New Value for New Growth
Annual Report 2012

Profile

About the Company
Sumitomo Realty & Development Co., Ltd., a core member of the Sumitomo Group, is one ofJapan’s leading real estate companies.
The Company is well established as a comprehensive developer and supplier of high-qualityofﬁce buildings and condominiums in urban areas.
With operations centered on four areas—leasing, sales, construction and brokerage—theCompany has achieved a combination of growth potential and balanced operations that will
drive its success in the challenging markets of the 21st century. Sumitomo Realty remains
committed to the creation of comfortable work and living environments that contribute to ahigher quality of life.
Shinjuku NS Building (Head office)

Our History

1949–80■ 1949 Izumi Real Estate Co., Ltd. established as the

successor to the holding company of the Sumitomozaibatsu following the 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.
■ 1964 Entered condominium sales business with Hama-

Ashiya Mansion in Kobe, Hyogo Prefecture.
■ 1970 Listed on the Tokyo Stock Exchange and Osaka

Securities Exchange.
■ 1973 Established Sumitomo Fudosan Tatemono Service

Co., Ltd., a consolidated subsidiary.
■ 1974 Completed construction of 52-story Shinjuku

Sumitomo Building in Shinjuku, Tokyo; moved
Company headquarters there from Tokyo Sumitomo
Building in Marunouchi, Tokyo.
■ 1975 Established Sumitomo Real Estate Sales Co., Ltd., aconsolidated subsidiary.
■ 1980 Established Sumitomo Fudosan Syscon Co., Ltd., a

81–2000■ 1982 Completed construction of 30-story Shinjuku NS

Building in Shinjuku, Tokyo; moved Company
headquarters there from Shinjuku Sumitomo Building.
■ 1995 Commenced American Comfort custom homeconstruction business.
■ 1996 Commenced Shinchiku Sokkurisan remodelingbusiness.
■ 1997 Entered high-quality business hotel market. Opened

Villa Fontaine Nihonbashi and hotels at two otherlocations.
■ 1998 Sumitomo Real Estate Sales Co., Ltd., a consolidated

subsidiary, listed on the Tokyo Stock Exchange.
■ 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 inJapan.
■ 2000 Commenced luxury condominium leasing business.

Completed construction of La Tour Shibakoen.

consolidated subsidiary.

Global Events■ 1964 Tokyo Olympic Games■ 1985 The Plaza Accord■ 1973 First oil crisis■ 1987 Black Monday■ 1978 Second oil crisis■ 1989 Collapse of Berlin Wall

The Nikkei Stock Average reaches an all-time high

ANNUAL REPORT 2012

Izumi Garden Tower

Shinjuku Central Park City

01–10

■ 2001 The number of managed STEP brokerage offices

exceeded 200.
■ 2002 Completed construction of Izumi Garden Tower(Roppongi 1-Chome Redevelopment Project).
■ 2003 Commenced sales of J·URBAN fixed-priceWorld City Towers

City Towers Toyosu

11–12■ 2011 Cumulative units contracted topped 70,000 in­Shinchiku Sokkurisan remodeling operations.
Opened Grand Mansion Gallery.
* Refer to page 17 for details

Completed Sumitomo Fudosan Shinjuku Grand Tower.

urban-style housing series.
■ 2004 Commenced sales of World City Towers in Minato

Ward, Tokyo.
■ 2006 Established Sumitomo Fudosan Reform Co., Ltd., aconsolidated subsidiary.
■ 2008 Established Sumitomo Fudosan Bellesalle Co., Ltd., aconsolidated subsidiary.
Commenced sales at City Towers Toyosu (KotoWard, Tokyo).
■ 2010 Completed construction of Shinjuku Central Park City

(Shinjuku Ward, Tokyo)

Sumitomo Fudosan Shinjuku Grand Tower■ 2012 Launched a Custom-order Condominium service.
* Refer to page 17 for details

Commenced sales of J·RESIDENCE.
* Refer to page 20 for details

J·RESIDENCE■ 1999 The euro is introduced■ 2001 The September 11th terrorist attacks■ 2008 Lehman crisis■ 2011 The Great East Japan Earthquake

European sovereign debt crisis
Record high yen against the U.S. dollar

SUMITOMO REALTY & DEVELOPMENT CO., LTD.

01

Contents
03 Consolidated Financial Highlights

26 Financial Section

04 A Message from the Management

26 Eleven-year Financial Summary

06 At a Glance

28 Management’s Discussion and Analysis

08 Review of Operations

32 Consolidated Balance Sheets

08 Leasing
14 Sales34	Consolidated Statements of Income and Consolidated Statements of Comprehensive Income

18 Construction

35 Consolidated Statements of Changes in Net Assets

21 Brokerage

36 Consolidated Statements of Cash Flows

22 CSR

37 Notes to Consolidated Financial Statements

24 Corporate Governance

59 Independent Auditor’s Report
60 Senior Management
61 Corporate Data/Investor Information

Cautionary Statement with Respect to Forward-looking Statements
Statements made in this annual report with respect to plans, targets and future performance that are not historical fact are forward-looking statements. These statements are based on
management’s assumptions and beliefs 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 thereal estate market and interest rate trends.

02

ANNUAL REPORT 2012

Consolidated Financial Highlights
Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
Years ended March 31

Overview of March 2012 Fiscal Year
Revenue from operations fell due to a year-on-year decrease in condominium units delivered. However, operating income and ordinary
profit exceeded our initial provisional forecasts and we recorded higher earnings for the second consecutive year. Net income was also
higher year on year.

Thousands of
U.S. dollars*1

Millions of yen
2012

2011

2010

2012

¥  688,662¥  744,756¥  719,636$ 8,385,024

147,465

138,463

133,979

1,795,507

Ordinary profit*

107,912106,296

100,464

1,313,917

Net income

53,23650,90852,662

648,192¥3,859,698¥3,234,203¥3,168,098$46,994,984

For the Year
Revenue from operations
Operating income
2

At Year-end
Total assets
Shareholders’ equity*

553,844526,227

488,896

6,743,504

Interest-bearing debt

2,554,115

2,021,599

1,935,166

31,098,441¥   112.28¥   107.35¥   111.04$      1.37

1,168.11

1,109.78

1,030.93

14.22

20.00

20.00

20.00

0.24

3

Per Share Data (Yen and U.S. dollars)
Net income
Shareholders’ equity
Cash dividend applicable to the year

*1 U.S. dollar amounts in this report are translated, for convenience only, at the rate of ¥82.13 = U.S.$1, the prevailing exchange rate at March 31, 2012.
*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 broken out in the Company’s English-language financial statements, but it is included here because it plays
an important role in the calculation of incentive payments for directors.
*3 Shareholders’ equity = Net assets – Minority interests

billionin the March 2012 fiscal year

¥107.9billionin the March 2012 fiscal year

¥53.2

08 09 10 11 12 13(Forecast)

08 09 10 11 12 13(Forecast)

08 09 10 11 12 13(Forecast)

46.2

0

63.1

109.0

0

107.9

0

106.3

25

100.5

50

113.6

60

125.2

300

150.0

50

147.5

100

138.5

120

134.0

600

146.4

75

154.6

150

720.0

180

688.7

900

744.8

(Billions of Yen)

719.6

(Billions of Yen)

695.2

(Billions of Yen)

691.9

(Billions of Yen)0billionin the March 2012 fiscal year

58.0

¥147.5billionNet Income

53.2¥688.7in the March 2012 fiscal year

Ordinary Profit* 2

50.9

Operating Income

52.7

Revenue from Operations

08 09 10 11 12 13(Forecast)

SUMITOMO REALTY & DEVELOPMENT CO., LTD.

03

A Message from the Management

We aim to achieve the targets of our Fifth Management Plan and move to the next stage of growth byresponding flexibly to change in our operating
environment.

Junji Takashima

Kenichi Onodera

ChairmanPresident

Progress under the Fifth Management Planbillion and ordinary profit was ¥107.9 billion. Operating income

We are currently working on our Fifth Management Plan, which

and ordinary profit thus rose for the second consecutive year.

ends in the March 2013 fiscal year. This plan was formulated in

We began the March 2012 fiscal year with a provisional

the middle of two straight years of lower earnings due to thetarget of achieving ordinary profit in excess of ¥100.0 billion for

impact of the global economic downturn after the beginning of

the 6th straight year. The target was provisional because of

the global financial crisis. Before that, in the year ended Marchdifficult conditions which made it hard to predict the impact of

31, 2008, we achieved record ordinary profit of ¥125.2 billion.

the Great East Japan Earthquake on our performance. However,We embarked on this plan with the basic policies of “Getting

we actually did better than we expected. Consumer sentimentback on track toward increased revenue and profit” andcooled and materials were in short supply after the earthquake,“Targeting record-setting business results in the March 2013

but that turmoil was brought to a close relatively quickly, while

fiscal year.”continued low interest rates underpinned a robust performance

In the March 2012 fiscal year, the second year of the Fifth

in our condominiums and brokerage operations. Leasing opera-

Management Plan, we saw the continuation of a seesaw busi-

tions also made a contribution, recording the first increase inness environment, with the after-effects of the Great East Japan

three years, mainly due to newly opened buildings.

Earthquake still being felt. This has made it difficult for us to

Revenue from operations fell due to a year-on-year

achieve our target for revenue from operations. However, wedecrease in unit sales of condominiums. However, ­operating

had achieved the equivalent of around two-thirds of our operat-

income and ordinary profit exceeded our initial ­provisional

ing income and ordinary profit targets under the plan as offorecasts and we recorded higher earnings for the second

March 31, 2012, meaning we are making steady progress on

straight year. Our business performance was better than wethe earnings front. With one year left to go in the Fifth

anticipated.

Management Plan, we intend to muster all our strengths andput the upmost priority on achieving our plan targets.

