutory auditors concerning the audit status properly.
(8) Particulars related to policies concerning the procedures for advancepayment or reimbursement of expenses that arise with regard to the
execution of duties of the Company’s statutory auditors or any otherprocessing of expenses or obligations that arise with regard to the
execution of duties
When, concerning the execution of duties, a statutory auditor of the Company
requests advance payment or reimbursement, etc. of expenses in accordance with
the Japanese Corporate Law, the Company shall process such expenses or
obligations, excluding any cases deemed unnecessary for the execution of duties ofthe said statutory auditor.
(9) Other systems for ensuring that audits by the Company’s statutory
auditors are performed effectively
Opportunities are ensured for the Company’s statutory auditors to attend meetingsof the Board of Directors and other important meetings so that they cancomprehend the Group’s important issues, etc., and state opinions, as necessary.
(10) Basic view for elimination of antisocial forces and the status ofestablishment of such systems
The Company shall take a resolute attitude toward antisocial forces that threatensocial order and safety, and have no relationships with such antisocial forces.
Designating the General Affairs Department as a division in charge ofcountermeasures against antisocial forces, the Company has appointed a person
responsible for the prevention of unjust claims. Furthermore, the Company collects
and manages information concerning antisocial forces by collaborating with thepolice and other relevant institutions, and shares such information internally alongwith cautionary notices.

Sumitomo Realty & Development Co., Ltd.

51

Corporate GovernanceBusiness Risks
The businesses of leasing, sales, construction, and brokerage that we operate are susceptible to economic trends, corporate
performance, trends in personal income, trends in land prices, financial market situations, taxation system, and other social aspects.
These factors may impact the Group’s operating results and financial position. Of these, key risks recognized by the management, as ofthe end of the fiscal year ended March 31, 2020, as having the potential to significantly affect consolidated financial position, earnings
results and cash flow situations are as follows.

1. Risk related to the spread of COVID-19
Businesses and consumer activities are currently restricted globally due tothe spread of new coronavirus infections (COVID-19). For the year
ending March 31, 2021, we have published an earnings forecast
predicted on a scenario in which economic activity will gradually comeback up starting in the fiscal second quarter but will not return to thelevel of the previous year by the fiscal year-end due to the impact of the
spread of COVID-19.
Specifically, we expected a significant fall in sales in the facilityoperating businesses, including hotel and multipurpose hall businesses,
where movement and gathering of people are significantly restricted
after a state of emergency was declared, and declines in orders andcontracts in the business of remodeling, custom home construction andbrokerage, where customer-attracting events and face-to-face sales
activity were severely restricted, and assumed that the total negative
impact on profit will exceed ¥30.0 billion mainly for these five businessareas. On the other hand, office building leasing business, which
represents two-thirds of the Group’s operating income, is expected toincrease in both revenue and profit, supported by record-low levelvacancy rates. Also, in the condominium sales business, which accounts
for 20% of the Group’s operating income, about 80% of the units
whose sales are planned to be booked in the year ending March 31,
2021 had already been sold when the fiscal year started. We expect
these two main business areas will support earnings.
In terms of funding, there has been no impact on the acquisition ofland properties for operation or capital expenditure plans as we secured
ample amounts of cash and cash equivalents at the beginning of the
fiscal year. The Group is working to maintain sales levels while taking
measures to prevent infections of customers or employees in accordancewith government policies and industry guidelines.
If the new coronavirus pandemic is not contained in Japan and majorcountries of the world and infections continue longer than expected,
worsening the situation beyond the above assumptions, the Group’s
earnings and financial position may be affected as the fall in sales
continues for the hotel, multipurpose hall and commercial facility
operating businesses, affected by restrictions on movement andgathering of people, and demand decreases in other businesses due toslowdown and shrinkage in economic activity.

3. Risk related to complianceBusinesses operated by the Group are subject to wide-ranging laws andregulations, including the Building Lots and Buildings Transaction
Business Act, the Construction Business Act, the Building Standards Act
and the Labor Standards Act. We closely monitor any change in themand work to ensure timely and appropriate compliance. The Internal
Control Meeting, subordinate to the Risk Management Committee,
monitors the Group’s compliance promotion activities, while the Internal
Audit Office conducts internal audit on entities including subsidiaries andoperates multiple whistleblowing desk in and outside the Company,
aiming to detect and deter misconduct and illegal acts. Still, there ispossibility that the Group’s business performance and financial position
may be affected through impacts of changes to laws, etc. on businessactivities. Furthermore, if the Group and its officers and employees
commit compliance violation, the Group’s business performance or
financial position may be affected as confidence in the Group isundermined and demand for the Group’s products decreases.

4. Risk related to information security
The Group’s businesses hold large amounts of important information,
including personal data. The Group has cybersecurity measures in place
to prevent information leaks and trains employees on information
security. However, if information is leaked due to cyberattacks or

negligence on the part of our employees, the Group’s businessperformance or financial position may be affected due to payment ofcompensation for the damage or decreases in demand for its products asconfidence in the Group is undermined.

5. Risk related to force majeure events, including disasters
In order to be prepared for force majeure events, including disasters, theGroup strives to improve its business continuity by adopting baseisolation and quake-absorption structures at its properties and equipping
facilities with emergency generators to ensure uninterrupted operation.
We also create manuals and carry out disaster drills based on expectedscenarios in our business activity in order to ensure operationalsustainability. However, if a force majeure event occurs in an extent that
far exceeds our assumptions, the Group’s business performance or
financial position may be affected as it faces costs to reconstruct its
properties or slowdown in business activity.

2. Risk related to financeIn the real estate leasing and sales businesses we operate, investment ismade up front, and revenue is not claimed until we first purchase land
and the building is completed. This means we need to secure a stablesupply of operating funds by borrowing from banks or issuing bonds. To
achieve this, we strive to stabilize funding by extending the period ofand promoting fixed interest rates for consolidated interest-bearing
debts while working to solidify stable relationship with diverse financial

institutions. However, a rapid and significant change in the financial
environment, a change in the operational situation of lenders, etc. may
inflict a negative impact on the Group’s earnings performance or
financial position in the forms of rises in borrowing rates anddeteriorated cash flows.

Corporate
Earnings

Economic Trends

Social Issues

Consolidated interest-bearing debts, etc. in recent fiscal years (Years ended March 31)
Consolidated interest-bearing debts
Consolidated equity

2016

2017

2018

2019

2020

3,158,901

3,370,474

3,473,512

3,342,786

3,440,908

888,099

1,007,347

1,114,975

1,202,103

1,294,998

Debt-to-equity ratio*

3.3

3.1

2.9

2.6

2.5

Percentage of long-term debts

98%

98%

98%

99%

96%

Percentage of debts bearing fixed interest rates

94%

95%

94%

96%

95%

Personal
IncomeInformation
Security

Land Prices
Disasters* Consolidated interest-bearing debts / Consolidated equity

ComplianceTax

52

Integrated Report 2020

Financial Market
Situations

COVID-19

Sumitomo Realty & Development Co., Ltd.

53

Financial Section
Eleven-year Financial Summary
Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
As of and for the years ended March 31
Millions of yen Thousands of U.S. dollars*1

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2020

¥1,013,513
395,592
324,967
218,931
69,331¥1,012,198
381,764
331,752
221,693
72,899¥  948,402
353,881311,193
209,356
69,169¥  925,151
337,466
314,299
203,623
66,714¥  854,964
313,340
274,761
199,115
61,496¥  806,835
289,117264,207
188,995
58,486¥  780,273
283,730
234,093
201,190
57,211¥  736,652
278,317232,149
171,082
50,957¥  688,662
271,812
198,154
165,995
49,397¥  744,756
292,875
239,709
162,924
46,430¥  719,636
293,533
219,662
158,21444,621$ 9,314,521
3,635,622
2,986,555
2,012,048
637,175

Cost of revenue from operations

691,832

711,050

664,015664,184

614,191

579,964

558,987

529,913490,437

551,364

534,270

6,358,166

SG&A expenses% of revenue from operations

87,3498.6%

81,7598.1%

78,7508.3%

72,796
7.9%

66,532
7.8%

60,976
7.6%

60,815
7.8%

55,394
7.5%

50,760
7.4%

54,9297.4%

51,3877.1%

802,766

Operating income% of revenue from operations

234,332
23.1%

219,38921.7%

205,63721.7%

188,17120.3%

174,241
20.4%

165,895
20.6%

160,471
20.6%

151,345
20.5%

147,465
21.4%

138,46318.6%

133,979
18.6%

2,153,589

Ordinary profit*2% of revenue from operations

220,52121.8%

203,227
20.1%

186,87119.7%

167,69718.1%

148,42417.4%

139,055
17.2%

130,537
16.7%

114,916
15.6%

107,91215.7%

106,29614.3%

100,464
14.0%

2,026,661

Profit attributable to owners of parent

140,997

130,103119,731

103,489

87,79880,567

69,697

59,82553,23650,90852,662

1,295,809

Depreciation and amortization

48,97446,313

41,62839,446

34,57433,51935,311

37,761

36,04923,70518,065450,087

At Year-end
Current assets
Inventories
Total assets
Shareholders’ equity*3
Net interest-bearing debt¥  916,034
648,881
5,317,623
1,295,000
3,245,547¥  933,011
679,9035,130,120
1,202,104
3,170,595¥1,126,118
783,308
5,167,199
1,114,975
3,210,302¥1,197,508
845,2144,980,040
1,007,347
3,101,162¥1,122,189
855,816
4,675,915
888,100
2,971,667¥1,025,703
801,950
4,523,804
832,462
2,875,660¥  924,452
715,779
4,220,429
707,948
2,652,929¥  965,786
679,496
4,105,500
627,0122,424,932¥  801,142
586,1703,859,698
553,8442,407,639¥  805,958
558,091
3,234,203
526,227
1,901,850¥  802,693
521,871
3,168,098
488,896
1,785,854$ 8,418,656
5,963,432
48,870,720
11,901,479
29,827,654

Per Share Amounts (Yen)Profit attributable to owners of parent
Shareholders’ equity
Cash dividend applicable to the year¥   297.50
2,732.41
35.00¥   274.51
2,536.40
30.00¥   252.62
2,352.53
27.00¥   218.34
2,125.36
24.00¥   185.23
1,873.71
22.00¥   169.97
1,756.25
21.00¥   147.02
1,493.48
20.00¥   126.18
1,322.52
20.00¥   112.28
1,168.11
20.00¥   107.35
1,109.78
20.00¥   111.04
1,030.93
20.00$      2.73
25.11
0.32

24.4
2.5
11.3
4.7
96
95
12.8

23.4
2.6
11.2
4.5
99
96
11.4

21.6
2.9
11.3
4.2
98
94
10.5

20.2
3.1
10.9
4.0
98
95
9.0

19.0
3.3
10.2
3.9
98
94
7.3

18.4
3.5
10.5
3.9
97
87
6.5

16.8
3.7
10.4
4.0
95
82
6.1

15.3
3.9
10.1
3.9
93
80
4.9

14.3
4.3
9.9
4.3
93
80
4.2

16.3
3.6
10.0
4.4
89
79
4.7

15.4
3.7
11.4
4.4
83
81
4.6

For the Year
Revenue from operations
Leasing
Sales
Construction
Brokerage

Key Ratios
Equity ratio (%)
ND/E ratio*4 (Times)
ROE (%)ROA (%)
Long-term debt ratio (%)
Fixed-interest rate debt ratio (%)
Interest coverage ratio*5 (Times)*1. U.S. dollar amounts in this report are translated, for convenience only, at the rate of ¥108.81 = U.S. $1, the prevailing exchange rate at March 31, 2020.
*2. Ordinary profit, which equals operating income after adjustment for non-operating gains/losses, is a management index that is widely used in Japan.
Due to differences in accounting standards, ordinary profit is not referred to in the Company’s English-language financial statements but is included here because it plays an important role in thecalculation of incentive payments for directors.
*3. Shareholders’ equity = Net assets – Non-controlling interests*4. ND/E ratio = Net interest-bearing debt (Interest-bearing debt – Cash, time and notice deposits) / Shareholders’ equity*5. Interest coverage ratio = (Operating income + Interest and dividend income) / Interest expense*6. The Company changed its accounting policy (revenue recognition standards of Sumitomo Real Estate Sales) from the beginning of the fiscal year ended March 31, 2020. The figures provided for the fiscal
year ended March 31, 2019 are those after retroactive application.

54

Integrated Report 2020

Sumitomo Realty & Development Co., Ltd.

55

Financial Section

Management’s Discussion and Analysis
Business Results for the Fiscal Year under Review
We have been operating under the Eighth Management Plan, launchedin April 2019. In the fiscal year ended March 31, 2020, the initial year of
the plan, we marked the eighth consecutive year of revenue growth, thetenth consecutive year of increases in operating income and ordinary
profit, and the seventh consecutive year of record revenue fromoperations, operating income, ordinary profit, and profit attributable toowners of parent.
By segment, the leasing business centered on office building leasingin Tokyo achieved revenue and profit growth, reaching a record high forboth revenue from operations and operating income for the fifth
consecutive years, driving growth in overall results. As a result, revenue
from operations stood at ¥1,013.5 billion (0.1% increase year on year),and operating income totaled ¥234.3 billion (6.8% increase year onyear).
Non-operating gains/losses improved by ¥2.3 billion from theprevious fiscal year due to an increase in dividend income and decrease
in interest expenses, and contributed to an increase in ordinary profit. As
a result, ordinary profit amounted to ¥220.5 billion (8.5% increase year
on year), and profit attributable to owners of parent amounted to¥140.9 billion (8.4% increase year on year).

Cash Flows
Cash flows for the consolidated fiscal year under review were as follows:
Cash flows from operating activities: ¥230,458 million (¥29,599
million decrease year on year)
Cash flows from investing activities: ¥ (290,118) million (¥80,906
million decrease year on year)
Cash flows from financing activities: ¥82,644 million (¥228,703
million increase year on year)
Cash and cash equivalents increased to ¥193,448 million (¥22,740
million increase year on year).
Cash flows from operating activities
With an ordinary profit of ¥220.5 billion for the fiscal year under review,
and a decrease in inventories due to an increase in the number ofcondominium units delivered, net cash provided by operating activities
amounted to ¥230.4 billion.
Cash flows from investing activities
Investment in property and equipment totaled ¥270.3 billion mainly forthe purpose of augmenting the leasing business, while the net amountof restitution of deposits from partnership investors was ¥22.1 billion.
As a result, net cash used in investing activities amounted to ¥290.1
billion.