In line with our emphasis on the continued payment of
stable dividends, we maintained the annual dividend at ¥20
per share, including an interim dividend of ¥10 per share. In

04

Results for the Year under Review

the March 2013 fiscal year, we intend to maintain an annual

In the March 2012 fiscal year, consolidated revenue from oper-

dividend of ¥20 per share, including an interim dividend of ¥10

ations was ¥688.7 billion, while operating income was ¥147.5

per share.

ANNUAL REPORT 2012

Fifth Management Plan (April 2010 to March 2013)• Getting back on track toward increased revenue and profit• Targeting record-setting business results in the March 2013 fiscal year

320

430

2,300

435

1st Plan*
1999–2001

2nd Plan
2002–2004

3rd Plan
2005–2007

4th Plan
2008–2010

5th Plan
2011–2013
FORECAST(Billions of Yen)

▪Revenue from operations

339

2,107

170

265

87

0

274

150

350

800

1,939

300

1,606

1,600

202

450

1,270

2,400

1,270

1,606

1,939

2,107

2,300

▪Operating income (right scale)

202

265

350

435

430

▪Ordinary profit (right scale)

87

170

274

339

320

(Years ended March 31)

Results
2011

Results
2012

Achievement
ratio

0

Remaining balance
2013

Revenue from operations

745

689

62%

867

Operating income (right scale)

138

147

66%

144

Ordinary profit (right scale)

106

108

67%

106

Note: The figures represent cumulative totals for the period covered by each plan.
* The figures shown for the 1st Plan are the cumulative totals for the final three years of the plan.

Outlook

responding to unfolding developments, we are determined to

In the March 2013 fiscal year, the final year of the Fifthbring our Fifth Management Plan to a successful conclusion by

Management Plan, we are aiming for higher revenue and earn-achieving our goals. We will also work extra hard so that we canings in all of our four main businesses. We are forecasting

create a growth scenario for our Sixth Management Plan.

­revenue from operations of ¥720.0 billion, operating income of¥150.0 billion and ordinary profit of ¥109.0 billion. We are

We ask for the continued support of our shareholders in theyears ahead.

therefore projecting top-line growth and a third year of higher
operating income and ordinary profit.

June 2012

There are increasing expectations for an economic recovery
in Japan, due to improving corporate earnings and reconstruction demand stemming from the Great East Japan Earthquake.
However, instability still clouds the economic picture due tofactors such as the debt crisis in Europe, the persistently
strong yen and likely power supply shortages in Japan. While

Junji Takashima
Chairman

Kenichi Onodera
President

SUMITOMO REALTY & DEVELOPMENT CO., LTD.

05

At a Glance

Balanced Portfolio
Our achievement of sustained growth has been the result of our well-balanced operations. We have a balanced
portfolio in four operational ﬁelds—leasing, sales, construction and brokerage—that have different risk proﬁlesand capital requirements.
Characteristics of Our Four Operational Fields

conditions. Nonetheless, revenue and profit are both relatively high.

Leasing and sales are our traditional main fields of business. These

Our housing construction operations and brokerage operations areare capital-intensive fields; returns and risk are both high and sub-order-based businesses with low capital requirements and no sales

stantial upfront investment is required, but the level of humanrisk but substantial human resources requirements. These opera-

resources is relatively low. In leasing, the period from the initial

tions have been developed more recently. In housing construction,

investment to the generation of revenue—the operational cycle—isthe operational cycle is short, about six months to a year, but prod-

long, but once a building is opened for occupancy it provides a

uct development capabilities are very important. Brokerage opera-

stable, sustained source of revenue. The sales business, however, istions have the shortest operational cycle of our fields of business but

characterized by a shorter operational cycle with volatile market

require strong, highly competitive service networks.

LEASING

SALES

Office building, condominium and other property leasing andMid- and high-rise condominium, detached house and housing

management and related activities

lot development and sales and related activities

Revenue from Operations

Revenue from Operations(Billions of Yen)

(Billions of Yen)
300

240

28.3%

200

38.9%

160

Operating Income

0

08

09

10

11

12 13
(Forecast)

Operating Income(Billions of Yen)

(Billions of Yen)
120

45

80

23.6%

Major Consolidated Subsidiaries

Major Consolidated Subsidiaries

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

Sumitomo Real Estate Sales Co., Ltd.

ANNUAL REPORT 2012

38.0

0

37.9

12 13
(Forecast)

33.4

11

19.6

10

30.7

89.6

09

42.7

88.2

08

92.0

97.6

0

30

15
105.3

40
93.4

55.9%

06

220.0

12 13
(Forecast)

198.2

11

239.7

10

219.7

271.8

09

191.2

292.9

08

193.6

293.5

275.0

298.4

0

80
279.6

100

08

09

10

11

12 13
(Forecast)Taking Steps to Maintain Well-balanced Operation
Sumitomo Realty’s four operational ﬁelds have complementary operational cycles and market characteristics, and in the past the adverse
effects of changing market conditions on a particular ﬁeld have gen-

Sumitomo Realty’s Balanced Portfolio
CapitalHigh level of capital,

LEASING low level of human resources

erally been offset by favorable performances in others. As a result,
SALES

the Company has been able to continue to record increases in

Relatively high level of capital,
relatively low level ofhuman resources­revenue and proﬁt over the medium to long term. In the future, ourbasic strategy will entail taking steps to maintain well-balanced
growth in our operational portfolio. Moreover, to further reinforce ourRelatively low level of capital, CONSTRUCTION
relatively high level ofhuman resources

growth prospects, we will endeavor to develop a strong market presLow level of capital,
high level of human resources

ence in a ﬁfth core ﬁeld of operations, and are currently searching forthe ﬁeld that would best complement our existing operations.

BROKERAGE

Human Resources

CONSTRUCTIONBROKERAGE

Custom home construction and remodeling and related activities

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

Revenue from Operations

Revenue from Operations(Billions of Yen)

(Billions of Yen)
180

7.1%

120

40

12 13
(Forecast)

Operating Income

0

54.0

11

49.4

10

46.4

166.0

09

44.6

162.9

08

43.1

158.2

167.0

160.1

0

20
156.6

60

58.5

23.7%

60

08

09

10

11

12 13
(Forecast)

Operating Income(Billions of Yen)

(Billions of Yen)
18

24

12

16

9.1%
6

0

Major Consolidated Subsidiaries

Major Consolidated Subsidiaries

Sumitomo Fudosan Syscon Co., Ltd.
Sumitomo Fudosan Reform Co., Ltd.

Sumitomo Real Estate Sales Co., Ltd.

16.0

12 13
(Forecast)

14.5

11

12.2

10

10.8

16.5

09

8.8

16.7

08

20.0

17.1

17.0

13.0

0

8
10.2

10.3%

08

09

10

11

12 13
(Forecast)

SUMITOMO REALTY & DEVELOPMENT CO., LTD.

07

Review of Operations

LEASINGIn leasing operations, Sumitomo Realty has worked to create new opportunities by implementing innovative
initiatives. In this way, the Company has established a position of leadership in the leasing industry. Our leasing
business is characterized by an outstanding portfolio that includes many upscale buildings in central Tokyo andby a direct involvement in operations.

Overview of the Fiscal Year

Sumitomo Realty’s Strengths

In the Tokyo office building market, which accounts for more than

The Company made its full-scale entry into the leasing

90% of our portfolio, demand was lackluster from companies look-business in the latter half of the 1970s. In 1995, following

ing for additional office space to expand operations amid continued

the collapse of Japan’s economic bubble, we were the firsteconomic uncertainty created by events and factors such as thecompany in the industry to restart construction work on

European sovereign debt crisis, the strong yen, and the Great East

office buildings. We paid particular attention to large-scale

Japan Earthquake. On the other hand, we received more inquiries,

projects in Tokyo CBD (Central Business District), especiallyparticularly for large buildings. The increase was driven by emerg-

those areas legally designated for redevelopment.

ing demand for buildings with outstanding BCP (Business Continu-

We currently operate about 200 buildings for lease. The

ity Plan) features, especially in terms of high earthquake resistanceadvanced interior features of our buildings are comple-

and own power generation, which added to demand from tenants

mented with distinctive exterior designs, including hotel-likelooking to integrate or amalgamate operations into one location.

entranceways and all-glass exteriors. Sumitomo Realty
creates innovative buildings with strong market presences.

Operating Income andOperating Margin(1,000 m2)(Billions of Yen)

(%)

300

120

60

4,500

200

80

40

3,000

100

40

20

1,500

0

0

09

10

11

12

13
(Forecast)

Operating Income
Operating Margin (right scale)

ANNUAL REPORT 2012

4,160

08

3,977

0

3,825

13
(Forecast)

92.0

12

33.5

89.6

275.0

11

33.0

88.2

271.8

10

30.1

97.6

292.9

09

33.3

105.3

293.5

08

35.3

93.4

298.4

0

279.6

33.4

08

Gross Floor Area

3,461(Billions of Yen)

3,403

Revenue from Operations

08

09

10

11

12

Sumitomo Fudosan Shibuya Infoss Annex

Sumitomo Fudosan Chiyoda Fujimi Building

Sumitomo Fudosan Shinjuku Grand Tower

OutlookIn this market environment, revenue from operations was¥271.8 billion, down 7.2% year on year. However, operating

In the March 2013 fiscal year, we are projecting higher revenues

income rose for the first time in three years, increasing 1.6% toand earnings due to the full-year contribution of buildings opened¥89.6 billion. This was partly due to a steady improvement in thein the year ended March 31, 2012 including Sumitomo Fudosan

vacancy rate for existing buildings, while buildings that opened in

Shinjuku Grand Tower and Sumitomo Fudosan Chiyoda Fujimi

the previous fiscal year, including Sumitomo Fudosan Iidabashi

Building, as well as the contribution from buildings to be opened

First Tower and Sumitomo Fudosan Shibuya First Tower, also madeduring the year ending March 31, 2013, including Sumitomoa full-year contribution to our results.

Fudosan Shibuya Garden Tower.