Cash flows from financing activities
Issuance of bonds and long-term loans payable totaled ¥249.0 billion(including non-recourse bonds and loans) to cover redemption of bonds
and repayment of long-term loans payable at maturity totaling ¥271.9
billion (including non-recourse bonds and loans). In addition, to secureliquidity on hand, commercial paper amounting to ¥120.0 billion was
issued in the fourth quarter. As a result, net cash provided by financing
activities amounted to ¥82.6 billion.

Revenue from Operations

Operating Income and Operating Margin

Billions of yen

Billions of yen

1,200

855.0

925.2 948.4

1,012.2 1,013.5
880.0

174.2
160

400

0

AssetsTotal assets as of the end of the fiscal year under review amounted to¥5,317.6 billion (¥187.5 increase from the end of the previous fiscal
year). Although real estate for sale (including real estate for sale inprocess) decreased due to an increase in the number of condominium
units delivered, property and equipment increased through investment
in buildings for leasing.

20.4

20.3

23.1

23.2

80

2016

2017

2018

2019

2020

0

2021

(Forecast)

2016

2017

2018

Billions of yen

240
203.2

2019

2020

2021

220.5
190.0

186.9
20

167.7

160 148.4

10

80

0

0

(Forecast)

Operating Margin (right scale)

103.5

87.8

2016

2017

Ordinary Profit

2018

141.0

130.1

119.7

2019

2020

130.0

2021

(Forecast)Profit Attributable to Owners of Parent* Please see note *2 on page 54.

Total Assets

Shareholders’ Equity andEquity Ratio

Billions of yen

Billions of yen%

Billions of yen

6,000

1,500

45

3,600

4,675.9

4,980.0

5,167.2

5,130.1

5,317.6

4,000

1,000

2,000

1,007.3

0

1,115.0

Net Interest-bearing Debt and
ND/E Ratio

1,202.1

1,295.0

23.4

21.6

20.2

2016

2017

2018

2019

0

2020

2016

2017

2018

2019

Times

2,971.730

888.1

3,210.3

3,101.2

3,170.6

6

3,245.5

4

2,400

24.4
3.3

500

2020

Shareholders’ Equity(Net Assets – Profit Attributable to Non-controlling Interests)

15

1,200

0

0

2016

3.1

2.9

2017

2018

Net Interest-bearing Debt

2.6

2019

2.5

2

0

2020

ND/E Ratio (right scale)

Equity Ratio (right scale)

ROE and ROA

Long-term Debt Ratio and
Fixed-interest Rate Debt Ratio

%

%

15

100

98

10.2

10.9

11.3

11.2

11.3

10

5
3.9

2016

4.0

2017

4.2

2018

4.5

2019

95

Interest Coverage Ratio
96

99

98

98
94

96

94

Billions of yen

Times

250

95

214.1
200

80

229.5

60

150

40

100

20

50

246.01
12.8

194.9

179.8

15

10.5

12

11.4
9

9.0
7.3

6

4.7

2020

ROE (Net Income / Shareholders‘ Equity)
ROA (Operating income + Interest and Dividend Income / Total Assets)

0

2016

2017

2018

2019

Short-term Loans and Commercial Paper
Long-term Loans and Bonds
Fixed-interest Rate Debt Ratio

Integrated Report 2020

30
204.0

21.7

21.7

Operating Income

0

56

%

234.3

188.2

19.0

Net assets
Total net assets amounted to ¥1,294.9 billion (¥92.8 billion increase
from the end of the previous fiscal year). Profit attributable to owners ofparent stood at ¥140.9 billion, retained earnings increased to ¥1,002.6
billion (¥125.8 billion increase from the end of the previous fiscal year),and the equity ratio improved from 23.4% at the end of the previous
fiscal year to 24.4%. As a result, ROE remains at double-digit 11.3%.
Furthermore, unrealized gains on investment and rental properties
increased from ¥2.7 trillion at the end of the fiscal year to ¥2.9 trillion asof the end of the fiscal year under review (refer to page 81) and havebeen highly evaluated by rating agencies as a buffer against financial
risks. JCR and R&I have issued ratings of A+(positive) and A+,
respectively.
As of the end of the fiscal year under review, long-term debt
accounted for 96% of consolidated interest-bearing debt, and fixeddebt for 95% (those number were 99% and 96%, respectively, at theend of the previous fiscal year).

219.4

205.6

800

Financial Resources for Capital and Liquidity of Funds

Liabilities
Total liabilities amounted to ¥4,022.6 billion (¥94.6 billion increase fromthe end of the previous fiscal year). Consolidated interest-bearing debt
decreased to ¥3,440.9 billion (¥98.1 billion increase from the end of theprevious fiscal year). ND/E ratio continued to improve from 2.6 times atthe end of the previous fiscal year to 2.5 times.

240

Ordinary Profit* andProfit Attributable to Owners of Parent

2020

0

24.5
2016

21.6
2017

20.4
2018

19.2

20.2
2019

2020

3
0

Operating Income + Interest and Dividend Income
Interest Expense
Interest Coverage Ratio (right scale)

Sumitomo Realty & Development Co., Ltd.

57

Financial Section

Consolidated Balance Sheets
Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
As of March 31, 2020 and 2019
Thousands of
U.S. dollars (Note 1)

Millions of yen

2020

AssetsCurrent assets:Cash, time and notice deposits (Notes 3, 5 and 6)
Notes and accounts receivable—trade (Note 6)
Allowance for doubtful accounts
Inventories (Note 4)
Other current assets
Total current assets

2019

2020

2020

2019

2020

Liabilities and Net Assets
Current liabilities:
Short-term debt (Notes 6 and 8)
Long-term debt due within one year (Notes 5, 6 and 8)
Long-term non-recourse debt due within one year (Notes 5, 6 and 8)
Notes and accounts payable—trade (Note 6)
Accrued income taxes
Accrued bonuses
Deposits received (Note 14)
Other current liabilities
Total current liabilities¥  146,726
131,471
70,37336,39332,344
5,440
51,196
148,102622,045¥   25,643
169,619
102,298
54,93729,2605,573
61,582
137,128
586,040$ 1,348,461
1,208,262
646,751
334,464
297,252
49,995
470,508
1,361,108
5,716,801

2,842,156
250,182
293,505
6,270
8,465
3,400,578

2,744,327
300,900
278,766
6,019
11,964
3,341,976

26,120,357
2,299,256
2,697,408
57,62377,796
31,252,440

122,805
104,154
1,002,634(4,473)1,225,120

122,805
104,154876,803(4,470)1,099,291

1,128,619
957,2109,214,539(41,109)
11,259,259

76,335(3,560)(2,718)(177)
69,8801,295,000¥5,317,623

109,210(3,972)(2,352)(74)
102,8121,202,104¥5,130,120

701,544(32,718)(24,979)(1,627)642,220
11,901,479$48,870,720¥  195,361
17,406(61)
648,881
54,447916,034¥  172,192
21,567(73)
679,90359,422933,011$ 1,795,432
159,967(561)
5,963,432
500,386
8,418,656

100,156
372,414(2,082)
470,488

61,544433,301(9,154)
485,691

920,467
3,422,608(19,134)
4,323,941

Long-term liabilities:
Long-term debt due after one year (Notes 5, 6 and 8)
Long-term non-recourse debt due after one year (Notes 5, 6 and 8)
Guarantee and deposits received (Notes 6 and 14)
Net defined benefit liability (Note 9)
Other long-term liabilities (Note 12)
Total long-term liabilities

2,558,356
1,584,047
40,382
2,054
133,718
4,318,557

2,523,937
1,378,337
35,5182,150
139,451
4,079,393

23,512,140
14,557,917
371,124
18,8771,228,914
39,688,972

Contingent liabilities (Note 21)

Accumulated depreciation and accumulated impairment losses
Net property and equipment(578,302)
3,740,255(548,382)
3,531,011(5,314,788)
34,374,184

Other assets:
Guarantee and lease deposits paid to lessors (Notes 6 and 7)
Leasehold rights and other intangible assets
Deferred income taxes (Note 12)
Other
Total other assets
Total assets

70,172
57,56230,06733,045
190,846¥5,317,623

70,29956,752
17,46435,892
180,407¥5,130,120

644,904
529,014276,326
303,695
1,753,939$48,870,720

Investments:
Investments in unconsolidated subsidiaries and affiliates (Note 6)
Investments in securities and other (Notes 6 and 7)
Allowance for doubtful accounts
Total investments

Property and equipment:
Land (Notes 4, 5 and 20)
Buildings and structures (Notes 4, 5 and 20)
Machinery and equipment (Notes 4, 5 and 20)
Leased assets
Construction in progress (Notes 4, 5 and 20)

Thousands of
U.S. dollars (Note 1)

Millions of yen

Net assets (Note 15):
Shareholders’ equity
Common stock:
Authorized —1,900,000 thousand shares
Issued    —476,086 thousand shares
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity
Accumulated other comprehensive income (loss)
Net unrealized holding gains on securities
Net deferred losses on hedges
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Total net assets
Total liabilities and net assets

See accompanying notes.

58

Integrated Report 2020

Sumitomo Realty & Development Co., Ltd.

59

Financial Section

Consolidated Statements of Income

Consolidated Statements of Changes in Net Assets

Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
For the years ended March 31, 2020, 2019 and 2018

Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
For the years ended March 31, 2020, 2019 and 2018
Millions of yen

Revenue from operations
Costs and expenses:
Cost of revenue from operations
Selling, general and administrative expenses

Thousands of
U.S. dollars (Note 1)

Thousands

Number ofshares ofcommon
stock

2020

2019

2018

2020

¥1,013,513¥1,012,198¥948,402$9,314,521

691,832
87,349779,181

711,050
81,759792,809664,01578,750742,765

6,358,166
802,766
7,160,932

Operating income
Other income (expenses):
Interest expense, net
Dividend income
Gain on sale of property and equipment
Loss on sale of property and equipment
Loss on impairment of fixed assets (Note 10)
Loss on disposal of property and equipment
Gain on sale of investments in securities (Note 7)
Loss on sale of investments in securities
Loss on devaluation of investments in securities (Note 7)
Reversal of allowance for doubtful accounts
Other, net

234,332

219,389

205,637

2,153,589(18,530)
11,024278(2,131)(9,660)(1,567)
1,417—(7,838)4,824(6,339)(28,522)(19,589)
9,472
75(3,724)(8,576)(1,280)12—(1,105)—(6,115)(30,830)(20,096)
8,229
38
(217)
(10,635)
(601)
1,010
(47)
—
—
(6,874)(29,193)(170,297)
101,314
2,555(19,585)(88,779)(14,401)
13,023—(72,034)
44,334(58,257)(262,127)

Income before income taxes
Income taxes (Note 12):Current
DeferredTotal

205,810

188,559

176,444

1,891,462

68,180(3,367)64,81362,823(4,367)58,456

62,098(6,180)55,918626,597(30,944)595,653

Profit140,997

130,103

120,526

1,295,809

—

—

795

—

¥  140,997¥  130,103¥119,731$1,295,809

Profit attributable to non-controlling interests
Profit attributable to owners of parent

Yen

Amounts per share of common stock:
Profit attributable to owners of parent:—Basic—Diluted
Cash dividend applicable to the year

U.S. dollars (Note 1)

2020

2019

2018

2020

¥297.50—
35.00¥274.51—
30.00¥252.62
—
27.00

$2.73
—
0.32

Shareholders’ equity

Balance at April 1, 2017
476,086
Profit attributable to owners of parent—
Foreign currency translation adjustments—
Net unrealized holding gains (losses) on securities—
Acquisition of treasury stock—
Disposal of treasury stock—
Change in scope of consolidation—
Cash dividends paid:
Final for prior year (¥13 per share)—
Interim for current year (¥13 per share)—
Change in treasury shares of parent arising fromtransactions with non-controlling shareholders—
Profit attributable to non-controlling interests—
Net deferred gains (losses) on hedges—
Remeasurements of defined benefit plans—
Balance at April 1, 2018
476,086
Cumulative effects of changes in accounting policies—
Restated balance
476,086
Profit attributable to owners of parent—
Foreign currency translation adjustments—
Net unrealized holding gains (losses) on securities—
Acquisition of treasury stock—
Disposal of treasury stock—
Change in scope of consolidation—
Cash dividends paid:
Final for prior year (¥14 per share)—
Interim for current year (¥14 per share)—
Profit attributable to non-controlling interests—
Net deferred gains (losses) on hedges—
Remeasurements of defined benefit plans—
Balance at April 1, 2019
476,086
Profit attributable to owners of parent—
Foreign currency translation adjustments—
Net unrealized holding gains (losses) on securities—
Acquisition of treasury stock—
Disposal of treasury stock—
Change in scope of consolidation—
Cash dividends paid:
Final for prior year (¥16 per share)—
Interim for current year (¥16 per share)—
Profit attributable to non-controlling interests—
Net deferred gains (losses) on hedges—
Remeasurements of defined benefit plans—
Balance at March 31, 2020
476,086

Treasury
stock

Total
shareholders’equity¥(4,379)
—
—
—
(64)
—
—

¥  913,976
119,731——(64)—(4,885)¥ 97,192——
33,923———¥(2,529)
—
—
—
—
—
—

¥(1,265)
—
(828)
—
—
—
—

¥ (27)——————(6,161)(6,161)——(6,161)(6,161)

—
—

—
—

—
—

—
—

—
—
—
—
¥122,805—
122,805
—
—
—
—
—
—

(28,594)
—
—
—
—
—
—
—
¥104,154 ¥  765,326—(5,299)104,154760,027—
130,103
—
—
—
—
—
—
0
—
—
(57)

—
—
—
—
¥(4,443)—(4,443)
—
—
—
(27)
0
—

(28,594)———¥  987,842(5,299)982,543
130,103
—
—
(27)
0
(57)

—
—
—
—
¥131,115—
131,115——(21,905)
—
—
—

—
—
480
—
¥(2,049)—(2,049)
—
—
—
—
—
—

—
—
—
—
¥(2,093)—(2,093)
—
(259)
—
—
—
—

—
—
—
—
—
¥122,805
—
—
—
—
—
—

—
(6,635)—(6,635)——————¥104,154 ¥  876,803—
140,997
—
—
—
—
—
—
0
—
—
—

—
(6,635)—(6,635)——————¥(4,470) ¥1,099,292—
140,997
—
—
—
—
(3)
(3)
0
0
—
—

—
—
—
—
—
¥109,210——(32,875)
—
—
—

—
—
—
(1,923)—¥(3,972)
—
—
—
—
—
—

—
—
—
—
—
¥122,805—(7,583)—(7,583)——————¥104,154 ¥1,002,634—(7,583)—(7,583)——————¥(4,473) ¥1,225,120

—
—
—
—
—
¥ 76,335

—
—
—
412
—
¥(3,560)

Commonstock

Capitalsurplus¥122,805
—
—
—
—
—
—

¥132,748 ¥  662,802—
119,731
—
—
—
—
—
—
—
—
—
(4,885)——Retainedearnings——

Shareholders’ equity

See accompanying notes.