Revenue from operations decreased year on year for the fiscal

Accordingly, we expect revenue from operations to increase

year under review. However, if the impact of consolidation of

1.2% to ¥275.0 billion, and operating income to rise 2.6% to­Special Purpose Entities (SPEs) at the beginning of the fiscal¥92.0 billion.

year is excluded, revenue from operations and operating income
actually increased ¥2.5 billion and ¥1.9 billion year on year,
respectively.
We are now making steady progress soliciting tenants for buildings that were opened in the year under review, such as Sumitomo­Fudosan Chiyoda Fujimi Building, and ­Sumitomo Fudosan ­Shinjuku
Grand Tower, as well as buildings scheduled for completion in theyear ending March 31, 2013—Sumitomo Fudosan Tamachi First
Building and Sumitomo ­Fudosan Shibuya Garden Tower.

Principal Office Buildings Opened in the March 2012 Fiscal Year
Name

Location (Tokyo CBD)

Completion

Gross floor area (m2)

Sumitomo Fudosan Shibuya Infoss Annex

Shibuya Ward

Apr. ’11

5,896

Sumitomo Fudosan Chiyoda Fujimi Building

Chiyoda Ward

Apr. ’11

22,544

Sumitomo Fudosan Shinjuku Grand Tower

Shinjuku Ward

Dec. ’11

168,058

TOTAL

196,498

SUMITOMO REALTY & DEVELOPMENT CO., LTD.

09

Review of Operations

LEASING: Sumitomo Realty’s Portfolio
In the Tokyo CBD (Central Business District), where buildings that meet the three conditions for prime properties—close,
new and large—are in strong demand, our competitive portfolio will provide a strong foundation for us to utilize our strengths—
development of high-value-added office buildings, tenant leasing and property management. We will utilize that foundation
to maximize the earnings potential of our office building operations and build a strong base for the achievement of sustainable growth in the years ahead.
BunkyoTokyo CBD (Central Business District):
7 wards, comprising Chiyoda, Minato, Chuo,
Shinjuku, Shibuya, Shinagawa and Bunkyo

Shinjuku

BunkyoChiyodaShinjuku

Shibuya

ChiyodaShibuya

Chuo

Chuo
MinatoMinatoShinagawa

Major flagship buildings(See the table below)• Other buildings

Shinagawa

Major Flagship Buildings
Location

No. of floors(Tokyo CBD)

(Above ground/
Below ground)

Completion

Gross floor area (m2)Minato Ward
Shinjuku Ward
Shinjuku Ward
Shinjuku Ward
Shinjuku Ward
Minato Ward
Minato Ward
Minato Ward
Shinjuku Ward
Bunkyo Ward
Minato Ward
Chiyoda Ward
Meguro Ward
Shinjuku Ward
Shibuya Ward
Bunkyo Ward
Chuo Ward
Chiyoda Ward
Shinjuku Ward
Minato Ward
Minato Ward
Shibuya Ward
Chiyoda Ward
Minato Ward

43/4
52/4
40/3
44/2
38/2
25/3
43/2
37/4
30/3
34/3
35/2
32/2
33/3
24/2
25/3
14/2
21/2
17/2
33/2
30/2
17/1
21/4
19/3
20/4

Oct. 02Mar. 74
Dec. 11
Feb. 10Jan. 03
July 04
Sept. 06
Jan. 05
Sept. 82
Apr. 10
June 00
Jan. 04
Aug. 09
Oct. 02
Aug. 10
Mar. 00
Aug. 09
Oct. 98
Apr. 09
Oct. 01
Aug. 06
Mar. 98
June 09
Oct. 93204,269
177,467
168,058
130,197
117,446
99,91398,33895,12875,046
68,382
63,822
61,20955,77353,047
52,942
52,74747,95137,47337,31735,54935,047
34,46031,991
31,516

Name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24

Izumi Garden Tower
Shinjuku Sumitomo Building
Sumitomo Fudosan Shinjuku Grand Tower
Shinjuku Central Park City
Shinjuku Oak City
Shiodome Sumitomo Building
Sumitomo Fudosan Mita Twin Building WestTokyo Shiodome Building
Shinjuku NS Building
Sumitomo Fudosan Iidabashi First Tower
Shibakoen First Building
Chiyoda First Building West
Sumitomo Fudosan Aobadai Tower
Sumitomo Fudosan Iidabashi Building No. 3
Sumitomo Fudosan Shibuya First Tower
Sumitomo Fudosan Iidabashi First Building
Sumitomo Fudosan Shiodome Hamarikyu Building
Chiyoda First Building East
Sumitomo Fudosan Nishi Shinjuku Building
Sumitomo Fudosan Shibakoen Tower
Sumitomo Fudosan Mita Twin Building East
Shibuya Infoss Tower
Sumitomo Fudosan Akihabara Building
Roppongi First Building

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

10

ANNUAL REPORT 2012

Leasing Portfolio | Total Gross Floor Area: 4.16 million m (as of March 31, 2012)2

1. CLOSE

2. NEW

Locations in the Tokyo CBDTokyo CBD*1

86 %3. LARGE

Brand-new and Recently Constructed Buildings
Less than
10 years old

23 Wards

94%

47%

To be a prime property, a building must be in thecentral business district and near a major station.
In the Tokyo CBD, where many of Japan’s leading
companies have their offices, this is an even more
important factor. Large, recently constructedbuildings in good locations are in short supply,
which has been a key element in our land acquisition efforts.

Large-scale Buildings

New
quake-resistance*2

Over 10,000 m2(gross floor area)

99 %The strong demand for recently constructedbuildings is a result of tenant needs for the following features:
1.	Advanced earthquake countermeasures, suchas vibration damping and earthquake-resistantconstruction

84%

Buildings that can accommodate multiple units ona single floor enable tenant companies to increase
the efficiency of their operations, and in recent
years there has been a trend for companies toconsolidate their offices. As a result, demand forlarge-scale buildings continues to increase.

2. Uninterruptible power supplies to support
business continuity
3. Reinforced floors, high-capacity electrical systems to accommodate large computer servers*1 Tokyo CBD (Central Business District): 7 wards,
comprising Chiyoda, Minato, Chuo, Shinjuku,
Shibuya, Shinagawa and Bunkyo*2 New standards that took effect in 1981

4.	Separate climate control systems for each suiteand high ceilings
5. Advanced security systems

State-of-the-art Facilities
Earthquake protection
Ceiling height*
Floor load
Air conditioning
Power capacity

Before 1981

1982–1996

1997 and after

Previous quake-resistant structure
2.5 m
300 kg/m2
Central air conditioning system
45 VA/m2

New quake-resistant structure
2.7 m
300–500 kg/m2
Climate control zones
60–70 VA/m2

Anti-sway structure
2.9–3.3 m
500–1,000 kg/m2
Separate climate control systems
85 VA/m2 and over

* Includes raised floors

Strengths of Sumitomo Realty’s Portfolio

earthquake-resistant structures, uninterruptible power sources,

Our portfolio includes many competitive prime properties located inseparate climate control systems for each suite, reinforced floors forcentral Tokyo. As of the end of March 2012, our leasing portfolio had

heavy loads, high-capacity electrical systems, high ceilings anda gross floor area of 4.16 million square meters and an average age

other attractive features. Since the Great East Japan Earthquake,of 14 years, the lowest among Japan’s major real estate companies.

they have been the focus of strong demand from many tenants.

About 47% of the buildings in our portfolio were completed in thepast 10 years. Also, 94% of the buildings in our portfolio were locatedCompetitive Growth Foundationin the 23 wards of Tokyo, with 86% in the Tokyo CBD. Furthermore,

Including the buildings that we expect to open during the Fifth

84% of the portfolio was made up of large-scale buildings with moreManagement Plan (2011–2013)*, prime properties will account forthan 10,000 square meters of gross floor area, and about 99% ofan even higher percentage of our portfolio. To respond to thethe buildings meet or exceed earthquake-resistance standards thatchange in market demand toward prime properties and away fromtook effect in 1981, which are a key yardstick for earthquake safety.

less-attractive buildings, such as those with low earthquake resis-

Moreover, nearly half of our buildings have been completed sincetance, we have been investing aggressively in new building con-1997, when we took the lead in the application of new building

struction, thereby further increasing the concentration of prime

design concepts. These high-quality buildings offer leading-edge

properties in our portfolio.
* Fiscal years ending March 31

SUMITOMO REALTY & DEVELOPMENT CO., LTD.

11

Review of Operations

LEASING: Future Development Projects
We commenced the Fifth Management Plan in April 2010. To achieve theplan’s objectives—getting back on track toward increased revenue and profit
and targeting record-setting business results in the March 2013 fiscal year—
we plan to increase total floor space by about 140,000 tsubo. In this way, we
will take steps to further expand our earnings foundation and strive to achievesustained growth in the years ahead.

Projects in the March 2013
Fiscal Year
Sumitomo Fudosan Tamachi First Building
Gross floor area (Tsubo) 6,600
No. of floors
11 above ground/
1 below ground
Completion
Apr. 2012
Sumitomo Fudosan Shibuya Garden Tower
Gross floor area (Tsubo) 18,000
No. of floors
24 above ground/
3 below ground
Completion
June 2012

Sumitomo Fudosan Shibuya Garden Tower

Principal Projects during the 5th Management Plan (2011–2013)
Name

Location (Tokyo CBD)

Completion

Gross floor area (Tsubo*)

Total gross floor area of projects completed in the March 2011 fiscal year

57,000Total gross floor area of projects completed in the March 2012 fiscal year

59,400Sumitomo Fudosan Tamachi First Building

Minato Ward

Sumitomo Fudosan Shibuya Garden Tower

Shibuya Ward

Apr. 2012

The 5th Management Plan TOTAL

6,600

June 2012

18,000

Apr. 2010–Mar. 2013

141,000* 1 tsubo = 3.3 m2

Total Gross Floor Area for Leasing (Years ended March 31)(Thousand tsubo)
2,000
Next Management Plan
5th Management Plan
New Operation
New Operation+140 thousand tsubo+141 thousand tsubo
+11%

1,500

3rd Management Plan

1,000

4th Management Plan
+12%

2nd Management Plan
1st Management Plan

12

ANNUAL REPORT 2012

870

1,020

1,160

1,300

1,440

0

680

500

01

04

07

10

13
(Forecast)

16(Forecast)Principal Projects during the Next Management Plan
—Two large-scale redevelopment projects set to get underway—

Nihonbashi
2-Chome
Project
Chuo

Project Features
1. Subway: Direct connection to Nihonbashi(planned)
2. Enhanced station functions: Building a square in
front of the station, improving pedestrian
convenience
3. Improved disaster prevention: Providing evacua-

Location
Chuo Ward
Gross floor area
40,000 tsubo
Expected completion March 2015 FY
35 above ground
Floors4 below groundtion spaces, improving area earthquake resistance, preventing fires spreading
4. Reinvigorating the Nihonbashi area: Tourist and information facilities
5. Environmental consideration: CO2 reduction, greenification

Roppongi
3-Chome
Project

Project Features

Minato

1. Redevelopment of an approximate 2.7 hectare site adjacentto Roppongi-itchome station
2. A big project with approximately
60,000 tsubo of gross floor area
and three types of facilities:

Location
Gross floor area

Minato Ward
60,000 tsubo

Expected completion March 2016 FY
Floors40 above ground5 below groundoffice, residential and commercial
3. Facilities in front of the station,a green square, greater pedestrian convenience and barrier-free access
4. Disaster prevention: underground square to serve as a temporary evacuation space in a disaster

SUMITOMO REALTY & DEVELOPMENT CO., LTD.

13

Review of Operations

SALES
Sumitomo Realty is a pioneer in the Japanese market for development of condominiums for sales. The Company
established its condominium sales business earlier than almost all of its competitors. The Company is building
attractive condominiums in good locations and working to raise its brand value.

Sumitomo Realty’s Strengths

The risk of market fluctuations is a critical factor in the

Sumitomo Realty’s condominium operations are centeredcondominium business. Consequently, the Company’son the Tokyo metropolitan area, which accounts for 70% ofpolicy is to offer a stable supply of condominiums and to

our units, and are conducted in other large urban areas

enhance the Sumitomo Realty brand through the ongoingsuch as Osaka/Kobe, Sapporo, Sendai, Nagoya, andsale of high-quality units. In the years ahead, the Com-

Fukuoka. The Company develops and sells about 5,000

pany will continue striving to maintain its strong position.

units a year.
Over the past decade, we have been one of the leading
suppliers of condominium units nationwide. This strong

Overview of the Fiscal Yearposition is the result of our central urban strategy, which we

In the condominium market, which accounts for more than 90%

implemented ahead of competitors, and our aggressiveof our portfolio in this segment, sales were a little sluggish at theapproach to large-scale and high-rise condominiums. Our

beginning of the year, reflecting the impact of voluntary restraint

landmark exterior designs, the rich array of common facilities

in our sales activities in the aftermath of the Great East Japanthat is made possible by the scale of the buildings and ele-

Earthquake. However, the sales environment returned to neargant entrances make our condominiums sought after by apre-disaster levels, supported by firm underlying demand. Thiswide range of consumers with diverse lifestyles. As a result,demand was underpinned by low mortgage interest rates andour high operating margin is at the top of the industry.

Revenue from Operations

government measures, such as tax reductions.

Operating Income andOperating Margin(Billions of Yen)

Units Delivered(Units)(Billions of Yen)

(%)

300

45

30

4,500

200

30

20

3,000

10

1,500

0

0

22.1
19.1
16.1

17.3

13.9

15

100

12

13
(Forecast)

Operating Income
Operating Margin (right scale)

14

ANNUAL REPORT 2012

4,600

11

4,119

10

4,841

09

4,222

08

4,008

0

3,743

13
(Forecast)

38.0

12

37.9

220.0

11

33.4

198.2

10

19.6

239.7

09

30.7

219.7

08

42.7

191.2

0

193.6

8.9

08

09

10

11

12

13
(Forecast)

City House Fuchu Keyaki-doriCity Terrace Narimasu

In this environment, the number of condominium units, detached

Outlook

houses and land lots delivered, including City Terrace Narimasu,

In the March 2013 fiscal year, we are aiming for higher revenue

City Terrace Otakanomori Station-Court, and City House Fuchu

from operations and earnings on projected units delivered of 4,600

Keyaki-dori, was 4,119, down 722 year on year.

condominium units and detached houses and land lots, an increase

The number of condominium units sold decreased year onof 481 units delivered year on year.

year to 4,034. However, this drop mainly reflected voluntary

Of the 4,500 condominium units and detached houses that

restraint in our sales activities following the Great East Japan

we expect to deliver in the March 2013 fiscal year, approximately

Earthquake, and the absence of new sales of large properties

30% had already been sold at April 1, 2012, the same as in thethat were recorded in the previous fiscal year. The number ofprevious year.

visitors to our showrooms remained steady, however, supporting

Therefore, we are forecasting revenue from operations ofa rise in condominium unit sales.

¥220.0 billion, up 11.0% year on year, and operating income of

Revenue from operations declined by 17.3% to ¥198.2 billion¥38.0 billion, up 0.3%.

because of the drop in units delivered. However, operating
income rose by 13.4% to ¥37.9 billion on improved margins.

Principal Condominium Development Projects (2012–2013)
Name

Location

No. of units for sale

Scheduled delivery*1

City Terrace Narimasu

Itabashi Ward, Tokyo

243

2012

City House Tokyo Morishita

Koto Ward, Tokyo

116

2012

City House Fuchu Keyaki-dori

Fuchu, Tokyo

140

2012

City Terrace Otakanomori Station-Court

Nagareyama

328

2012

City Terrace Yokohama Tsuzuki no Oka

Yokohama

190

2012
2

2012

City House Tamagawa Terrace

Kawasaki

115*

City House Kairoen Marina Court

Hiroshima

154

City Terrace Itabashi Hasune

Itabashi Ward, Tokyo

350

2013

City Terrace Shimomeguro

Meguro Ward, Tokyo

175

2013

City Terrace Nishiogikubo

Suginami Ward, Tokyo

143

2013

City Terrace Oi-sendaizaka Hill Top Garden

Shinagawa Ward, Tokyo

130

2013

City Tower Saitama Shintoshin

Saitama405

2013

City Terrace Yokohama Nakamachidai Ichibankan

Yokohama

245

2013

2012

City Tower Nagoya Hisaya-odori Koen

Nagoya226

2013

City Tower Tennoji Sanadayama

Osaka

216

2013

*1 Fiscal years ending March 31*2 The number of units includes the units of business partners.

SUMITOMO REALTY & DEVELOPMENT CO., LTD.

15

Review of Operations

City Terrace Yokohama Nakamachidai Ichibankan

Policy Regarding Main DisasterPrevention Measures in Condominiums

City Terrace Shimomeguro

Measures after a Disaster• Installation of emergency generators: These generators canSince the Great East Japan Earthquake in March 2011, there

supply power for a certain period of time to disaster-prevention

has been greater interest than ever among customers in thefacilities in common areas even during a blackout.

safety and security of their homes. In response, we are steadily• Provision of emergency manhole toilets: These toilets connect

implementing disaster-prevention measures in our condomini-

directly with the sewage system enabling use in a disaster.

ums in terms of facilities and specifications. And our policy is to• Installation of emergency wells: These wells ensure building

actively employ quake-resistant technologies, especially for theoccupants have water for general daily use even when basic

high-rise buildings we begin construction on going forward.

services such as water and electricity are cut off.

Examples * Deployment differs by property
Preparing for a Disaster

City Tower Nagoya
Hisaya-odori Koen

• Distribution of a disaster-prevention manual

City Tower Kobe
Sannomiya• Provision of disaster-prevention rucksacks: These rucksacks
contain drinking water, food, dust masks and other items
necessary in an emergency.

Measures during a Disaster• Earthquake early warning service: This equipment alerts
occupants to an impending earthquake based on data fromthe Japan Meteorological Agency.
• Foundation strengthening to prevent furniture from toppling over
• Provision of home security lighting: This equipment can be

16

No. of units
for sale
No. of floors

used as automatic lighting or as a flashlight when removed

Scheduleddeliveryfrom its casing during a power outage.

Features

ANNUAL REPORT 2012

226

594

31 above ground/
1 below ground54 above ground/
1 below ground

2013

2014

Earthquake-resistant structure
Emergency generator

Topics

New Initiatives in the Condominium BusinessGrand Mansion Gallery Opened October 2011
We have established Grand Mansion Gallery showrooms for

Each Grand Mansion Gallery is divided into three sections—condominium sales in five locations in central Tokyo: Shinjuku,

counsel, choice and experience—to match customers’ reasons

Shibuya, Ikebukuro, Akihabara and Tamachi. We did this tofor visiting. Visitors can receive advice on properties; compare theenable people to inspect and compare condominiums in one

features of properties in brochures and on touch screens, andlocation instead of trekking around various showrooms spread

check interior colors and materials; and get a close-up view ofacross the Tokyo metropolitan area. (The name “Grand Mansion

disaster-prevention systems and the latest equipment and facilities.

Gallery” uses the word “mansion” because it is the RomanizedJapanese word for condominium.)

Point

1

CounselConcierge Desk and Meeting Space• Property consultations• Loan and taxation explanations• New/existing and ownership/rental condominium comparisons

These groundbreaking comprehensive showrooms target
greater customer convenience and satisfaction.

Point

2

Point

Choice3

Touch Panel Devices andConcept Theatre• List by area of all of our condominiums forsale in the Tokyo metropolitan area
• Touch panel device-based property search• Brochures

Experience

Concept Room and Exhibition Corner• Display of interior colors and materials
for checking• Hands-on display of the latest facilities,
including “mist sauna” bathrooms andintercom and security systems• Exhibition space showing disasterresponse measures

Custom-order Service Announced January 2012
Generally in Japan condominiums are provided to customers
with limited floor plans and customers cannot choose or change
their floor plans to fit their lifestyles.
Sumitomo Realty has launched a Custom-order Condominium service, enabling customers to partially personalizeinterior designs suited to various lifestyles in new condominiums.
In addition to being able to select the interior color, customers can reposition plumbing for the kitchen, bathroom and otherparts of a condominium free of charge, even after completion.
Our aim is to raise customer satisfaction by providing adetailed response to their needs.