Consolidated Statements of Comprehensive Income

Commonstock

Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
For the years ended March 31, 2020, 2019 and 2018

Thousands of
U.S. dollars (Note 1)

Millions of yen

2020

2019

2018

2020

ProfitOther comprehensive income (loss) (Note 19)
Net unrealized holding gains (losses) on securities
Net deferred gains (losses) on hedges
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Total other comprehensive income (loss)
Comprehensive income¥140,997¥130,103¥120,526$1,295,809(32,875)
412
(366)
(103)
(32,932)¥108,065(21,905)(1,923)(259)(234)(24,321)¥105,782

33,935538(1,098)
188
33,563¥154,089(302,132)
3,786(3,364)(946)(302,656)$  993,153

Comprehensive income attributable to:
Owners of the parent
Non-controlling interests¥108,065—¥105,782—¥153,493
596$  993,153—

Balance at April 1, 2019
Profit attributable to owners of parent
Foreign currency translation adjustments
Net unrealized holding gains (losses) on securities
Acquisition of treasury stock
Disposal of treasury stock
Change in scope of consolidation
Cash dividends paid:
Final for prior year ($0.15 per share)
Interim for current year ($0.15 per share)
Profit attributable to non-controlling interests
Net deferred gains (losses) on hedges
Remeasurements of defined benefit plans
Balance at March 31, 2020

Millions of yen
Accumulated other comprehensive income (loss)
RemeasureNet unrealized
Foreignments ofholding gains
Net deferredcurrency
defined(losses) on
gains (losses)
translation
benefitsecurities
on hedges
adjustments
plans

CapitalsurplusRetainedearnings

Treasury
stock

Total
shareholders’equityTotal
accumulated
othercomprehensive
income (loss)

Noncontrollinginterests¥ 93,371 ¥ 31,756
—
—
(828)
—
33,923
—
—
—
—
—
—
—
—
—

(6,161)(6,161)

—
—
—
187
¥ 160
—
160
—
—
—
—
—
—

—
—
—
(31,756)
480
—
187
—
¥127,133 ¥    —
——127,133
—
—
—
(259)
—
(21,905)
—
—
—
—
—
—
—

(28,594)(31,756)
480
187¥1,114,975(5,299)1,109,676
130,103(259)(21,905)
(27)
0
(57)

—
—
—
—
—
¥(2,352)
—
(366)
—
—
—
—

—
—
—
—
(234)
¥ (74)
—
—
—
—
—
—

—
—
—
—
—
—
(1,923)—(234)—¥102,812 ¥    —
—
—
(366)
—
(32,875)
—
—
—
—
—
—
—

(6,635)(6,635)—(1,923)(234)¥1,202,104
140,997(366)(32,875)
(3)
0
—

—
—
—
—
—
¥(2,718)

—
—
—
—
(103)
¥(177)

—
—
—
—
—
—
412
—
(103)
—
¥ 69,880 ¥    —(7,583)(7,583)—412(103)¥1,295,000

Thousands of U.S. dollars (Note 1)
Accumulated other comprehensive income (loss)
RemeasureNet unrealized
Foreignments ofholding gains
Net deferredcurrency
defined(losses) on
gains (losses)
translation
benefitsecurities
on hedges
adjustments
plans

—
—

Total net
assets¥1,039,103
119,731(828)
33,923(64)—(4,885)

Total
accumulated
othercomprehensive
income (loss)

Noncontrollinginterests

Total net
assets$1,128,619
—
—
—
—
—
—

$957,210 $8,058,110 $(41,081) $10,102,858 $1,003,676— 1,295,809—
1,295,809
—
—
—
—
—
—
—
—
—
—
(302,132)
—
—
(28)
(28)
—
0
—
0
0
—
—
—
—
—
—

$(36,504)
—
—
—
—
—
—

$(21,616)—(3,363)————$ (680)
—
—
—
—
—
—

$944,876—(3,363)(302,132)———$— $11,047,734—
1,295,809—(3,363)—(302,132)
—
(28)
—
0
—
—

—
—
—
—
—
$1,128,619—(69,690)—(69,690)——(69,690)—(69,690)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$957,210 $9,214,539 $(41,109) $11,259,259 $  701,544

—
—
—
3,786
—
$(32,718)

—
—
—
—
—
$(24,979)

—
—
—
—
(947)
$(1,627)

—
—
—
3,786
(947)
$642,220—(69,690)—(69,690)
—
—
—
3,786
—
(947)
$— $11,901,479

See accompanying notes.

See accompanying notes.

60

Integrated Report 2020

Sumitomo Realty & Development Co., Ltd.

61

Financial Section

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
For the years ended March 31, 2020, 2019 and 2018

Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
As of and for the years ended March 31, 2020, 2019 and 2018
Thousands of
U.S. dollars (Note 1)

Millions of yen

2020

2019

2018

2020

¥ 205,810
48,9749,660(4,848)
60
1,853
1,567
(1,417)
7,838(11,680)
19,186
4,637
46,767(18,543)(416)(6,117)303,331¥ 188,559
46,313
8,576
(309)
(242)
3,649
1,280
(12)
1,105
(10,067)
20,1842,233
65,981
26,189(12,073)(1,800)339,566¥ 176,444
41,628
10,635
(525)
91
179
601
(963)
—
(8,484)
20,352(5,669)25,915(12,536)
17,076(6,648)258,096$ 1,891,462
450,087
88,779(44,555)551
17,03014,401(13,023)
72,034(107,343)
176,326
42,616429,804(170,416)(3,823)(56,217)
2,787,713

Proceeds from interest and dividend income
Payments for interest
Payments for income tax and other taxes
Net cash provided by operating activities

11,680(19,334)(65,218)
230,459

10,066(20,147)(69,427)
260,058

8,484(20,395)(56,252)
189,933

107,343(177,686)(599,375)
2,117,995

Cash flows from investing activities:
Payments for purchases of property and equipment
Proceeds from sale of property and equipment
Payments for purchases of investments in securities
Proceeds from sale and redemption of investments in securities
Payments for guarantee and lease deposits paid to lessors
Proceeds from guarantee and lease deposits paid to lessors
Payments for guarantee and lease deposits received
Proceeds from guarantee and lease deposits received
Receipts of deposits from partnership investors
Restitution of deposits from partnership investors
Other, net
Net cash used in investing activities(270,347)
11,307(46,695)
2,676(1,121)804(10,950)
29,52523(22,208)
16,867(290,119)(188,573)
6,617(31,281)
334
(738)
4,475
(14,324)
35,664
1,004(10,442)(11,949)(209,213)(220,017)
357(28,835)
2,197(1,317)28,462(11,276)
25,271
2,420(11,544)(6,252)(220,534)(2,484,579)
103,915(429,143)
24,593(10,302)7,389(100,634)
271,345
211(204,099)
155,013(2,666,291)

121,083—(40,000)
2,000(2,000)
153,300(129,619)
93,720(100,363)(3)(15,163)(35,773)—(60,000)
4,900(4,900)198,300(225,752)
37,110(44,611)(27)(13,269)(2,892)30,000(80,000)
1,700(1,700)376,000(209,622)
12,610(21,258)(64)(12,337)

1,112,793—(367,613)
18,381(18,381)
1,408,878(1,191,242)
861,318(922,369)(28)(139,353)—(310)
82,645—(2,036)(146,058)(60,910)(5,066)
26,461—(2,849)759,535

Cash flows from operating activities:
Income before income taxes
Depreciation and amortization
Loss on impairment of fixed assets (Note 10)
Provision for (Reversal of) allowance for doubtful accounts
Increase (Decrease) in net defined benefit liability
Loss (Gain) on sale of property and equipment, net
Loss on disposal of property and equipment
Loss (Gain) on sale of investments in securities, net
Loss (Gain) on devaluation of investments in securities
Interest and dividend income
Interest expense
Decrease (Increase) in notes and accounts receivable—trade
Decrease (Increase) in inventories
Increase (Decrease) in notes and accounts payable—trade
Increase (Decrease) in advances received
Other, net
Total

Cash flows from financing activities:
Increase (Decrease) in short-term debt, net
Proceeds from issuance of bonds
Redemption of bonds
Proceeds from non-recourse bonds
Redemption of non-recourse bonds
Proceeds from long-term loans payable
Repayment of long-term loans payable
Proceeds from long-term non-recourse loans
Repayment of long-term non-recourse loans
Decrease (Increase) in treasury stocks, net
Cash dividends paid
Payments for purchases of investments in subsidiaries not resulting
in change in scope of consolidation
Other, net
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents

(244)

243

(124)

(2,242)

Net increase (decrease) in cash and cash equivalents

22,741(94,970)(4,264)208,997

Cash and cash equivalents at beginning of year
Increase in cash and cash equivalents of a newly consolidated
subsidiary
Decrease in cash and cash equivalents resulting from exclusionof subsidiaries from consolidation
Cash and cash equivalents at end of year (Note 3)

170,707

262,046

267,944

1,568,854

—

3,631

—

—

—
¥ 193,448—¥ 170,707(1,634)¥ 262,046—$ 1,777,851

See accompanying notes.

62

Integrated Report 20201

 asis of presenting consolidatedBfinancial statements

The accompanying consolidated financial statements of Sumitomo Realty& Development Co., Ltd. (“the Company”) and its consolidated
subsidiaries have been prepared in accordance with the provisions set
forth in the Financial Instruments and Exchange Act and its related
accounting regulations, and in conformity with accounting principles
generally accepted in Japan (“Japanese GAAP”), which are different incertain respects as to application and disclosure requirements fromInternational Financial Reporting Standards (“IFRS”).
The accounts of the Company’s overseas subsidiaries are based on
their accounting records maintained in conformity with generally
accepted accounting principles prevailing in the respective countries of
domicile. The accompanying consolidated financial statements have been
restructured and translated into English (with certain expandeddisclosure) from the consolidated financial statements of the Company
prepared in accordance with Japanese GAAP and filed with theappropriate Local Finance Bureau of the Ministry of Finance as requiredby the Financial Instruments and Exchange Act. Certain supplementary
information included in the statutory Japanese-language consolidated
financial statements, but not required for fair presentation, is notpresented in the accompanying consolidated financial statements.
The translation of the Japanese yen amounts into U.S. dollars is
included solely for the convenience of readers outside Japan, using theprevailing exchange rate at March 31, 2020, which was ¥108.81 to U.S.
$1. The translation should not be construed as representations that theJapanese yen amounts have been, could have been or could in the future
be converted into U.S. dollars at this or any other rate of exchange.
2

Accounting policies(1) Consolidation
The accompanying consolidated financial statements include theaccounts of the Company and significant companies over which theCompany has power of control through majority voting rights orexistence of certain conditions evidencing control by the Company.
In the elimination of investments in subsidiaries, the assets andliabilities of the subsidiaries, including the portion attributable to minority
shareholders, are recorded based on the fair value at the time theCompany acquired control of the respective subsidiaries.
All significant intercompany balances, transactions and profits havebeen eliminated in consolidation.
In the year ended March 31, 2020, the Company acquired the entire
shares of PrimeQuest Three Co., Ltd. (the operator of PrimeQuest Threesilent partnership) and PrimeQuest Four Co., Ltd (the operator ofPrimeQuest Four silent partnership), to make them wholly owned
subsidiaries, after which the Company merged the two companies in anabsorption-type merger with the Company as the surviving company. As
a result, the two companies were included in the scope of consolidation
while the silent partnerships were excluded, then the two companies
were dissolved and excluded from the scope of consolidation.
(2) Foreign currency translation
Receivables and payables denominated in foreign currencies aretranslated into Japanese yen at the year-end rate.
Financial statements of consolidated overseas subsidiaries aretranslated into Japanese yen at the year-end rate, except forshareholders’ equity accounts, which are translated at historical rates,

and income statement items resulting from transactions with theCompany, which are translated at the rates used by the Company.
Differences arising from translation are presented as “Foreign
currency translation adjustments” in net assets.
(3) Cash and cash equivalents
In preparing the consolidated statements of cash flows, cash on hand,readily available deposits and short-term, highly liquid investments withmaturities not exceeding three months at the time of purchase areconsidered to be cash and cash equivalents.
(4) Recognition of revenue
Revenues from sales operations of condominiums, detached houses andland lots are recognized when the units are delivered and customers
accepted the delivery. Revenues from leasing operations of officebuildings, residences and other properties are recognized as rent accrues
over the lease term.
The Company’s consolidated subsidiary, Sumitomo Real Estate Sales
Co., Ltd. recognizes brokerage fees as revenue at the delivery of theproperty. However, the amount received of the brokerage fees waspreviously recognized as revenue on the date it was received in case ofwhich the brokerage fees are received after the conclusion of the sales
contracts and before the delivery of property. From the year ended March
31, 2020, its revenue recognition has been changed and the total
amount received of the brokerage fees are recognized as revenue at thetiming of the delivery of the property.
This change was made as a result of reviewing the revenue
recognition policy of Sumitomo Real Estate Sales Co., Ltd. to be alignedwith the policy of the Company, after it was delisted and became awholly owned subsidiary to the Company, and implemented as theCompany completed the preparation of the operation system toaccommodate the change at the timing of formulating the EighthManagement Plan starting from the year ended March 31, 2020.
The consolidated financial statements for the year ended March 31,
2019 have been adjusted reflecting the retroactive application of the new
accounting policy.
As a result, revenue from operations decreased by ¥1,032 million,
operating income and income before income taxes decreased by ¥1,030
million respectively. In addition, the balance of retained earnings at April
1, 2018 decreased by ¥5,299 million reflecting cumulative effects to net
assets at the beginning of the year ended March 31, 2019.
As the effect of the change on amounts per share of common stock,earnings per share decreased by ¥1.51 for the year ended March 31, 2019.
(5) Inventories
Inventories are stated at cost, determined by the specific identification
method principally. The carrying amount of inventories is written downwhen the profitability declines.
(6) Securities
Held-to-maturity securities are stated at amortized cost. Investments in
subsidiaries and affiliates that are not consolidated or accounted for using
the equity method are stated at moving-average cost. Available-for-salesecurities with available fair values are stated at fair value. Unrealized
gains and losses on these securities are reported, net of applicable income
taxes, as a separate component of net assets. Realized gains and losseson the sale of such securities are computed using moving-average cost.
Sumitomo Realty & Development Co., Ltd.