Past

Present

Interior design, including floor plan, options
2 or 3 types
available for one
condominium unit

Up to 13 types (3 color
options are available forroom interiors)

Selection period forinterior design, including floor plan

Short time after conSelection possible after
struction begins (before
building completion
completion)

Fee for selection after­building completion

Option not available

Available free of charge

SUMITOMO REALTY & DEVELOPMENT CO., LTD.

17

Review of Operations

CONSTRUCTION
In the construction business, Sumitomo Realty’s business consists of the construction of custom homes and house
remodeling. Our construction operations are order-based and do not require substantial amounts of capital.

Sumitomo Realty’s Strengths

Custom Homes
In 1995, Sumitomo Realty launched the American Comfort lineof high-quality, low-cost Western-style homes in Japan using theknow-how that the Company acquired in building and selling
homes constructed with the two-by-four method in California.
In April 2003, we launched the J·URBAN home design,
which combines the excellent security features of condominiums with the superior ventilation and lighting of detachedhouses. J·URBAN has been highly evaluated in the marketplace and has received a Good Design Award from the Japan
Industrial Design Promotion Organization.
In June 2012, we commenced sales of a new product called“J·RESIDENCE.”

J·URBANKey Features• Advanced performance: We have developed proprietary
earthquake-resistant technologies, namely the “New Power
Column”, “New Power Cube” and “Super Power Wall” construction methods, and are actively incorporating these technologies in all our products.
• Top-class equipment and specifications: Leveraging our

Building deformation is alleviated during an

and economies of scale as a comprehensive developer, weearthquake by attaching earthquake-resistant

employ high-grade condominium interior materials as a stan-systems to the upper part of L-shaped walls.

dard specification.

The interior, which is usually used for storage,• Complete after-sales support: Our homes are backed by a 30-year
guarantee and we have a dedicated contact line for customers.

18

New Power Cube:

strengths in the form of our track record in condominiums

ANNUAL REPORT 2012

can be customized for refuge in an emergency.
Standard specification for J·RESIDENCE.

REMODELING Shinchiku Sokkurisan
After

BEFORE

Cost Comparison

100 %Rebuilding

Shinchiku
Sokkurisan

50%~70%In 1996, Sumitomo Realty launched the Shinchiku Sokkurisan

Key Features

Full Remodeling Package. This product addresses the concern• Sales engineer system: Most of our sales personnel havethat remodeling can sometimes be more expensive thanrebuilding in Japan due to the risk of cost overruns. With
­Shinchiku Sokkurisan, a house can be fully remodeled at 50%

engineering qualifications.
• Carpenters: We use carpenters who work exclusively for­Sumitomo Realty.

to 70% of the cost and in half the time required to rebuild it.

• Fixed price: We provide the customer with a fixed price per

And because Shinchiku ­Sokkurisan uses fewer materials, it isunit of floor area, so there are no concerns about additional

also environmentally friendly. We were the first major real estate

construction charges.

company to offer this type of product, and Shinchiku Sokkurisan
has been well received in the marketplace. Cumulative sales
have surpassed 70,000 units, and we anticipate continued
growth in Shinchiku Sokkurisan sales in the years ahead.

• No need for temporary moves: We remodel homes while thecustomers continue to live in them, which is a major advantage.
• Earthquake resistance: We incorporate earthquake-resistancestrengthening measures based on a computerized analysisof the home as well as measures to prevent damage fromtermites and moisture.

SUMITOMO REALTY & DEVELOPMENT CO., LTD.

19

Review of Operations
J·RESIDENCE

NEW
Model

Features• Accommodates people of allages and can blend in withany location• A residential style thatincorporates the equipment
and specifications found in
high-grade condominiums• The proprietary earthquakeresistant, New Power Cube,
is incorporated as a standard specification

Overview of the Fiscal YearIn this segment, which includes Sumitomo Fudosan Reform

In Shinchiku Sokkurisan remodeling operations during the year

Co., Ltd., revenue from operations rose 1.9% to ¥166.0 billion.

under review, we saw year-on-year declines in both units contracted

Operating income, however, was down by 1.3% to ¥16.5 billion,

and units delivered. These declines resulted from voluntary restraint

as we were unable to fully absorb sales cost increases from thein our sales activities and the temporary suspension of construction

Great East Japan Earthquake.

after the Great East Japan Earthquake. Despite these declines,
revenue from operations rose year on year to a record level, with

Outlooksales per unit rising in the share of earthquake strengthening work

In both the Shinchiku Sokkurisan remodeling operations and custom

performed.

home operations, we will work to enhance our product lineup andcontinue strengthening sales and marketing systems. We aim to

In custom home operations, units contracted, units delivered

expand orders and return to an upward earnings trajectory.

and revenue from operations were all up from the year ended

For the March 2013 fiscal year we are projecting revenue

March 31, 2011 despite a persistently low level of new owner-from operations of ¥167.0 billion, up 0.6%, and operating

occupied housing starts in Japan.

income of ¥17.0 billion, up 3.2%.

Revenue from Operations(Billions of Yen)

Operating Income andOperating Margin

Shinchiku Sokkurisan andCustom Home Units Contracted(Billions of Yen)

(Units)

180

18

120

12

10.8

10.2

9.9

10.2

12

7,500

2,400

8

5,000

1,600

4

2,500

800

0

0

8.1

11

12

13
(Forecast)

Operating Income
Operating Margin (right scale)

20

ANNUAL REPORT 2012

08

09

10

11

12

Shinchiku Sokkurisan
Custom Home (right scale)

7,500
2,000

10

7,228
1,968

09

7,463
1,840

08

7,521
1,779

0

7,051
1,687

13
(Forecast)

17.0

167.0

12

16.5

166.0

11

16.7

162.9

10

17.1

158.2

09

13.0

160.1

08

10.2

156.6

0

7,324
1,680

6.5

6

60

0

13
(Forecast)Review of Operations

BROKERAGEThe Company’s real estate brokerage business is handled by Sumitomo Real Estate Sales Co., Ltd., which wasestablished in 1975 to conduct sales of condominiums developed by Sumitomo Realty. After entering the realestate brokerage sector in 1979, Sumitomo Real Estate Sales achieved significant success in that field, andit was listed on the Tokyo Stock Exchange in 1998.

begun to recover as a result.
Under these conditions, brokerage operations, which are han-Sumitomo Realty’s Strengths
Under the STEP brand name, Sumitomo Real Estate Sales

dled by Sumitomo Real Estate Sales Co., Ltd., saw transactions

operates a network of brokerage offices with close ties toedge up 0.5% year on year to 31,443, a record for the third con-local communities. The network has been steadily

secutive year, and the resumption of new office openings. Moreover,

expanded and upgraded, and the number of offices

the average transaction price rose and transaction value increased

reached 246 by the end of March 2012. Because all of the

7.0% year on year, with contracts for large properties contributing

brokerage offices are directly operated, the network boasts

to corporate transactions.
Accordingly, revenue from operations and operating income

high profit margins. Sumitomo Real Estate Sales holds thenumber one position in the industry in terms of brokeragerose for the third consecutive year in this segment. Revenue

revenue from direct operations and in terms of profitability.

from operations rose 6.4% to ¥49.4 billion, and operating
income rose 19.2% to ¥14.5 billion.

In the future, the company will continue working to
expand its marketing base and increase its market share.

OutlookIn brokerage operations, we will continue to open new offices andOverview of the Fiscal Yearupgrade existing offices. While also striving to improve sales effi-

In the existing home market in Japan, transactions temporarily

ciency, we aim to set a new brokerage transaction record andstalled in the Tokyo metropolitan area immediately after the Greatdeliver a fourth consecutive year of higher revenue and earnings.

East Japan Earthquake. However, transactions slowly increased

Accordingly, for the March 2013 fiscal year we are forecasting

through the latter half of the fiscal year, supported by low mortgage­revenue from operations of ¥54.0 billion, up 9.3%, and operat-interest rates for home purchases. The number of contracts has

ing income of ¥16.0 billion, up 10.0%.

Revenue from Operations

Operating Income andOperating Margin(Billions of Yen)

Number of Transactions and­Transaction Value(Billions of Yen)

(%)(Billions of Yen)

60

24

60

1,200

40

16

40

800

32,00034,53229,753

34.2

8

20

48,000

24.1

26.3

29.4

29.6

20

400

0

0

27,822

29,974

31,293 31,443

16,0001213(Forecast)

Operating Income
Operating Margin (right scale)

08

09

10

11

12

1,011.9

11

892.8

10

834.6

09

769.9

08

821.2

0

1,107.9

13(Forecast)

16.0

12

14.5

54.0

11

12.2

49.4

10

10.8

46.4

09

8.8

44.6

08

20.0

43.1

0

58.5

20.3

0

13
(Forecast)­Transaction Value­Number of Transactions (right scale)

SUMITOMO REALTY & DEVELOPMENT CO., LTD.

21

CSR

Basic Stance
1. Sumitomo’s Business Philosophy

2. The Sumitomo Realty Group’s Fundamental Mission

The Sumitomo Group’s business philosophy is encapsulated by

Guided by Sumitomo’s business philosophy, we have set forth

the following precepts—“Place prime importance on integrity

our fundamental mission as being “to create even better socialand sound management in the conduct of its business” and “Under

assets for the next generation” through our business. Based on

no circumstances, shall it pursue easy gains or act imprudently.”

this fundamental stance, we engage in business with the aim of

These have been inherited as teachings since the time ofcreating cities and urban spaces that are resilient to disasters

the Sumitomo Group’s founder. They are still regarded as theand friendly to people and the environment.

touchstone for the Sumitomo Realty Group’s business activities.

Our Aims in Creating Cities
We aim to create cities from the following three main perspectives.