63

Financial Section

Preferred equity securities are stated at cost determined by the
specific identification method, and securities with no available fair value
are stated at moving-average cost.
Investments in limited partnerships, which are regarded as securities
under the Financial Instruments and Exchange Act, are accounted for in amanner similar to the equity method based on the recent financial
statements.
If the market value of held-to-maturity securities, investments in
subsidiaries and affiliates and available-for-sale securities declines
significantly, such securities are stated at fair value and the difference
between fair value and the carrying amount is recognized as a loss in the
period of the decline. If the fair value of investments in unconsolidated
subsidiaries and affiliated companies not accounted for using the equity
method is not readily available, such securities should be written down to
the net asset value with a corresponding charge in the income statementin the event net asset value declines significantly. In these cases, such fairvalue or the net asset value will be the carrying amount of the securities
at the beginning of the next fiscal year.
(7) Property and equipment
The Company and its consolidated domestic subsidiaries depreciatebuildings using the straight-line method, and other property andequipment (excluding facilities attached to buildings and structuresacquired on or after April 1, 2016) using the declining-balance method
over their estimated useful lives. The consolidated overseas subsidiaries
depreciate property and equipment using primarily the straight-line
method in accordance with the accounting principles in the respective
countries.
In addition, the Company and its consolidated domestic subsidiaries
depreciate facilities attached to buildings and structures acquired on orafter April 1, 2016 using the straight-line method.
Leased assets related to finance lease transactions without title
transfer are depreciated using the straight-line method over the lease
periods as their useful lives with no residual value.
Estimated useful lives used in the computation of depreciation are
generally as follows:
Buildings and structures...................... 6 to 60 years
Machinery and equipment.................. 2 to 20 years
Leased assets...................................... Lease periods(8) Software costs
Software costs are amortized using the straight-line method over theestimated useful lives (five years).
(9) Allowance for doubtful accounts
The Company and its consolidated subsidiaries provide for doubtful
accounts at an estimated uncollectable amount based on the evaluationof certain identified doubtful and bankrupt receivables plus an amountcalculated using the percentage of actual collection losses in certain
reference periods with respect to remaining receivables.
(10) Lease transactions
Leased assets related to finance lease transactions without title transfer
are depreciated using the straight-line method over the lease periods as
their useful lives with no residual value.

64

Integrated Report 2020(11) Income taxes
Income taxes are provided for on the basis of income for financial
statement purposes. The tax effects of temporary differences between
the carrying amounts of assets and liabilities for financial statements andincome tax purposes are recognized as deferred income taxes.
(12) Employees’ severance and retirement benefits
The Company and its certain consolidated subsidiaries provide two typesof post-employment benefit plans, lump-sum payment plans and defined
benefit corporate pension plans, under which all eligible employees areentitled to benefits based on their current rate of pay, length of service
and the conditions under which termination occurs.
For the calculation of retirement benefit obligations, the estimatedamount of retirement benefits is allocated to the respective fiscal years by
the straight-line method.
Some of the Company’s consolidated subsidiaries calculate net
defined benefit liability and retirement benefit expenses by using asimplified method in which retirement benefit obligations are equal tothe amount that would be paid if all employees resigned voluntarily atthe end of the fiscal year.
Prior service costs are recognized as expenses in the period in which
they are incurred, and actuarial gains and losses are recognized as
expenses in the following period.
(13) Construction contracts
The construction projects for which the outcome of the portion
completed by the end of the fiscal year under review can be reliably
estimated are accounted for by the percentage-of-completion method(the degree of completion of each construction project is estimated using
the cost-comparison method), while other construction projects areaccounted for by the completed-contract method.
(14) Derivative transactions and hedge accounting
The Company and its consolidated subsidiaries state derivative financial
instruments at fair value and recognize changes in the fair value as gains
or losses unless derivative financial instruments are used for hedging
purposes and qualify for hedge accounting.
If derivative financial instruments are used as hedges and meet certain
hedging criteria, the Company and its consolidated subsidiaries defer
recognition of gains or losses resulting from changes in fair value of thederivative financial instruments until the related gains or losses on thehedged items are recognized.
Also, if interest rate swap contracts are used as a hedge and meetcertain hedging criteria (regarding interest rate swap contracts), the net
amount to be paid or received under the interest rate swap contracts isadded to or deducted from the interest on the assets or liabilities relative
to which the swap contract was executed as a hedge.
(15) Amounts per share of common stock
The computation of earnings per share is based on the weighted-average
number of shares of common stock outstanding during each year.
Diluted earnings per share is computed based on the amount of profit
attributable to owners of parent on common stock and the weightedaverage number of shares of common stock outstanding during eachyear after giving effect to the dilutive potential of shares of common
stock to be issued upon the exercise of stock options.

Diluted earnings per share is not presented as there are no potential
shares.
Cash dividends per share represent actual amounts applicable to therespective year.
(16) New accounting pronouncements (Accounting standards andguidance issued but not yet effective)“Accounting Standard for Revenue Recognition” (ASBJ Statement No.
29, March 31, 2020)“Implementation Guidance on Accounting Standard for Revenue
Recognition” (ASBJ Guidance No. 30, March 31, 2020)(1) Overview
The standard and guidance provide comprehensive principles forrevenue recognition. Under the standard and guidance, revenue isrecognized by applying the following 5 steps:
Step 1: Identify contract(s) with customers
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligation in
the contract
Step 5: Recognize revenue when (or as) the entity satisfies a
performance obligation(2) Effective date
Effective from the beginning of the year ending March 31, 2022
(3) Effects of the application of the standards
The Company and its consolidated domestic subsidiaries are currently
in the process of determining the effects of these new standards onthe consolidated financial statements.
“Accounting Standard for Fair Value Measurement” (ASBJ Statement No.
30, July 4, 2019)“Implementation Guidance on Accounting Standard for Fair Value
Measurement” (ASBJ Guidance No. 31, July 4, 2019)“Accounting Standard for Measurement of Inventories” (ASBJ Statement
No. 9, July 4, 2019)“Accounting Standard for Financial Instruments” (ASBJ Statement No.
10, July 4, 2019)“Implementation Guidance on Disclosures about Fair Value of Financial
Instruments” (ASBJ Guidance No. 19, March 31,2020)(1) Overview
In order to enhance comparability with internationally recognizedaccounting standards, “Accounting Standard for Fair Value
Measurement” and “Implementation Guidance on AccountingStandard for Fair Value Measurement” (together, hereinafter referred3

to as “Fair Value Accounting Standards”) were developed andguidance on methods measuring fair value was issued. Fair Value
Accounting Standards are applicable to the fair value measurement of
the following items:* Financial instruments in “Accounting Standard for Financial
Instruments”; and* Inventories held for trading purposes in “Accounting Standard for
Measurement of Inventories.”
In addition, “Implementation Guidance on Disclosures about Fair
Value of Financial Instruments” has been revised, and items of notes
such as the breakdown by the fair value level of financial instruments
are required.
(2) Effective date
Effective from the beginning of the year ending March 31, 2022
(3) Effects of the application of the standards
The Company and its consolidated domestic subsidiaries are currently
in the process of determining the effects of these new standards onthe consolidated financial statements.
“Accounting Standard for Disclosure of Accounting Estimates” (ASBJ
Statement No. 31, March 31, 2020)(1) Overview
For the purpose of disclosing information that contributes to the usersof financial statements to understand, the standard addresses figures
recorded in the financial statements for the current fiscal year basedon accounting estimates for items that have a risk of a significantly
impacting financial statements in the next fiscal year.
(2) Effective date
Effective from the end of the year ending March 31, 2021
(17) Additional information(Accounting estimates regarding the impact of COVID-19 pandemic)
The accounting estimates such as the valuation of real estate for sale andthe loss on impairment of fixed assets are calculated reasonably based ondata available at the time of preparing the consolidated financial
statements.
The Company and its consolidated subsidiaries calculated theaccounting estimates based on the assumption that the impact of
COVID-19 shall be temporary. However, its effect to the businessactivities and business results is unclear for the time being. Despite theanticipation that business activities will be gradually resumed and returntoward normal from the second quarter of the next fiscal year, theCompany assumes that they will not return to the level of the previous
fiscal year during the next fiscal year and will take 1 – 2 years to recover.

Cash and cash equivalents

Cash and cash equivalents at March 31, 2020 and 2019 consisted of the following:Thousands of
U.S. dollars

Millions of yen

Cash, time and notice deposits
Time deposits
Cash and cash equivalents

2020

2019

2020

¥195,361(1,913)¥193,448¥172,192(1,485)¥170,707$1,795,432(17,581)$1,777,851

Sumitomo Realty & Development Co., Ltd.

65

Financial Section

4

6

Inventories

Inventories at March 31, 2020 and 2019 are as follows:
Thousands of
U.S. dollars

Millions of yen

Real estate for sale
Real estate for sale in process
Costs on uncompleted construction contracts
Other
Total

2020

2019

2020

¥351,369
286,254
10,370888¥648,881¥390,026
282,595
5,827
1,455¥679,903$3,229,198
2,630,769
95,304
8,161$5,963,432

The Company transferred amounts between inventories and property and equipment. Such transfers at March 31, 2020 and 2019 are as follows:
Thousands of
U.S. dollars

Millions of yen

Inventories:
Transferred to property and equipment
Transferred from property and equipment
Net decrease
5

2020

2019

2020

¥(6,785)
3,523¥(3,262)¥(23,162)
4,822¥(18,340)$(62,356)
32,378$(29,978)

Pledged assets

Assets pledged as collateral at March 31, 2020 and 2019 are as follows:
Thousands of
U.S. dollars

Millions of yen

2020

2019

2020

Cash, time and notice deposits¥  2,091¥  2,068$   19,217

Buildings and structures

108,863

103,708

1,000,487

Land

418,971

393,316

3,850,482

Construction in progress

—

85

—

Machinery and equipment

127

210

1,168

¥530,052¥499,387$4,871,354

Total

Financial instruments

1. Policy for financial instruments
The Company and its consolidated subsidiaries (“the Group”) have thepolicy to limit its fund management to short-term deposits with funds
through loans from banks and the issuance of corporate bonds andcommercial paper.
The Group utilizes derivative financial instruments only for the
purpose of hedging the interest rate risk associated with the Group’sloans payable, and does not utilize derivative financial instruments forany speculative purposes.
2. Details of financial instruments, risks, and policies andsystems of risk management
Operating receivables such as notes and accounts receivable—trade areexposed to customers’ credit risk, but this risk is generally avoided
through the receipt of deposits.
Investments in securities are business-related equities and are exposed
to market price fluctuation risk. The Group regularly checks the market
value of the securities and the financial condition of the issuers, andcontinuously reviews whether it continues to hold securities withconsideration for its relationships with the issuers.
Guarantee and lease deposits are mostly deposits related to leasing
properties, and are exposed to the counterparty credit risk.
In addition, the Group accommodates counterparties with loans andconsequently is exposed to the borrowers’ credit risk. However, theGroup constantly checks the financial condition of principal borrowers
and their performance using the funds lent to those borrowers even after
accommodation.
The majority of due dates of operating debt, such as notes andaccounts payable, are within one year.
Interest rate swap contracts are used to hedge risks arising fromfluctuations in interest rates on certain loans and corporate bonds.
In regard to derivative transactions, the Group utilizes interest rate
swaps for bank loans and deposits, and utilizes foreign exchange forward
contracts and cross currency swap contracts for foreign currencydenominated transactions. Interest rate swap contracts are exposed to
the risks of interest rate changes, and foreign exchange forward
contracts and cross currency swap contracts are exposed to the risks offoreign exchange rate changes. The derivative financial instruments are
executed with creditworthy financial institutions, and the Group’s
management believes there is insignificant risk of default by
counterparties. Derivative transactions are executed by the Group’s
Finance Department in accordance with the decisions of a committee
whose chairman is the director of the Finance Department. The Finance
Department prepares reports on derivative transactions that are provided
to the director of the Finance Department periodically.
3. Supplemental information on fair values of financial instruments
The fair values of financial instruments are based on their market prices,
and if the market price is not available, other rational valuation
techniques are used instead. The rational valuation techniques
incorporate variable factors, and as a result the values may change due
to using different assumptions.
The amounts of derivative transactions shown in Note 17 “Derivativetransactions” are not representing the market risks related to derivativetransactions.
The carrying amounts of financial instruments on the consolidatedbalance sheets, their fair values and the differences between them as ofMarch 31, 2020 and 2019 are as follows. (Financial instruments whose
fair value is extremely difficult to estimate are not included; please see(Note 2).)

For 2020
Millions of yen

Secured liabilities at March 31, 2020 and 2019 are as follows:
Thousands of
U.S. dollars

Millions of yen

Long-term debt due within one year
Long-term non-recourse debt due within one year
Long-term debt due after one year
Long-term non-recourse debt due after one year
Total

2020

2019

2020

¥    190
70,373
94,810250,182¥415,555¥      —102,298—
300,900¥403,198$    1,746
646,751
871,335
2,299,256$3,819,088

Specified assets for non-recourse debts at March 31, 2020 and 2019 are as follows:
Thousands of
U.S. dollars

Millions of yen

Cash, time and notice deposits
Buildings and structures
Land
Construction in progress
Machinery and equipment
Total

2020

2019

2020

¥  3,261
86,741
273,324—
96¥363,422¥ 11,345
103,708
393,31685
210¥508,664$   29,970
797,179
2,511,938—
882$3,339,969

Assets:(1) Cash, time and notice deposits(2) Notes and accounts receivable—trade(3) Investments in securities
Available-for-sale securities(4) Guarantee and lease deposits
Held-to-maturity securities
Available-for-sale securities
Total assets
Liabilities:(1) Notes and accounts payable—trade(2) Short-term debt
(3) Long-term debt (including due within one year)(4) Long-term non-recourse debt (including due within one year)
Total liabilities
Derivative transactions*:
Hedge accounting
Total derivative transactions

Carrying amount

Fair value¥  195,361
17,406¥  195,361
17,406

366,734

Thousands of U.S. dollars
Difference

Carrying amount

Fair value

Difference¥     ——

$ 1,795,432
159,967$ 1,795,432
159,967$      ——

366,734—

3,370,407

3,370,407

—

200
747
¥  580,448

200
747¥  580,4480—¥     0

1,838
6,865
$ 5,334,509

1,838
6,865
$ 5,334,509

0—$      0¥   36,393
146,726
2,973,627
320,555¥3,477,301¥   36,393
146,726
3,026,438
325,637¥3,535,194¥     ——
52,811
5,082¥57,893$   334,464
1,348,461
27,328,619
2,946,007$31,957,551$   334,464
1,348,461
27,813,969
2,992,712$32,489,606$      —
—485,350
46,705$532,055¥   (5,134)¥   (5,134)¥   (5,134)¥   (5,134)¥     —
¥     —$   (47,183)$   (47,183)$   (47,183)$   (47,183)$      —
$      —

(Note) “Specified assets for non-recourse debts” includes a portion of the amount of “Assets pledged as collateral” for the years ended March 31, 2020 and 2019.

66

Integrated Report 2020

Sumitomo Realty & Development Co., Ltd.

67

Financial Section

For 2019

Derivative transactions:
Please see Note 17 “Derivative transactions.”

Millions of yen

Assets:(1) Cash, time and notice deposits(2) Notes and accounts receivable—trade(3) Investments in securities
Available-for-sale securities(4) Guarantee and lease deposits
Held-to-maturity securities
Available-for-sale securities
Total assets
Liabilities:(1) Notes and accounts payable—trade(2) Short-term debt
(3) Long-term debt (including due within one year)(4) Long-term non-recourse debt (including due within one year)
Total liabilities
Derivative transactions*:
Hedge accounting
Total derivative transactions

Carrying amount

Fair value

Difference¥  172,192
21,567¥  172,192
21,567¥    ——

414,743414,743

—

3,169
1,170
¥  612,841

3,167
1,170
¥  612,839(2)—¥    (2)(Note 2) Financial instruments whose fair value is extremely difficult to estimate¥   54,937
25,643
2,913,946
403,198¥3,397,724¥   54,937
25,643
2,964,782
410,218¥3,455,580¥    ——
50,836
7,020¥57,856¥   (5,733)¥   (5,733)¥   (5,733)¥   (5,733)¥    —¥    —

Carrying amount

Investments in subsidiaries and affiliates*1

68

Integrated Report 2020

Liabilities:(1) Notes and accounts payable—trade and (2) Short-term debt
The fair value of these items approximates their carrying amounts
because of their short-term maturities.
(3) Long-term debt (including due within one year)
For floating rate notes, the carrying amount is used as the fair value because
the market interest rate is reflected in such notes within a short time period
and because the credit standing of the Company is the same after borrowing.
The fixed-coupon debt is calculated by discounting the combined total ofprincipal and interest at an interest rate assumed for similar new borrowings.
The specific matching criteria of interest rate swaps are applicable tosome long-term debts with floating interest rates (please see Note 17“Derivative transactions”). The fair value of these items is calculated bydiscounting the combined total of interest and principal, with which theinterest rate swap has been accounted for, at an interest rate rationallyestimated for similar borrowings.
The fair value of corporate bonds issued by the Company (included in(3) Long-term debt (including due within one year)) is based on themarket price.
(4) Long-term non-recourse debt (including due within one year)
For floating rate notes, the carrying amount is used as the fair value because
the market interest rate is reflected in such notes within a short time period
and the value of its non-exempt properties has not been changed.
The fixed-coupon debt is calculated by discounting the combined
total of principal and interest at an interest rate assumed for similar new
borrowings or bonds.
The specific matching criteria of interest rate swaps are applicable tosome long-term non-recourse debts with floating interest rates (please
see Note 17 “Derivative transactions”). The fair value of these items is
calculated by discounting the combined total of interest and principal,
with which the interest rate swap has been accounted for, at an interest
rate rationally estimated for similar borrowings or bonds.

2020

2019

2020

¥ 74,468¥ 35,856$  684,386

Unlisted equity securities*1

2,338

2,327

21,487

Preferred equity securities, etc.*1

25,68825,688236,081

2

352

18

Investments in limited partnerships, etc.*1
Guarantee and lease deposits (excluding held-to-maturity securities and available-for-sale securities)*

69,22465,960636,192

Guarantee and deposits received*3

247,610

228,959

2,275,618

2*1. The fair value of these items are not disclosed since their market price is unavailable and the assessment of their fair value is deemed extremely difficult.
*2. Guarantee and lease deposits (excluding held-to-maturity securities and available-for-sale securities) are not included in “Assets (4) Guarantee and lease deposits” because their remaining terms cannot
be determined and the assessment of their fair value is deemed extremely difficult.
*3. The fair value of guarantee and deposits received (mainly consisting of lease deposits) are not disclosed because their remaining terms cannot be determined and the assessment of their fair value isdeemed extremely difficult.

(Note 3) Redemption schedule of pecuniary claims and securities with maturities
For 2020
Millions of yen
1 year or less* Derivative transactions are stated at net of assets and liabilities. Figures in parentheses indicate net liabilities.

(Note 1) The calculation methods of fair value for financial instruments
Assets:(1) Cash, time and notice deposits
The fair value of cash, time and notice deposits approximates theircarrying amounts because of their short-term maturities.
(2) Notes and accounts receivable—trade
The fair value of notes and accounts receivable—trade approximates theircarrying amounts unless the credit standing of debtors has changed
significantly since the loan origination.
The allowance for doubtful receivables is estimated based on expected
recoverable amounts, considering the possibility of individual collections.
Therefore, the fair value of doubtful receivables approximates the carrying
amount deducted by the estimated allowance for doubtful accounts on
the consolidated balance sheets as of the end of the fiscal year.
(3) Investments in securities
The fair value of listed shares is based on the exchange prices at market.
For floating rate notes, the carrying amount is presented as the fair value,as the fair value approximates the carrying amount because the market
interest rate is reflected in such notes within a short time period. The fairvalue of the fixed-coupon debt is determined based on the present value
discounted at the interest rate which reflects the period remaining tomaturity and the credit risk.
For notes on securities classified by purpose of holding, please see
Note 7 “Securities.”(4) Guarantee and lease deposits
The fair value of guarantee and lease deposits are based on the value
offered by correspondent financial institutions.
For notes on securities classified by purpose of holding, please see
Note 7 “Securities.”

Thousands of
U.S. dollars

Millions of yen

Cash, time and notice deposits
Notes and accounts receivable—trade
Guarantee and lease deposits:
Held-to-maturity securities (National government bonds)
Available-for-sale securities with maturities (National government bonds)
Total

1 to 5 years

5 to 10 years

Over 10 years¥195,361
17,406

¥ —
—

¥—
—

¥—
—

200
206
¥213,173

—
483
¥483

—
43
¥43

—
—
¥—

For 2019
Millions of yen
1 year or lessCash, time and notice deposits
Notes and accounts receivable—trade
Guarantee and lease deposits:
Held-to-maturity securities (National government bonds)
Available-for-sale securities with maturities (National government bonds)
Total

1 to 5 years

5 to 10 years

Over 10 years¥172,192
21,567

¥ —
—

¥ —
—

¥—
—

2,969
407
¥197,135

200
561
¥761

—
171
¥171

—
—
¥—

For 2020
Thousands of U.S. dollars
1 year or lessCash, time and notice deposits
Notes and accounts receivable—trade
Guarantee and lease deposits:
Held-to-maturity securities (National government bonds)
Available-for-sale securities with maturities (National government bonds)
Total

1 to 5 years

5 to 10 years

Over 10 years$1,795,432
159,967

$   —
—

$ —
—

$—
—

1,838
1,893
$1,959,130—
4,439$4,439

—
395
$395

—
—
$—

Sumitomo Realty & Development Co., Ltd.

69

Financial Section(Note 4) Repayment schedule of corporate bonds, long-term debt, long-term non-recourse debt and other interest-bearing debt
For 2020
Millions of yen
Year ending March 31

Short-term debt
Long-term debt (including due within one year)
Long-term non-recourse debt (including due within one year)
Total

2021

2022

2023

2024

¥146,726
131,471
70,373¥348,570¥     —
211,446
15,404¥226,850¥     —
237,386
3,846¥241,232¥     —
289,472
3,700¥293,172

2020

2021

2022

2023

¥ 25,643
169,619
102,298¥297,560¥     —
131,281
69,913¥201,194¥     —
211,256
14,944¥226,200¥     —
237,1963,386¥240,582

2021

2022

2023

2024

$1,348,461
1,208,262
646,751$3,203,474$      —1,943,259
141,568$2,084,827$      —2,181,656
35,346$2,217,002$      —2,660,344
34,004$2,694,348

2025 2026 and thereafter¥     —
379,4143,434¥382,848¥      —1,724,438
223,798¥1,948,236

For 2019
Millions of yen
Year ending March 31

Short-term debt
Long-term debt (including due within one year)
Long-term non-recourse debt (including due within one year)
Total

2024 2025 and thereafter¥     —
289,2823,240¥292,522¥       —1,875,312
209,417¥2,084,729

For 2020
Thousands of U.S. dollars
Year ending March 31

Short-term debt
Long-term debt (including due within one year)
Long-term non-recourse debt (including due within one year)
Total
72025 2026 and thereafter$      —3,486,941
31,560$3,518,501$       —15,848,157
2,056,778$17,904,935

Securities

For 2020
A. The following tables summarize the acquisition costs, carrying amounts and fair values of securities with available fair values as of March 31, 2020:(a) Held-to-maturity securities:
Millions of yen

Carrying amount

Securities whose fair value exceeds carrying amount:
National and local government bonds, etc.
Securities whose fair value does not exceed carrying amount:
National and local government bonds, etc.
Total

Millions of yen

Carrying amount

Securities whose fair value exceeds carrying amount:
National and local government bonds, etc.
Securities whose fair value does not exceed carrying amount:
National and local government bonds, etc.
Total

Difference¥  461¥  462¥1

2,708¥3,1692,705¥3,167(3)¥(2)

Carrying amount

Acquisition cost

¥348,562
1,171—
349,733¥180,791
1,140—
181,931¥167,771
31—
167,80265,517—664
66,181¥415,914

75,824—664
76,488¥258,419(10,307)——(10,307)¥157,495(b) Available-for-sale securities:
Securities whose carrying amount exceeds acquisition cost:
Equity securities
Debt securities*
Other
Subtotal
Securities whose carrying amount does not exceed acquisition cost:
Equity securities
Debt securities
Other
Subtotal
Total

Fair value

Millions of yen
Difference* Debt securities in securities whose carrying amount exceeds acquisition cost are included in “Guarantee and lease deposits paid to lessors” on the consolidated balance sheets.
(Note) The Company recognized impairment loss on investments in securities of ¥1,105 million related to equity securities in available-for-sale securities.

B. Total sales of available-for-sale securities sold in the year ended March 31, 2019 amounted to ¥264 million and the related gains amounted to ¥12 million.

Thousands of U.S. dollars

Difference

Carrying amount

Fair value

Difference

¥200

¥200

¥ 0

$1,838$1,838

$ 0

—
¥200

—
¥200

—
¥ 0

—
$1,838—$1,838—$ 0

Carrying amount

Acquisition cost

¥257,807
747—
258,554
108,045—882
108,927¥367,481(b) Available-for-sale securities:
Securities whose carrying amount exceeds acquisition cost:
Equity securities
Debt securities*
Other
Subtotal
Securities whose carrying amount does not exceed acquisition cost:
Equity securities
Debt securities
Other
Subtotal
Total

Fair value

For 2019
A. The following tables summarize the acquisition costs, carrying amounts and fair values of securities with available fair values as of March 31, 2019:(a) Held-to-maturity securities:

Millions of yen

Thousands of U.S. dollars
Difference

Carrying amount

Acquisition cost

Difference¥124,727
732—
125,459¥133,080
15—
133,095$2,369,332
6,865—
2,376,197$1,146,283
6,727—
1,153,010$1,223,049
138—
1,223,187

130,965—891
131,856¥257,315(22,920)—(9)(22,929)¥110,166

992,969—8,106
1,001,075$3,377,272

1,203,612—
8,189
1,211,801$2,364,811(210,643)—(83)(210,726)$1,012,461* Debt securities in securities whose carrying amount exceeds acquisition cost are included in “Guarantee and lease deposits paid to lessors” on the consolidated balance sheets.
(Note) The Company recognized impairment loss on investments in securities of ¥7,838 million ($72,034 thousand) related to equity securities in available-for-sale securities.

B. Total sales of available-for-sale securities sold in the year ended March 31, 2020 amounted to ¥2,302 million ($21,156 thousand) and the related gains
amounted to ¥1,417 million ($13,023 thousand).

70

Integrated Report 2020

Sumitomo Realty & Development Co., Ltd.