1

Disaster Resistant

AEDs
In order to be better prepared for a medical

Protecting office workers and businesses

emergency at an office building, hotel or other

Sumitomo Realty’s latest office buildings actively employ earthquake-key facility we run and manage, we haveresistant features to protect office workers. Furthermore, we installinstalled automated external defibrillators

emergency generators in buildings to supply power for a certain period(AEDs). What’s more, all personnel undertakeof time during a blackout, enabling tenants to continue operations.

first-aid training.

Contributing to regional disaster prevention
Sumitomo Realty has contributed to regional development through3

Environment Friendly

various redevelopment projects in cities. By redeveloping areas with
densely packed wooden houses, we recreate cities so they are more

Improving the environmental performance of buildings

resistant to disasters. The open spaces that are a feature of our redevel-

When we build condominiums, we give consideration to the envi-

opment projects also serve as places for temporary refuge in a disaster.

ronment, including by planting trees, adding greenery to rooftops,
and creating open green areas. Furthermore, the soil excavated2

during construction is processed into soil blocks.

People Friendly

We have developed technology for reusing soil from condominium construction sites to create blocks with few CO2 emissions.

Enhancing regional convenience and promoting­barrier-free access

The blocks are environmentallyfriendly because they are made of

Our redevelopment business makes people-friendly cities. A casenatural materials, which will eventuallyin point is the Roppongi 3-Chome Project (East ­District), where an

return to the ground at the end of theirunderground walkway is being built so that pedestrians of alllife. The blocks are used in planted

abilities can move more easily from city areas to train stations.

zones in condominium sites.

Promoting energy conservation
In buildings we operate, we work to reduce CO2 emissions, such as
by actively introducing highly energy-efficient HF fluorescent lamps
and LED lighting.

22

ANNUAL REPORT 2012

CSR through Business
Urban Redevelopment That Improves Cities—Sumitomo Fudosan Shinjuku Grand Tower
In December 2011, we completed redeveloping an approximate 2 hectare area in the western part of Shinjuku Ward,
Tokyo, under the basic concept of creating a multi-purpose urban area combining offices, residences, an event hall andshops with a gross floor area of 168,058 m2.
1. Redevelopment of an Area of Densely Packed Old
Wooden Houses
Prior to redevelopment, the area was disaster-prone, with oldwooden houses densely packed around narrow streets. The
redevelopment has turned it into a safe and pleasant area with
the infrastructure expected of a modern city, such as fire-resistantbuildings, public spaces and roads.
Furthermore, by equipping the

2. Disaster Resistancearea with community roads

We have created open spaces that can serve as refuge areas

primarily for non-automobile

for locals in a disaster, and provided spaces for temporary

use and walkways, we havetoilets as well as emergency water wells. Furthermore, we will

enhanced convenience andopen the large, multi-purpose Belle Salle hall to provide shelter

safety for pedestrians.

for people who cannot return home in an emergency.

3. Creating Green and Open Spaces

4. Introduction of Solar Power Generation andEnergy-Saving Facilities

The redevelopment features an approximate 4,000 m2 open

To supply electricity to some common areas, we installed solararea along the road. Our aim was to create an urban space

panels on the roof for generating power. And we are working towith a pleasant environment that is easy to work in. We also

reduce energy use as well by employing a highly efficient elec-

endeavored to ease the “heat island” effect and improve thetrical air-conditioning system and LED lighting, as well as

environment by adding greenery to the roofs of buildings.

motion-sensing lights.

Shinchiku Sokkurisan Remodeling Operations
Our Shinchiku Sokkurisan remodeling operations facilitate remodeling of existing buildings. We reduce remodeling costs,
improve earthquake-resistance and make other improvements in response to customer demands.
1. Earthquake Reinforcement, Extended Life andEnergy Conservation for Housing

2. Harmony with Building’s History
Shinchiku Sokkurisan can

Shinchiku Sokkurisan is contributing to efforts to promotealso breathe new life into oldearthquake-proofing of existing homes through low-costhouses. We add value suited

remodeling. It is also extends the life of existing housing

to modern living, while taking

through earthquake reinforcement work requiring no disman-care to preserve the history

tlement, while leaving the main structural elements intact. The

and character of a house thatprocess also does not waste resources and generates little

may have been home to manyindustrial waste; for instance, old tatami mats are reused as

generations of a family. Sumi-

material for cement.

tomo Realty is giving its all to
reinvigorate old houses morethan 100 years old, helping toensure that tradition stays alive.

SUMITOMO REALTY & DEVELOPMENT CO., LTD.

23

Corporate GovernanceFundamental Approach to Corporate Governanceof its audits to the statutory auditors and the independent auditors

To achieve sound management, Sumitomo Realty believes that it isand exchanges opinions with them in an appropriate manner.

important to share information on a Companywide basis, ensure that

These activities help to improve the quality and efficiency of theeveryone is aware of problems, enhance internal management super-

audit work of the Internal Audit Division, the statutory auditors andvision and achieve highly transparent management through appropri-

the independent auditors. At the same time, the Internal Audit

ate information disclosure. We have implemented a number ofDivision, the statutory auditors and the independent auditors pro-

corporate governance initiatives to realize these practices efficiently.

vide timely advice and guidance to internal departments that areassociated with internal control.

Corporate Governance Bodies
The Board of Directors is made up of nine directors. The Board

Independent Auditors

makes decisions on important Company matters, and oversees the

In accordance with the Corporate Law and the Financial Instruments

directors’ execution of duties. Furthermore, internal information,

and Exchange Law, the Company has concluded an auditing contractawareness of issues and other matters are shared through thewith KPMG AZSA & Co. for the auditing of the Company’s accounts.

Board of Directors, internal meetings and other forums, promoting
quick and rational decision-making.

There are no conflicts of interest between Sumitomo Realty andthe independent auditing company or its employees.

In April 2004, we instituted an executive officer system with theobjectives of selecting capable young employees and substantially

Reason for Adopting the Current Structure

bolstering our administrative systems.

The current Board of Directors is comprised of directors who are

The Board of Statutory Auditors has five members, including

familiar with the nature of the Company’s business. The Company

three outside statutory auditors. To strengthen management over-therefore believes that the current Board of Directors is most suit-sight, we continue working to enhance outside auditing. The statu-

able for promoting management. While Sumitomo Realty has nottory auditors attend meetings of the Board of Directors and otherappointed any outside directors, the Company ensures corporate

important meetings, and track internal issues that are important forgovernance is maintained by enhancing management oversightrobust auditing.

through the Board of Statutory Auditors and through proper infor-

Each of the three outside statutory auditors has abundant man-mation disclosure. The Company has judged that corporate gover-agement experience at other companies, and they were nominated

nance is functioning effectively with a system of five statutory

because their character and knowledge were considered to beauditors at present, three of whom are outside statutory auditors.

appropriate for the Company’s statutory auditors. There are no conflicts of interest between Sumitomo Realty and these statutory auditors. The outside statutory auditors fulfill their roles by expressing
objective opinions on governance from an independent standpointfrom the Company without being influenced by executives responsible for operational execution. They also work together to improve

General Meeting of Shareholders
Appoint

Board of Statutory
Auditors
5 Statutory Auditors (Incl. 3
Outside Statutory Auditors)

Appoint
Audit
ReportExecutive Officers Committee

ReportSelect, Supervise

Independent Auditors

ReportReportSelect, Supervise

Executive Officers

auditors. At the same time, they provide timely advice and guidance

Execute Operations

to internal departments associated with internal control.
Sumitomo Realty does not have standards or a policy regarding

9 Directors

Representative Directors

auditing by, for example, exchanging opinions as needed with otherstatutory auditors, the Internal Audit Division and the independent

Board of Directors

Appoint
Audit

Departments, Divisions, Branches, etc.

Audit

Internal Audit Divisionindependence from the Company for selecting outside statutory
auditors. However, the Company does refer to the Tokyo Stock

Internal Control and Risk Management Systems

Exchange’s evaluation standards regarding the independence ofTo efficiently institute sound management practices, the Company

directors and corporate auditors when appointing such individuals.

has established a range of internal control systems and is working

The Internal Audit Division, which has nine staff members,monitors the operational execution of divisions throughout the24

to enhance those systems.
To further enhance our compliance with laws and regulations

Group and the operation of internal control systems. The divisionand to ensure ethical business practices, we established the Risk

also works to prevent misconduct and mistakes, and proposesManagement Committee. In addition, through the Compliance

operational improvements. Moreover, the division reports the results

Department, we have established internal auditing and internal

ANNUAL REPORT 2012

reporting systems. In these ways, we are working to prevent inap-

abnormal speculations to our business approach, which has

propriate and illegal actions.

brought significant achievements. The Company therefore intro-

In regard to information management, to ensure proper storage

duced a policy for responding to large-scale purchases of its

and control of documents, we have established internal standards

shares, and at the ordinary general meeting of shareholders held on

for document control. Furthermore, in terms of risk management

June 28, 2007 the policy was approved by more than 70% of

systems, each department tracks and manages the risks associatedshareholders, which is the level of support required for the approvalwith its operations on a daily basis, while important issues are dis-of special resolutions. At the 77th general meeting of shareholders

cussed and decided upon by the Board of Directors and the Execu-

held on June 29, 2010, with the approval of the shareholders, thetive Officers Committee. In the future, we will consider further

policy was extended to the conclusion of the 80th general meetingenhancement of regulations and systems as needed.

of shareholders in June 2013.