71

Financial Section

8

Short-term debt and long-term debt

Non-recourse debt at March 31, 2020 and 2019 consisted of the following:

Short-term debt at March 31, 2020 and 2019 consisted of the following:
Millions of yen

2020

Loans, principally from banks
Commercial paper
Total¥ 26,726
120,000¥146,726

Average interest
rate (%)

0.27
0.00

2019

Average interest
rate (%)¥25,643—¥25,643

0.27
—

2020

$  245,621
1,102,840$1,348,461

The interest rates represent weighted-average rates in effect at March 31, 2020 and 2019, regardless of borrowing currencies, though the range ofthe interest rate varies by borrowing currency.
Long-term debt at March 31, 2020 and 2019 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2.50% domestic straight bonds, due 2019
0.563% domestic straight bonds, due 2020
0.877% domestic straight bonds, due 2020
1.098% domestic straight bonds, due 2023
0.950% domestic straight bonds, due 2023
0.968% domestic straight bonds, due 2023
0.987% domestic straight bonds, due 2024
0.914% domestic straight bonds, due 2024
0.904% domestic straight bonds, due 2024
0.884% domestic straight bonds, due 2024
0.836% domestic straight bonds, due 2024
0.809% domestic straight bonds, due 2024
0.429% domestic straight bonds, due 2021
0.392% domestic straight bonds, due 2022
0.670% domestic straight bonds, due 2025
0.826% domestic straight bonds, due 2025
0.992% domestic straight bonds, due 2025
0.400% domestic straight bonds, due 2026
0.230% domestic straight bonds, due 2026
0.400% domestic straight bonds, due 2027
Loans, principally from banks and insurance companies, with interest at weighted-average rates of 0.31%
in 2020 and 2019, respectively:
SecuredUnsecured
Subtotal
Amount due within one year
Total

72

Integrated Report 2020

2020

2019

2020

¥      ——
—10,00010,00010,00020,00020,00020,00020,00020,00020,00010,00010,00010,00020,00020,00010,00010,00030,000¥   10,000
10,00020,00010,00010,00010,00020,00020,00020,00020,00020,00020,00010,00010,00010,00020,00020,00010,00010,00030,000$       ——
—91,90391,90391,903
183,807
183,807
183,807
183,807
183,807
183,807
91,90391,90391,903
183,807
183,807
91,90391,903
275,71095,0002,608,627
2,973,627(131,471)¥2,842,156—
2,603,946
2,913,946(169,619)¥2,744,327

873,082
23,974,147
27,328,619(1,208,262)$26,120,357

Thousands of
U.S. dollars

Millions of yen

Thousands of
U.S. dollars

Non-recourse bonds, with interest at weighted-average rates of 0.09% in 2020 and 0.07% in 2019:
Due within one year
Due after one year
Subtotal
Non-recourse loans, with interest at weighted-average rates of 0.11% in 2020 and 2019, respectively:
Due within one year
Due after one year
Subtotal
Total
SecuredUnsecured
Total

2020

2019

2020

¥  8,000
31,10039,100¥  2,000
37,10039,100$   73,523
285,819359,342

62,373
219,082
281,455¥320,555

100,298
263,800
364,098¥403,198

573,229
2,013,436
2,586,665$2,946,007¥320,555—¥320,555¥403,198—¥403,198$2,946,007—$2,946,007

The aggregate annual maturities of long-term debt at March 31, 2020 are as follows:Year ending March 31

Millions of yen

Thousands of
U.S. dollars

2021
2022
2023
2024
2025
2026 and thereafter
Total¥  131,471
211,446
237,386
289,472
379,414
1,724,438¥2,973,627$ 1,208,262
1,943,259
2,181,656
2,660,344
3,486,941
15,848,157$27,328,619

The aggregate annual maturities of non-recourse debt at March 31, 2020 are as follows:Year ending March 31

2021
2022
2023
2024
2025
2026 and thereafter
Total

Millions of yen

Thousands of
U.S. dollars¥ 70,373
15,404
3,846
3,700
3,434
223,798¥320,555$  646,751
141,568
35,34634,00431,5602,056,778$2,946,007

It is customary in Japan that security must be given if requested by lending banks under certain circumstances, and generally banks have the right tooffset cash deposited with them against any debt or obligations payable to the bank that becomes due in the case of default and certain other specified
events. The Company and its consolidated subsidiaries have never received such a request.

Sumitomo Realty & Development Co., Ltd.

73

Financial Section

9

Employees’ severance and retirement benefits(6) Components of remeasurements of defined benefit plans (before deducting tax effect)

As explained in Note 2 (12), the liabilities and expenses for severance and retirement benefits are determined based on the amounts obtained by actuarial
calculations except for the cases using the simplified method.
Unrecognized actuarial differences
Total

For 2020 and 2019
1. Defined benefit plan
(1) Adjustment table of retirement benefit obligations between the beginning and the end of the fiscal year

Thousands of
U.S. dollars

Millions of yen

Retirement benefit obligations at beginning of year
Service costs
Interest costs
Actuarial differences
Retirement benefits paid
Retirement benefit obligations at end of year

2020

2019

2020

¥11,876
732
48
(64)
(523)
¥12,069¥11,615
714
48
(1)
(500)
¥11,876$109,144
6,727
441
(588)
(4,806)$110,918(2) Adjustment table of plan assets between the beginning and the end of the fiscal year

Thousands of
U.S. dollars

Millions of yen

Plan assets at beginning of year
Expected return on plan assets
Actuarial differences
Employer contributions
Retirement benefits paid
Plan assets at end of year

2020

2019

2020

¥5,857
117
(321)
380
(234)
¥5,799¥5,650
113
(67)
388
(227)
¥5,857$53,828
1,075(2,950)3,492(2,150)$53,295(3) Adjustment table of retirement benefit obligations and plan assets at the end of the fiscal year and net defined benefit liability on the consolidatedbalance sheets

Thousands of
U.S. dollars

Millions of yen

2020

2019

2020

Obligations under retirement benefit plans (unfunded)
Net amount of liabilities on the consolidated balance sheets¥ 6,307(5,799)508
5,762¥ 6,270¥ 6,295(5,857)438
5,581¥ 6,019$ 57,963(53,295)
4,668
52,955$ 57,623

Net defined benefit liability
Net amount of liabilities on the consolidated balance sheets¥ 6,270¥ 6,270¥ 6,019¥ 6,019$ 57,623$ 57,623

Obligations under retirement benefit plans (funded)
Fair value of plan assets(4) Components of retirement benefit expenses

Thousands of
U.S. dollars

Millions of yen

Service costs
Interest costs
Expected return on plan assets
Actuarial differences
Retirement benefit expenses

2020

2019

2020

¥ 732
48
(117)
66
¥ 729

¥ 714
48
(113)
(229)
¥ 420

$ 6,727441(1,075)607$ 6,700(5) Remeasurements of defined benefit plans (before deducting tax effect)

74

Integrated Report 2020

(7) Major breakdown of plan assets
Debt securities
Equity securities
General life insurance accounts
Other
Total
(8) Actuarial assumptions
Discount rate
Rate of expected return on plan assets

2020

2019

2020

¥257
¥257

¥66
¥66

$2,362$2,362

2020

2019

29.7%
29.1
39.5
1.7
100.0%

25.6%
34.9
37.8
1.7
100.0%

2020

2019

0.4%
2.0

0.4%
2.0

2. Defined contribution plan
The required contribution amount for a defined contribution plan that one of the Company’s consolidated subsidiaries adopted is ¥394 million ($3,621
thousand) and ¥389 million for the years ended March 31, 2020 and 2019, respectively.
10 Loss on impairment of fixed assets
The Company and its consolidated domestic subsidiaries recognized impairment losses on the following assets for the years ended March 31, 2020, 2019and 2018, respectively.
For 2020
Use

Location

Number of properties

Assets leased to others

Tokyo

2

Use

Location

Number of properties

Asset leased to others

Tokyo

1

Use

Location

Number of properties

Asset leased to others

Tokyo

1

For 2019

For 2018

The Company and its consolidated domestic subsidiaries recognized
losses on the impairment of certain properties, which are generally
assessed individually for impairment. The Company’s houses are treatedas common assets.
Loss on sales of property and equipment of ¥9,660 million ($88,779
thousand) and ¥8,576 million were recognized by a consolidated
subsidiary by restructuring of assets within the Group for the years ended
March 31, 2020 and 2019, respectively. The selling price of the asset,
based on evaluation by a real estate appraiser, was determined as its

recoverable amount, and loss on sales of property and equipment of theasset was recognized as impairment losses in other expenses for the years
ended March 31, 2020 and 2019, respectively.
The carrying value of the asset has been reduced to its recoverable
amount by ¥10,635 million since the total amount of its future cash flow
is estimated to be less than the carrying value for the year ended March
31, 2018. The recoverable amount is calculated by discounting the future
cash flow at 4.0%. The write-down was recognized as impairment losses
in other expenses for the years ended March 31, 2018.

Thousands of
U.S. dollars

Millions of yen

Actuarial differences
Total

Thousands of
U.S. dollars

Millions of yen

2020

2019

2020

¥191
¥191

¥295
¥295

$1,755$1,755
Sumitomo Realty & Development Co., Ltd.

75

Financial Section

11 Asset retirement obligations
Even though removing asbestos is required for some buildings theCompany and its consolidated subsidiaries (“the Group”) operate at thetime of demolishing, it is difficult to estimate the fair value ofobligations associated with such assets reasonably since the timing
and/or method of settlement for the retirement obligations are not clear
enough. Therefore, for the years ended March 31, 2020 and 2019, asset
retirement obligations related to such a case are not recorded (except
for the asset retirement obligations recorded on the financial
statements).

13 Business Combination
In addition, under the partial lease contracts, the Group has obligations
for restoring office spaces when they move out. For the asset retirement
obligations associated with such a case, the duration of use of the assets
is not clear enough and these assets do not have any relocation plans.
Therefore, the Group is unable to estimate the asset retirement obligations
since it is difficult to estimate the timing of fulfillment of the obligations.
Consequently, for the years ended March 31, 2020 and 2019, asset
retirement obligations related to such a case are not recorded (except for
the asset retirement obligations recorded on the financial statements).

12 Income taxes
The normal effective statutory income tax rate in Japan arising out of the aggregation of corporate, enterprise and inhabitants’ taxes was approximately
30.62% for the years ended March 31, 2020 and 2019 respectively, and 30.86% for the year ended March 31, 2018.
Details of deferred tax assets and liabilities at March 31, 2020 and 2019 are as follows:

Thousands of
U.S. dollars

Millions of yen

2020

2019

2020

Deferred tax assets:
Loss on devaluation of real estate for sale
Loss on impairment of fixed assets
Loss on adjustment of profit and loss on transfer
Depreciation and amortization of consolidated adjustment
Net operating loss carryforwards
Accrued enterprise tax and business office tax
Loss on devaluation of investments in securities
Net defined benefit liability
Accrued bonuses
Net deferred losses on hedges
Loss on devaluation of investments in SPEs’ holding properties for sale
Allowance for doubtful accounts
Elimination of unrealized profit
Other
Subtotal of deferred tax assets
Valuation allowance
Total deferred tax assets¥ 18,582
13,899
11,633
6,312
3,136
2,284
1,951
1,847
1,742
1,571
1,413
1,290
909
17,49584,064(14,613)¥ 69,451¥ 14,415
17,077
4,254
7,258
1,593
1,834
797
1,759
1,875
1,752
1,413
3,439
926
15,767
74,159(9,247)¥ 64,912$ 170,775
127,736
106,91158,00928,821
20,991
17,93016,97516,01014,43812,986
11,856
8,354
160,784
772,576(134,298)$ 638,278

Deferred tax liabilities:
Net unrealized holding gains on securities
Retained earnings appropriated for tax allowable reserves
Other
Total deferred tax liabilities
Net deferred tax assets¥(33,756)(3,731)(1,908)¥(39,395)¥ 30,056¥(48,241)(3,731)(637)¥(52,609)¥ 12,303$(310,229)(34,289)(17,535)$(362,053)$ 276,225(Notes)
1. Valuation allowance increased by ¥5,366 million ($49,315 thousand) as a result of mainly the recognition of loss on adjustment of profit and loss on transfer.
2. The amounts of deferred tax assets for the year ended March 31, 2019 are restated after reflecting retroactive application of the new accounting policy as stated in (4) “Recognition of revenue” inNote 2 “Accounting policies.”

The difference between the statutory tax rate and the effective tax rate for the years ended March 31, 2020, 2019 and 2018 was insignificant and notpresented.

76

Integrated Report 2020

(Transactions conducted by commonly controlled entities)(An absorption-type merger of consolidated subsidiaries)
The Company resolved at its board of directors meeting held on
August 13, 2019 to merger by absorption with its consolidated
subsidiaries, PrimeQuest Three Co., Ltd. and PrimeQuest Four Co.,
Ltd. The merger agreement had been executed on the same date, andthese subsidiaries were absorbed and merged as of October 1, 2019.
1. Overview of business combination(1) Name and business of the target companies
Name: PrimeQuest Three Co., Ltd. and PrimeQuest Four Co., Ltd.
Business: Property leasing(2) Date of business combination
October 1, 2019(3) Legal form of business combination
An absorption-type merger in which the Company is thesurviving company and PrimeQuest Three Co., Ltd. andPrimeQuest Four Co., Ltd. are absorbed.

(4) Name of company after combination
No change(5) Purpose of business combination
The purpose is to simplify the organization of the Company’s
consolidated Group as PrimeQuest Three Co., Ltd. andPrimeQuest Four Co., Ltd. jointly own 100% of the trust
beneficiary rights of Shinjuku Sumitomo Building.
2. Overview of accounting treatments
The transaction is treated as a common control transaction
pursuant to “Accounting Standard for Business Combinations”(ASBJ Statement No. 21, January 16, 2019), as well as “Guidanceon Accounting Standard for Business Combinations andAccounting Standard for Business Divestitures” (ASBJ Guidance No.
10, January 16, 2019).