Compensation of Directors and Statutory Auditors
At the ordinary general meeting of shareholders held in June 2004,

Overview of Takeover Defense Measures and Board of
Directors’ Judgment

we introduced a new performance-based compensation system for

The Company believes that if a large-scale purchase of the Com-

directors. Under this system, the annual compensation for directors

pany shares is initiated, the shareholders, in principle, should

is based on the Company’s performance. The new system com-

decide to accept or reject the large-scale purchase. To enable thebines the three elements that made up the previous system—

shareholders to correctly understand the large-scale purchase’s

monthly compensation, annual bonuses and retirement allowances.

effect on the corporate value and the common interests of share-

Under the new system, total annual (July to June) compensa-

holders, however, it is necessary that both the party making thetion for directors is set at 1% of consolidated ordinary profit. In thelarge-scale purchase and the Board of Directors of the Company

year under review, compensation for directors was ¥1,048 million,

provide to the shareholders necessary and sufficient information,compensation for statutory auditors (excluding outside statutory

opinions, alternative proposals, etc. and that the shareholders areauditors) was ¥30 million and compensation for outside statutory

given sufficient time to consider the provided information, opinions,

auditors was ¥39 million.

alternative proposals, etc.

Takeover Defense Measurespurchase shall begin after necessary and sufficient information is

The Group endeavors to increase corporate value through inte-provided to the Board of Directors by the large-scale purchaser and agrated Group management. This entails striving for well-balanced

certain period for evaluation by the Board of Directors has elapsed.

The large-scale purchase rules stipulate that the large-scale

growth whereby mainstay businesses of a different nature—leasing,sales, construction and brokerage—complement each other.
Of our business segments, the real property leasing businessand the real property sales business are “development businesses
based on market anticipation” requiring anticipatory investments. In

To ensure the objectivity, fairness and rationality of decisions of
the Board of Directors, a special committee will be established thatconsists of members selected from among external academic
experts, lawyers, certified public accountants, etc.
If the large-scale purchase will significantly damage the corporate

other words, we need to acquire land and construct a building

value and common interests of shareholders, after considering thewithin a planned period before we are allowed to record revenue.

opinions of external experts, including lawyers and financial advisors,

The Company’s main business is to always make appropriate antici-

and taking into the fullest account the recommendations of the spe-

patory investments for the future. The characteristic of the twocial committee, the Board of Directors may take countermeasures tobusinesses mentioned above is that investments lead to revenues

deter the purchase, such as the issuance of stock options.

and enhancement of our corporate value after an interval.
However, considering the existence of various market partici-

Based on the above basic conceptions, we set out rules on largescale purchase and request the large-scale purchaser to comply withpants in stock markets who are capable of making huge amount of

the large-scale purchase rules. The Board of Directors shall takeinvestment, we are cautious about a risk of potential abnormal

certain measures if the large-scale purchaser does not comply withinvestment in stock of the Company amid an enormous variety of

the large-scale purchase rules, or even though the large-scale pur-decisions and speculations. Hence as a company aiming tochaser complies with the large-scale purchase rules, if it is clear that

improve shareholder value steadily over the medium and long term,

the large-scale purchase will cause unrecoverable damages to thewe have determined that it promotes the common interests ofCompany or if the large-scale purchase significantly damages theshareholders to take certain measures to avoid disturbance bycorporate value and common interests of shareholders.

SUMITOMO REALTY & DEVELOPMENT CO., LTD.

25

Senior Management
As of June 28, 2012

Board of Directors and Statutory Auditors

Chairman of the Board
Junji Takashima*

President
Kenichi Onodera*

Directors

Nobuaki Takemura*

Kojun Nishima*

Masato Kobayashi*

Yoshinobu Sakamoto
Statutory Auditors
Naoto Enda
Ryoichi Nomura
Hiroshi Tomoyasu
Tadashi Kitamura
Yoshifumi Nakamura

Masayuki Iwamoto

Yoshiyuki Odai

Executive Officers
Senior Managing Executive Officers
Takahiro Daisaka
Takashi Saito
Tadaharu Izumisawa
Managing Executive Officers
Takao Shiojima
Isamu Jobo
Koji Ito
Toshikazu Tanaka

60

ANNUAL REPORT 2012

Naoto Yamamoto
Akihiro Katsuki
Katsunori Takahashi
Hiroshi Kato

Masayoshi Ohashi*Representative Director

Eleven-year Financial Summary
Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
Years ended March 31

Millions of yen

2012

2011

2010

2009

Revenue from operations �����������������������������������������������������������

¥  688,662¥  744,756¥  719,636¥  695,240

Leasing�������������������������������������������������������������������������������������

271,812292,875

293,533

298,359

Sales ���������������������������������������������������������������������������������������

198,154239,709219,662

191,224Construction �����������������������������������������������������������������������������

165,995

162,924

158,214160,134

Brokerage ���������������������������������������������������������������������������������

49,39746,43044,621

43,105

Cost of revenue from operations �������������������������������������������������

490,437

551,364

534,270

496,547

SG&A expenses �������������������������������������������������������������������������

50,76054,92951,38752,327% of revenue from operations �����������������������������������������������������

7.4%

7.4%

7.1%

7.5%

Operating income ���������������������������������������������������������������������

147,465

138,463

133,979

146,366% of revenue from operations �����������������������������������������������������

21.4%

18.6%

18.6%

21.1%

Depreciation and amortization �����������������������������������������������������

36,04923,70518,065

17,886

Current assets ���������������������������������������������������������������������������

¥  801,142¥  805,958¥  802,693¥  759,816

Sales inventory �������������������������������������������������������������������������

586,170558,091

521,871

518,885

Total assets �������������������������������������������������������������������������������

3,859,698

3,234,203

3,168,098

3,006,412

Shareholders’ equity*2 ���������������������������������������������������������������

553,844526,227

488,896436,667

Net interest-bearing debt �����������������������������������������������������������

2,407,639

1,901,850

1,785,854

1,722,733

Net income �������������������������������������������������������������������������������

¥   112.28¥   107.35¥   111.04¥    97.39

Shareholders’ equity �����������������������������������������������������������������

1,168.11

1,109.78

1,030.93

920.74

Cash dividend applicable to the year �������������������������������������������

20.00

20.00

20.00

20.00

Equity ratio (%) �������������������������������������������������������������������������

14.3

16.3

15.4

14.5

ND/E ratio* (Times)�������������������������������������������������������������������

4.3

3.6

3.7

3.9

For the YearAt Year-end

Per Share Amounts (Yen)Key Ratios
3* U.S. dollar amounts in this report are translated, for convenience only, at the rate of ¥82.13 = U.S.$1, the prevailing exchange rate at March 31, 2012.
*2 Shareholders’ equity = Net assets – Minority interests*3 ND/E ratio = Net interest-bearing debt (Interest-bearing debt – Cash, time and notice deposits) / Shareholders’ equity
1

Contents

26

28

Management’s Discussion and Analysis

32

Consolidated Balance Sheets

34

Consolidated Statements of Income and Consolidated Statements of Comprehensive Income

35

Consolidated Statements of Changes in Net Assets

36

Consolidated Statements of Cash Flows37

Notes to Consolidated Financial Statements

59

Independent Auditor’s Report

ANNUAL REPORT 2012

Thousands of
U.S. dollars*1

2008

2007

2006

2005

2004

2003

2002

2012

¥  691,928¥  676,834¥  646,525¥  616,115¥  573,862¥  533,915¥  497,877$ 8,385,024

279,568

262,620234,280

221,234

202,776

192,979

178,034

3,309,534

193,575

211,035

224,735

224,191

213,303

183,745

170,428

2,412,687

156,606

142,564

135,158

127,388

125,086

124,464

115,3292,021,125

58,54256,532

49,21743,44539,80937,57736,184

601,449488,202490,491

487,805

470,636

435,078

403,777

377,199

5,971,472

49,11849,167

46,69745,18842,807

41,62640,308618,045

7.1%

7.3%

7.2%

7.3%

7.5%

7.8%

8.1%

—

154,608

137,176

112,023

100,291

95,97788,51280,3701,795,507

22.3%

20.3%

17.3%

16.3%

16.7%

16.6%

16.1%

—

17,15015,677

16,33014,01912,211

11,973

10,731

438,926¥  784,195¥  756,488¥  619,219¥  481,341¥  503,911¥  423,446¥  404,999$ 9,754,560

511,868

489,093

330,700

211,180

189,547

161,156

156,535

7,137,100

2,894,004

2,747,900

2,460,080

2,136,329

2,090,970

2,015,667

1,972,735

46,994,984

427,423

409,197375,656

320,098

303,875

211,821

213,767

6,743,504

1,548,509

1,343,824

1,150,880

935,155

916,156

1,036,419

1,098,407

29,314,976¥   133.00¥   105.92¥    68.33¥    32.64¥    15.34¥    12.22¥    56.50$      1.37

900.57861.93790.74673.40639.01520.84525.17

14.22

18.00

14.00

10.00

9.00

9.00

6.00

6.00

0.24

14.8

14.9

15.3

15.0

14.5

10.5

10.8

—

3.6

3.3

3.1

2.9

3.0

4.9

5.1

—

SUMITOMO REALTY & DEVELOPMENT CO., LTD.

27

Management’s Discussion and Analysis

Overview and the Fifth Management Plan
In the March 2012 fiscal year, the second year of the Fifth Management Plan, consolidated revenue from operations was ¥688.7
billion, while operating income was ¥147.5 billion and ordinary
profit was ¥107.9 billion. Operating income and ordinary profit
thus rose for the second consecutive year. Net income was also
higher year on year at ¥53.2 billion.
In the year under review, we saw the continuation of a seesaw
business environment, with the after-effects of the Great East
Japan Earthquake still being felt. This has made it difficult for us
to achieve our Fifth Management Plan target for revenue fromoperations. However, we had achieved the equivalent of around
two-thirds of our operating income and ordinary profit targets
under the plan as of March 31, 2012, meaning we are making
steady progress on the earnings front. With one year left to go in
the Fifth Management Plan, we intend to muster all our strengths
and put the upmost priority on achieving our plan targets. For
further information about the Fifth Management Plan, please see“A Message from the Management” on pages 4 to 5.