14 Deposits received with interest rate
Guarantee and deposits received at March 31, 2020 and 2019 are as follows:

Thousands of
U.S. dollars

Millions of yen

2020

Short-term deposits and long-term deposits due within one year:
Non-interest-bearing
Interest-bearing
Guarantee and lease deposits from tenants:
Non-interest-bearing
Interest-bearing
Long-term deposits:
Non-interest-bearing
Interest-bearing
Total¥ 51,196—
51,196247,610—45,895—
293,505¥344,701

Average interest
rate (%)

—

—

—

2019

¥ 61,582—
61,582228,959—
49,807—
278,766¥340,348

Average interest
rate (%)

—

—

—

2020

$  470,508—
470,5082,275,618—
421,790—2,697,408$3,167,916

15 Net assets
Under the Japanese Corporate Law (“the Law”) and its regulations, theentire amount paid for new shares is required to be designated as common
stock. However, a company may, by a resolution of the Board of Directors,
designate an amount not exceeding one-half of the price of the newshares as additional paid-in capital, which is included in capital surplus.
Under the Law, in cases where a dividend distribution of surplus ismade, the smaller of an amount equal to 10% of the dividend or theexcess, if any, of 25% of common stock over the total of additional
paid-in capital and legal earnings reserve must be set aside as additional
paid-in capital or legal earnings reserve. Legal earnings reserve is included
in retained earnings on the accompanying consolidated balance sheets.

Under the Law, legal earnings reserve and additional paid-in capital
could be used to eliminate or reduce a deficit and capitalized by aresolution of the shareholders’ meeting.
Additional paid-in capital and legal earnings reserve may not be
distributed as dividends. Under the Law, all additional paid-in capitaland all legal earnings reserve may be transferred to other capitalsurplus and retained earnings, respectively, which are potentiallyavailable for dividends.
The maximum amount that the Company can distribute as dividends
is calculated based on the non-consolidated financial statements of theCompany in accordance with the Law and its regulations.

Sumitomo Realty & Development Co., Ltd.

77

Financial Section

16 Information for certain lease transactions

18 Segment information

Future lease payments and receipts under such non-cancelable operating leases at March 31, 2020, 2019 and 2018 are as follows:

The Company and its consolidated subsidiaries mainly operate theirbusiness in five segments: (1) Leasing business consists of leasing of
office buildings, residences and other properties, and management ofthese properties; (2) Sales business consists of sale of condominiums,
detached houses and land lots; (3) Construction business consists ofconstruction of housing, condominiums and buildings; (4) Brokeragebusiness; and (5) Other businesses including fitness business andrestaurant business.

Thousands of
U.S. dollars

Millions of yen

Operating leases:
Future lease payments:
Due within one year
Due after one year
Total

2020

2019

2018

2020

¥  1,526
39,395¥ 40,921¥  1,526
42,211¥ 43,737¥  1,401
38,241¥ 39,642$   14,024
362,053$  376,077

The calculation method for segment profit/loss has been changed
reflecting the change of the revenue recognition method of brokerage
fees as stated in (4) “Recognition of revenue” in Note 2 “Accounting
policies”. The segment information for the year ended March 31, 2019has been adjusted retroactively, and as a result, revenue from operations
from customers decreased ¥1,032 million and segment profit decreased¥1,030 million, respectively, compared to the amount before its
application.

Information by business segment for the years ended March 31, 2020, 2019 and 2018 is summarized as follows:
Future lease receipts:
Due within one year
Due after one year
Total

¥ 89,154
122,544¥211,698¥ 95,607
142,321¥237,928¥ 83,254
153,777¥237,031$  819,355
1,126,220$1,945,575

17 Derivative transactions
Hedge accounting was applied to all derivative transactions for the years ended March 31, 2020 and 2019.
The summary of these transactions is as follows:(1) Foreign currency-related derivatives
Not applicable(2) Interest-related derivatives
For 2020
Hedging accounting

Types of derivative transactions

Deferred hedge
accounting
Exceptional accounting forinterest rate swaps

Interest rate swap contracts
Fixed rate payments / Floating rate receipts
Interest rate swap contracts
Fixed rate payments / Floating rate receipts

Millions of yen
Hedged items

Bank loans
Bank loans and bonds

Contract amounts

Contract amounts
due after one year

Types of derivative transactions

Deferred hedge
accounting
Exceptional accounting forinterest rate swaps

Interest rate swap contracts
Fixed rate payments / Floating rate receipts
Interest rate swap contracts
Fixed rate payments / Floating rate receipts

Hedged items

Bank loans
Bank loans and bonds

Fair value¥  342,900¥  302,900¥(5,134)

1,474,995

1,333,990— (*)

Contract amounts

Contract amounts
due after one year

Fair value$ 3,151,365$ 2,783,751$(47,183)

13,555,693

12,259,811— (*)

For 2019
Hedging accounting

Types of derivative transactions

Deferred hedge
accounting
Exceptional accounting forinterest rate swaps

Interest rate swap contracts
Fixed rate payments / Floating rate receipts
Interest rate swap contracts
Fixed rate payments / Floating rate receipts

Integrated Report 2020

Leasingbusiness

Salesbusiness

Construction
business

Brokeragebusiness

Total

Adjustments

Consolidated financial
statements amounts¥  392,110
3,482
395,592¥  169,416¥3,922,318¥324,700
267
324,967¥ 47,374¥670,079¥216,622
2,309
218,931¥ 20,583¥ 25,053¥69,119
212
69,331¥19,337¥ 8,181¥10,962
1,135
12,097¥   775¥72,476¥1,013,513
7,405
1,020,918¥  257,485¥4,698,107¥     —
(7,405)(7,405)¥ (23,153)¥619,516¥1,013,513—
1,013,513¥  234,332¥5,317,623¥   45,421
9,660¥    119—¥  1,283—¥   462—¥   314—¥   47,599
9,660

¥

1,375
—

¥   48,974
9,660

273,245

2,919

1,553

429

608

278,754620

279,374

For 2019

Hedged items

Bank loans
Bank loans and bonds

Contract amounts

Contract amounts
due after one year

Other businesses

Revenue from operations:Customers
Intersegment
Total
Segment profit
Segment assets
Other:
Depreciation and amortization
Loss on impairment of fixed assets
Increase in property and equipment,
and intangible assets

Reportable segments
Leasingbusiness

Salesbusiness

Construction
business

Brokeragebusiness¥  378,091
3,673
381,764¥  149,933¥3,737,136¥331,516
236
331,752¥ 47,115¥713,300¥219,776
1,917
221,693¥ 20,407¥ 30,057¥71,490377
71,867¥20,978¥14,074¥11,325
1,419
12,744¥ 1,528¥32,545¥1,012,198
7,622
1,019,820¥  239,961¥4,527,112¥     —
(7,622)(7,622)¥  (20,572)¥603,008¥1,012,198—
1,012,198¥  219,389¥5,130,120¥   43,201
8,576¥    145—¥  1,182—¥   458—¥   227—¥   45,213
8,576¥  1,100—¥   46,313
8,576

179,872

590

2,015

920

1,001

184,398397

184,795

Other businesses

Total

Adjustments

Consolidated financial
statements amounts

Millions of yen

Millions of yen
Fair value¥  248,600¥  208,600¥(5,733)

1,507,198

1,415,693— (*)(Note) Fair value is determined based on the quoted price obtained from relevant financial institutions.
(*) Interest rate swap contracts which qualify for hedge accounting and meet specific matching criteria are not remeasured at market value, but the differential paid or received under the swap agreements
is recognized and included in interest expenses or income of the long-term debt or the long-term non-recourse debt as hedged items. Thus, the fair value of such interest rate swap contracts is includedin the fair value of the long-term debt.

78

Revenue from operations:Customers
Intersegment
Total
Segment profit
Segment assets
Other:
Depreciation and amortization
Loss on impairment of fixed assets
Increase in property and equipment,
and intangible assets

Reportable segments

Millions of yen

Thousands of U.S. dollars
Hedging accounting

Millions of yen

For 2020

For 2018
Revenue from operations:Customers
Intersegment
Total
Segment profit
Segment assets
Other:
Depreciation and amortization
Loss on impairment of fixed assets
Increase in property and equipment,
and intangible assets

Reportable segments
Leasingbusiness

Salesbusiness

Construction
business

Brokeragebusiness¥  350,211
3,670
353,881¥  139,368¥3,565,088¥310,914
279
311,193¥ 46,839¥826,574¥206,839
2,517
209,356¥ 16,109¥ 27,946¥68,858311
69,169¥21,457¥12,200¥11,580
1,297
12,877¥ 1,628¥25,203¥  948,402
8,074
956,476¥  225,401¥4,457,011¥     —
(8,074)(8,074)¥  (19,764)¥710,187¥  948,402—
948,402¥  205,637¥5,167,199¥   38,981
10,635¥    174—¥  1,022—¥   471—¥   217—¥   40,865
10,635¥    763—¥   41,628
10,635

220,785

672

1,027

859

428

223,771

4,523

228,294

Other businesses

Total

Adjustments

Consolidated financial
statements amounts

Sumitomo Realty & Development Co., Ltd.

79

Financial Section

20 Investment and rental properties

Thousands of U.S. dollars

For 2020
Revenue from operations:Customers
Intersegment
Total
Segment profit
Segment assets
Other:
Depreciation and amortization
Loss on impairment of fixed assets
Increase in property and equipment,
and intangible assets

Reportable segments
Leasingbusiness

Salesbusiness

Construction
business

Brokeragebusiness$ 3,603,621
32,001
3,635,622$ 1,556,989$36,047,404$2,984,101
2,454
2,986,555$  435,383$6,158,248$1,990,828
21,2202,012,048$  189,165$  230,245$635,227
1,948
637,175$177,713$ 75,186$   417,434
88,779$    1,094—$   11,791—$  4,246—

2,511,212

26,827

14,273

3,943

Adjustments

Consolidated financial
statements amounts$100,744 $ 9,314,521
10,431
68,054111,175
9,382,575$  7,123 $ 2,366,373$666,079 $43,177,162$       —(68,054)(68,054)$  (212,784)$5,693,558$ 9,314,521—
9,314,521$ 2,153,589$48,870,720$  2,886 $   437,451—
88,779$   12,636—$   450,087
88,7795,698

2,567,540

Other businesses

5,587

Total

2,561,842(Note) Information for the year ended March 31, 2018 has been adjusted retroactively reflecting the adoption of ”Partial Amendments to Accounting Standard for Tax Effect Accounting” (ASBJ Statement No.
28, February 16, 2018) effective from the beginning of the year ended March 31, 2019.

Intercompany eliminations between the Company and its
consolidated subsidiaries and undistributed corporate expenses to eachsegment are included in adjustments of segment profit, and theCompany classified expenses of the general administrative division in the
Company and its certain consolidated subsidiaries to corporate expenses
for the years ended March 31, 2020, 2019 and 2018.

Intercompany eliminations between the Company and its consolidated
subsidiaries and undistributed corporate assets to each segment are includedin adjustments of segment assets, and the Company classified cash, time andnotice deposits, investments in securities and assets of the generaladministrative division in the Company and its certain consolidated subsidiaries
to corporate assets for the years ended March 31, 2020, 2019 and 2018.

19 Comprehensive income
Amounts reclassified to profit in the current period that were recognized in other comprehensive income in the current or previous periods and tax effects
for each component of other comprehensive income (loss) for the years ended March 31, 2020, 2019 and 2018 are as follows:
Thousands of
U.S. dollars

Millions of yen

Unrealized holding gains (losses) on securities:
Increase (Decrease) during the fiscal year
Reclassification adjustments
Amounts before tax effects
Tax effects
Total
Deferred gains (losses) on hedges:
Increase (Decrease) during the fiscal year
Reclassification adjustments
Amounts before tax effects
Tax effects
Total
Foreign currency translation adjustments:
Increase (Decrease) during the fiscal year
Remeasurements of defined benefit plans:
Increase (Decrease) during the fiscal year
Reclassification adjustments
Amounts before tax effects
Tax effects
Total
Total other comprehensive income (loss)

80

Integrated Report 2020

2020

2019

2018

2020

¥(53,788)
6,434(47,354)
14,479¥(32,875)¥(32,668)
1,088(31,580)
9,675¥(21,905)¥ 50,290(1,373)
48,917(14,982)¥ 33,935$(494,330)
59,131(435,199)
133,067$(302,132)¥   (349)
942
593
(181)
¥   412¥ (3,628)
876(2,752)829¥ (1,923)¥   (453)
1,208
755
(217)
¥   538$  (3,207)
8,657
5,450
(1,664)$   3,786¥   (366)¥   (259)¥ (1,098)$  (3,364)¥   (257)
66
(191)
88
¥   (103)¥(32,932)¥    (66)
(229)
(295)
61
¥   (234)¥(24,321)¥   22941
270(82)¥   188¥ 33,563$  (2,362)
607(1,755)809$    (946)$(302,656)

The Company and its certain consolidated subsidiaries own some rental properties such as office buildings and residences in Tokyo and other areas.
Certain domestic office buildings are not recognized as rental properties but as a portion used as investment and rental properties since the Company or
its certain consolidated subsidiaries use some of the floor space of these properties.
The carrying amounts of these properties on the consolidated balance sheets, their changes during the fiscal year and their fair values at March 31,
2020 and 2019 are as follows:
Thousands of
U.S. dollars

Millions of yen

Investment and rental properties

A portion used as investment and rental properties

Balance at beginning of fiscal year
Changes during the fiscal year
Balance at end of fiscal year
Fair value at end of fiscal year
Balance at beginning of fiscal year
Changes during the fiscal year
Balance at end of fiscal year
Fair value at end of fiscal year

2020

2019

2020

¥3,373,449
42,533
3,415,982
6,330,951¥  141,889(2,798)139,091
400,272¥3,208,325
165,124
3,373,449
5,838,717¥  141,950(61)
141,889
379,883$31,003,116
390,892
31,394,008
58,183,540$ 1,304,007(25,715)
1,278,292
3,678,632(Notes)* Carrying amounts on the consolidated balance sheets are the amounts determined by deducting accumulated depreciation and accumulated impairment losses from the acquisition costs.
* Fair values as of March 31, 2020 and 2019 are calculated by the Company primarily based on their fair values according to Real Estate Appraisal Standards.

Significant changes during the years ended March 31, 2020 and 2019 are as follows:

Thousands of
U.S. dollars

Millions of yen

Increase:
Acquired real estateTransferred from real estate for sale in process, etc.
Decrease:
Depreciation and amortization
Transferred to real estate for sale, etc.
Loss on impairment of fixed assets
Transferred to owner-occupied properties, etc.

2020

2019

2020

¥181,035
6,785¥173,144
23,162$1,663,772
62,356¥ (42,436)(1,940)(9,660)(67,244)¥ (42,374)(4,822)(8,576)—$ (390,001)(17,829)(88,779)(617,995)

Income and expenses for investment and rental properties for the years ended March 31, 2020 and 2019 are as follows:

Thousands of
U.S. dollars

Millions of yen

Investment and rental properties

A portion used as investment and rental properties

IncomeExpenses
Balance
Other income (expenses)
IncomeExpenses
Balance
Other income (expenses)

2020

2019

2020

¥291,163
135,568
155,595(12,197)¥ 18,536
8,869
9,667
(45)

¥269,493
137,784
131,709(9,193)¥ 18,413
9,176
9,237
(4)

$2,675,885
1,245,915
1,429,970(112,094)$  170,352
81,50988,843(414)(Notes)* As a portion used as investment and rental properties includes a portion used by the Company or its certain consolidated subsidiaries for providing services as well as management and administration,
income for these are not recorded above. The expenses primarily consist of rent, depreciation, taxes and dues, and others.
* Other income (expenses) for investment and rental properties is mostly the loss on impairment of fixed assets, and Other income (expenses) for a portion used as investment and rental properties is mostly
the loss on disposal of property and equipment.

Sumitomo Realty & Development Co., Ltd.

81

Financial Section

Independent Auditor’s Report

21 Contingent liabilities
The Company and its consolidated subsidiaries were contingently liable as guarantors of borrowings by customers and others in an amount aggregating
to ¥9,407 million ($86,453 thousand) and ¥7,316 million at March 31, 2020 and 2019, respectively.
22 Subsequent events(Change in ownership of its subsidiary with transfer of equity interest)
The Company decided to transfer all of its equity interest in its subsidiary, Dalian Qingyun Sky Realty and Development Co., Ltd., to Dalian Jiaguan
Guangcheng Corporate Management Centre (Limited Partnership) as of June 12, 2020.
1. Reason for transfer of equity interest
The Company established the subsidiary in 2013, with business objectives of development and sales of condominiums, as a joint-venture with Yida
Group Co., Ltd., a prominent developer in Dalian, China (due to the reorganization of Yida Group, the current partner is Dalian Yida Management
Consultancy Co., Ltd., herein referred to as “Yida”). Although the subsidiary had been promoting its business thereafter, Yida offered to dissolve
the joint venture and the Company decided to transfer all of its equity interest in the subsidiary to a LLP led by Yida, in which the Company holds
no stake.
2. Overview of the subsidiary transferred
Name: Dalian Qingyun Sky Realty and Development Co., Ltd.
Address: Room 524, 9-1 Kuiying Street, Zhongshan District, Dalian City, Liaoning Province, PRC
Position and name of representative: Executive Director, Yusuke Menjo
Description of business: Development, construction, sale, lease and related operations of real estate
Paid-in capital: RMB 2,963,280,000
Establishment: February, 2013
Shareholding ratio: Sumitomo Realty & Development Co., Ltd. 75%, Dalian Yida Management Consultancy Co., Ltd. 25%
3. Name of the counterparty of the transfer
Dalian Jiaguan Guangcheng Corporate Management Centre (Limited Partnership)
4. Amount of transfer
RMB 3,030,000,000
5. Date of transfer
June 12, 2020
6. Effect on the financial statements
The gain on sale of investments in securities of ¥12,293 million (¥15.06/RMB) will be recognized as Other income for the year ending March 31, 2021.
(Dividends)
On June 26, 2020, the shareholders of the Company approved payments of a year-end cash dividend of ¥19 ($0.17) per share or a total of ¥9,004 million($82,750 thousand) to shareholders of record at March 31, 2020. Such appropriations are recognized in the period in which they are approved by theshareholders.

82

Integrated Report 2020

To the Board of Directors of Sumitomo Realty & Development Co., Ltd.:

OpinionWe have audited the accompanying consolidated financial statements of Sumitomo Realty & Development Co., Ltd. (“the Company”) and its
consolidated subsidiaries (collectively referred to as “the Group"), which comprise the consolidated balance sheets as at March 31, 2020 and 2019, theconsolidated statements of income and comprehensive income, changes in net assets and cash flows for each of the years in the three-year period ended
March 31, 2020, and notes, comprising a summary of significant accounting policies, other explanatory information.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Groupas at March 31, 2020 and 2019, and its consolidated financial performance and cash flows for each of the years in the three-year period ended March
31, 2020, in accordance with accounting principles generally accepted in Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our responsibilities under those standards are further
described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Groupin accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Japan, and we have fulfilled ourother ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our opinion.
Responsibilities of Management and Corporate Auditors and the Board of Corporate Auditors for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles
generally accepted in Japan, and for such internal control as management determines is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, asapplicable, matters related to going concern in accordance with accounting principles generally accepted in Japan and using the going concern basis ofaccounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Corporate auditors and the board of corporate auditors are responsible for overseeing the directors’ performance of their duties including the design,
implementation and maintenance of the Group’s financial reporting process.

Sumitomo Realty & Development Co., Ltd.

83

Financial Section

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not aguarantee that an audit conducted in accordance with auditing standards generally accepted in Japan will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected toinfluence the economic decisions of users taken on the basis of these consolidated financial statements.

Convenience Translation
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31, 2020 are presented solely forconvenience. Our audit also included the translation of yen amounts into U.S. dollar amounts and, in our opinion, such translation has been made on thebasis described in Note 1 to the consolidated financial statements.
Interest required to be disclosed by the Certified Public Accountants Act of Japan
We do not have any interest in the Group which is required to be disclosed pursuant to the provisions of the Certified Public Accountants Act of Japan.

As part of our audit in accordance with auditing standards generally accepted in Japan, we exercise professional judgment and maintain professional
skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform
audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances,while the objective of the audit is not to express an opinion on the effectiveness of the Group’s internal control.

/S/ Atsuji Maeno
Designated Engagement Partner
Certified Public Accountant/S/ Hidekazu Takahashi
Designated Engagement Partner
Certified Public Accountant

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made bymanagement.

/S/ Masako Kanno
Designated Engagement Partner
Certified Public Accountant

Conclude on the appropriateness of management’s use of the going concern basis of accounting and based on the audit evidence obtained,
whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the
consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

KPMG AZSA LLC
Tokyo Office, Japan
July 29, 2020

Evaluate whether the presentation and disclosures in the consolidated financial statements are in accordance with accounting standards generally
accepted in Japan, the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether
the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

Notes to the Reader of Independent Auditor’s Report:
This is a copy of the Independent Auditor’s Report and the original copies are kept separately by the Company and KPMG AZSA LLC.

Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an
opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remainsolely responsible for our audit opinion.

We communicate with corporate auditors and the board of corporate auditors regarding, among other matters, the planned scope and timing of the audit,
significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide corporate auditors and the board of corporate auditors with a statement that we have complied with relevant ethical requirements regarding
independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and whereapplicable, related safeguards.

84

Integrated Report 2020

Sumitomo Realty & Development Co., Ltd.

85

Company Information
Corporate Data

(As of March 31, 2020)

Investor Information

History
Global Events

Head OfficePaid-in Capital

Shinjuku NS Building
4-1, Nishi-Shinjuku 2-chome,
Shinjuku-ku, Tokyo 163-0820, Japan¥122,805 million• Izumi Real Estate Co., Ltd. established as the successor to the holding company of the Sumitomo zaibatsu following the1949
breakup of the conglomerate.
1957 • Izumi Real Estate Co., Ltd. changed its name to Sumitomo Realty & Development Co., Ltd.
1963 • Merged with the holding company of the former Sumitomo zaibatsu during its liquidation.

Number of Common Stock

Breakdown of
Shareholders

Authorized: 1,900,000,000 shares
Issued: 476,085,978 shares

Corporate Website
http://www.sumitomo-rd.co.jp/english/

Date of Establishment

Number of Shareholders
12,865

December 1, 1949

Stock Exchange Listing

Number of Employees

Tokyo Stock Exchange

13,676 (Consolidated)

Major Consolidated Subsidiaries
Sumitomo Real Estate Sales Co., Ltd.
Sumitomo Fudosan Tatemono Service Co., Ltd.
Sumitomo Fudosan Syscon Co., Ltd.
Sumitomo Fudosan Villa Fontaine Co., Ltd.
Sumitomo Fudosan Bellesalle Co., Ltd.
Sumitomo Fudosan Esforta Co., Ltd.
Sumitomo Fudosan Finance Co., Ltd.

1970 • Listed on the Tokyo Stock Exchange and Osaka Securities Exchange.
1972 • Established Sumitomo Realty & Development CA., Inc., a consolidated subsidiary.

Trust Accounts
Financial Institutions
Other Companies
Foreign Companies
Individuals and Others

28.81%
9.44%
34.84%
23.61%
3.30%

Number of shares held(Thousands)

Percentage ofshares held

46,26026,725
11,99010,417
9,030
8,392
8,367
7,550
7,500
7,090

9.76%
5.64%
2.53%
2.20%
1.91%
1.77%
1.77%
1.59%
1.58%
1.50%

The Master Trust Bank of Japan, Ltd. (Trust account)
Japan Trustee Services Bank, Ltd. (Trust account)
Sumitomo Mitsui Banking Corporation
Japan Trustee Services Bank, Ltd. (Trust account 4)
Japan Trustee Services Bank, Ltd. (Trust account 5)
J.P.MORGAN BANK LUXEMBOURG S.A.384500
Daikin Industries, Ltd.
Taisei Corporation
Shimizu Corporation
Obayashi Corporation

1974• Completed construction of 52-story Shinjuku Sumitomo Building in Shinjuku, Tokyo; moved Company head office there from
Tokyo Sumitomo Building in Marunouchi, Tokyo.

1975 • Established Sumitomo Real Estate Sales Co., Ltd., a consolidated subsidiary.

Yen
6,000

Stock Price (right)
TOPIX (left)• Completed construction of 30-story Shinjuku NS Building in Shinjuku, Tokyo; moved Company head office there from
Shinjuku Sumitomo Building.

1984 • Established Sumitomo Fudosan Finance Co., Ltd., a consolidated subsidiary.
1986 • Established Sumitomo Fudosan Fitness Co., Ltd. (currently Sumitomo Fudosan Esforta Co., Ltd.), a consolidated subsidiary.
1995 • Commenced American Comfort custom home construction business.
1996 • Commenced Shinchiku Sokkurisan remodeling business.
1997 • Entered high-quality business hotel market. Opened Villa Fontaine Nihombashi and hotels at two other locations.

1999• Commenced real estate joint investment trust fund. Launched sales of Sumitomo Realty & Development Fund (SURF) series.
• Implemented the Sumquest bond issue, which was the first public issue of real estate securities in Japan.

2002 • Completed construction of Izumi Garden Tower (Minato Ward, Tokyo).

2004 • Commenced sales of World City Towers (Minato Ward, Tokyo).
• Commenced sales of City Towers Toyosu (Koto Ward, Tokyo).

4,000

1,200

3,000

800

2,000

2014 • Number of condominium units brought to market over the full year was the highest in Japan for the first time.

400

1,000

2015

0

2016

2017

2018

2019

2020

Trading Volume

Millions of shares100

2010 • Completed construction of Shinjuku Central Park City (Shinjuku Ward, Tokyo).
2011
2012

2017

• Opened Grand Mansion Gallery.
• Completed construction of Sumitomo Fudosan Shinjuku Grand Tower (Shinjuku Ward, Tokyo).
• Launched a Custom-order Condominium service.
• Commenced sales of J∙RESIDENCE.

2011• The Great East Japan
Earthquake• European sovereign
debt crisis• Record-high yen
against the U.S. dollar
2015• China stock market
crash• Completed construction of Tokyo Nihombashi Tower (Chuo Ward, Tokyo).
• Cumulative units contracted topped 100,000 in Shinchiku Sokkurisan remodeling operations.
• Completed construction of Shinjuku Garden Tower (Shinjuku Ward, Tokyo).

2016• Brexit referendum• Completed construction of Sumitomo Fudosan Roppongi Grand Tower (Minato Ward, Tokyo).
• Commenced sales of City Towers Tokyo Bay (Koto Ward, Tokyo).
• Sumitomo Real Estate Sales Co., Ltd. delisted as it became a wholly owned subsidiary.

2018 • Completed construction of Sumitomo Fudosan Osaki Garden Tower (Shinagawa Ward, Tokyo).

75

1999
• Introduction of euro2007-2008• The Global Financial
Crisis (Lehman crisis)• Established Sumitomo Fudosan Bellesalle Co., Ltd., a consolidated subsidiary.

1,600

2016

1989
• Collapse of Berlin Wall
• Nikkei Stock Average
all-time high2001
• September 11
terrorist attacks

2001 • The number of managed STEP brokerage offices exceeded 200.

5,000

2015

1987
• Black Monday

2000 • Commenced luxury condominium leasing business. Completed construction of La Tour Shibakoen.

2008

7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6

1985• The Plaza Accord

1998 • Sumitomo Real Estate Sales Co., Ltd., a consolidated subsidiary, listed on the Tokyo Stock Exchange.

2,000

0

1978
• Second oil crisis

1980 • Established Sumitomo Fudosan Syscon Co., Ltd., a consolidated subsidiary.

2003 • Commenced sales of J∙URBAN fixed-price urban-style housing series.

Stock Price and Trading Volume on Tokyo Stock Exchange
Yen
2,400

1973
• First oil crisis

1973 • Established Sumitomo Fudosan Tatemono Service Co., Ltd., a consolidated subsidiary.

1982

Major Shareholders
Name

1964
• Tokyo Olympic Games

1964 • Entered condominium sales business with Hama-Ashiya Mansion in Kobe, Hyogo Prefecture.

2019 • Number of condominium units brought to market over the full year was the highest in Japan for the sixth consecutive year.

2020• COVID-19 Pandemic

50
25
0

7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6

2015

86

Integrated Report 2020

2016

2017

2018

2019

2020

Sumitomo Realty & Development Co., Ltd.

87

Sumitomo Realty & Development Co., Ltd.
Integrated Report 2020

Shinjuku NS Building, 4-1, Nishi-Shinjuku 2-chome,
Shinjuku-ku, Tokyo 163-0820, Japan
http://www.sumitomo-rd.co.jp/english/

Integrated Report

2020

Printed in Japan

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