Cash Flows
Cash and cash equivalents at end of year totaled ¥140.2 billion,
an increase of ¥20.5 billion from the end of the previous year.
Cash flows were as follows.
Cash Flows from Operating Activities
Net cash provided by operating activities was ¥101.4 billion, an¥87.0 billion improvement year on year. Besides income before
income taxes and minority interests of ¥97.2 billion, thisreflected a lower increase in inventories year on year and anincrease in notes and accounts payable—trade.
Cash Flows from Investing Activities
Net cash used in investing activities was ¥72.1 billion. Paymentsfor purchases of property and equipment, principally for measures to strengthen leasing operations, were ¥112.3 billion. On
the other hand, net receipts of deposits from partnership investors were ¥39.1 billion and net proceeds from guarantee andlease deposits paid to lessors were ¥8.4 billion.

Results of Operations
Revenue from Operations and Operating Income
In the fiscal year under review, we recorded lower revenue but
higher profit in leasing operations. In the sales segment, revenue
from operations declined because of a drop in units delivered. As
with leasing, operating income improved in sales.
Consequently, in the fiscal year under review revenue fromoperations declined 7.5%, to ¥688.7 billion, and operating
income rose 6.5%, to ¥147.5 billion. For further information
about each segment, please see the Review of Operations section
on pages 8 to 21.

Cash Flows from Financing Activities
Net cash used in financing activities was ¥30.1 billion. For longterm fund raising stability, redemption of bonds and repaymentof long-term loans payable totaled ¥374.1 billion, while proceedsfrom issuance of bonds and from long-term loans payable totaled¥420.9 billion. Net decrease in short-term debt, including commercial paper, was ¥46.0 billion. Furthermore, a net ¥9.9 billion
was used for the redemption of non-recourse bonds and therepayment of long-term non-recourse loans raised by SPEs consolidated during the year under review.

Operating Income andOperating Margin(Billions of Yen)

(Billions of Yen)

(%)

750

180

30

150

500

120

20

100

10

50

0

0

21.4

21.1

09

10

11

12

13
(Forecast)

Operating Income
Operating Margin (right scale)

ANNUAL REPORT 2012

08

09

10

11

12

Ordinary Profit*
Net Income* Please see the note on page 3.

109.0
58.0

08

107.9
53.2

0

106.3
50.9

13
(Forecast)

150.0

12

147.5

720.0

11

138.5

688.7

10

134.0

744.8

09

146.4

719.6

08

154.6

695.2

0

18.6

60
691.9

250

20.8

100.5
52.7

22.3

18.6

28

Ordinary Profit* and Net Income

113.6
46.2

(Billions of Yen)

125.2
63.1

Other Income and Expenses
Net other expenses decreased by ¥0.4 billion, to ¥50.3 billion.
Major factors included loss on impairment of fixed assets of ¥5.6
billion and interest expense, net of ¥35.7 billion, which rose
20.0% year on year due to the consolidation of SPEs.

Revenue from Operations

Net Income
Income before income taxes and minority interests rose 10.7%,
to ¥97.2 billion. Income taxes increased 19.5%, to ¥41.8 billion. Consequently, net income rose 4.6%, to ¥53.2 billion, andthe net margin increased from 6.8% to 7.7%.

13(Forecast)Capital Resources and Liquidity

Company, which will continue to implement development investment for further growth, we believe that this method of raisingfunds is effective in increasing our financial stability. For further
information, please see “Overview of Perpetual Subordinated
Loan and New Stock Subscription Rights” on page 31.

SPE Consolidations
Effective from the year ended March 31, 2012, the Company
early adopted new accounting standards. As a result, 24 Special
Purpose Entities (SPEs) in which the Company has a stake were
newly included within the scope of consolidation. For further
information about the new accounting standards, please see “(1)Consolidation” of “Notes to Consolidated Financial Statements”
on page 37.

Shareholders’ Equity*
Shareholders’ equity was up 5.2% year on year, to ¥553.8 billion.
Net income was ¥53.2 billion, and retained earnings increased¥22.8 billion year on year. Consequently, the equity ratio was
14.3%, compared to 16.3% a year earlier. Allowing for the capital nature of the perpetual subordinated loan, the effective equity
ratio was 16.7%.
ROE was 9.9%, compared with 10.0% in the previous fiscal
year, while ROA was 4.3%, compared with 4.4% in the March2011 fiscal year.

AssetsAt the end of the year under review, total assets had increased¥625.5 billion to ¥3,859.7 billion. This increase mainlyreflected the consolidation of SPEs effective from the March2012 fiscal year. This led to a ¥693.9 billion increase in net
property and equipment to ¥2,672.5 billion, while total investments and loans decreased ¥65.5 billion to ¥164.4 billion.

* Shareholders’ equity = Net assets – Minority interests

Liabilities
Total liabilities at the end of the year under review were up¥588.1 billion from the previous fiscal year-end, to ¥3,277.0
billion. This increase was largely due to the consolidation of SPEs.
At the end of the fiscal year, consolidated interest-bearing
debt was up ¥532.5 billion, to ¥2,554.1 billion. The main
reason was the impact of consolidating SPEs at the beginning of
the year. However, consolidated interest-bearing debt was almost
the same as March 31, 2011, if the impact of consolidating
SPEs at the beginning of the year under review is excluded. For abreakdown of consolidated interest-bearing debt, please see thetable on the right.
Interest-bearing debt includes a perpetual subordinated loanof ¥120.0 billion that the Company took out on February 22,
2008. This subordinated loan, which received a high level of
equity credit—75%—from the Japan Credit Rating Agency, wasintended to increase effective shareholders’ equity while avoiding
equity dilution, as a provision for future financial risk. For theMillions of yen
2012

Short-term debt:
Principally frombanks
Commercial paper
SubtotalLong-term debt:
Bonds
Non-recourse bonds
Loans principallyfrom banks
Non-recourse loans
Perpetualsubordinated loan
SubtotalInterest-bearing debt
Total

Shareholders’ Equity andEquity Ratio

Total Assets(Billions of Yen)¥  149,700 ¥  185,750
19,99429,989169,694
215,7391,392,668
393,405

1,285,860—

106,808
393,405

8.3%—

120,000
2,384,421

120,000
1,805,860—
578,561—
32.0%¥2,554,115 ¥2,021,599¥532,516

26.3%

ROE and ROA
(%)

30

18

3,000

400

20

12

200

12

553.8

3,859.7

11

0

526.2

3,234.2

10

10

08

09

10

11

12

0

Shareholders’ Equity (Net Assets – Minority Interests)
Equity Ratio (right scale)

11.4
10.0

9.9

4.4

4.4

4.3

10

11

12

6
5.6

488.9

3,168.1

09

10.7
14.3

436.7

3,006.4

08

15.1

16.3

427.4

2,894.00–19.4%–33.3%–21.3%–15.0%
—

600

1,500

¥   –36,050–9,995–46,045–60,000
138,348

4,500

15.4

% change

400,000
—

(%)

14.5

Amountchange340,000
138,348(Billions of Yen)

14.8

2011

5.1

0
08

09

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

SUMITOMO REALTY & DEVELOPMENT CO., LTD.

29

Financial Strategy

for the fifth and subsequent plans. Due to the need to coordinate rights among landowners, redevelopment requires time andeffort, but on the other hand comparatively high levels of profit
can be expected.
In addition to moving ahead with these types of investments,
we are steadily strengthening our financial position. To maintain astable financial position even in a worsening financial environment,
we raised ¥120.0 billion in February 2008 through a perpetual
subordinated loan. This subordinated loan, which received a highlevel of equity credit—75%—from a rating agency, was intended
to increase effective shareholders’ equity while avoiding equity
dilution. Aiming for further growth, the Company will continue toinvest in development, as this is a useful method of fund-raisingfrom the viewpoint of increasing financial stability.
In the March 2013 fiscal year, the final year of the Fifth Plan,
through the generation of profit we expect to improve the ND/E
ratio, including the debt of SPEs, to about 4 times from 4.8
times as of March 31, 2010.
In addition, the cash flow generated by our core leasing business is more than ¥100.0 billion, reaching ¥123.6 billion in theyear under review. This represents increased operational stability.
Accordingly, while net interest-bearing debt (ND) has increased
compared with four years ago, the ND/Leasing Cash Flows Ratio
has remained stable. Also, properties for leasing, including SPEs,
have about ¥1 trillion in unrealized gains (the difference between
the carrying amount and the fair value). Ratings agencies haveevaluated these two strengths highly, and we have maintained ourrating even in difficult financial environments, such as after the
Lehman Shock. Presently, we maintain A and A– ratings with JCR
and R&I, respectively. Due to the early adoption of new accounting standards, SPEs will be included within the scope of consolidation from the March 2012 fiscal year. However, there will be
no change in evaluations from ratings agencies and financial
institutions, and there will be no effect on fund-raising.
We are also working to raise funds at fixed, long-term rates asa precaution against future increases in interest rates. As aresult, at the end of the year under review, long-term debt
accounted for 93% of interest-bearing debt, and fixed-interest
rate debt accounted for 80% of interest-bearing debt.

Characteristics of Operations and Diversification of Fund-raising
In leasing and sales, which are our mainstay business segments,
several years are required from the acquisition of a site to thecompletion of a building and the generation of revenue. In addition, significant advance investment is required. In considerationof these factors, under the three mid-term management plansfrom April 1997 to reinforce our financial position and achieve
operational growth, we worked to diversify our fund-raising methods so as to control interest-bearing debt while making investments needed for growth.
Specifically, we have aggressively introduced development
securitization methods using SPEs. With SPEs where off-­balancesheet funds are raised through non-recourse loans, we have worked
to conduct development on a large-scale with a small amount ofequity money without placing a burden on our balance sheet. In
addition, to diversify our fund-raising methods in order to control
interest-bearing debt, we have formed SURF (Sumitomo Realty &Development Fund) investment partnerships backed by leased
buildings, making effective use of our assets in our fund-raising
activities. At the end of March 2012, the balance of investment
received in SURF investment partnerships was ¥136 billion, which
was recorded on the balance sheet as deposits received.
By actively utilizing these types of fund-raising methods that
do not rely on interest-bearing debt, in the first half of the
2000s, we raised large amounts of funds without having to sell
assets at low prices, and have aggressively acquired sites whensite acquisition costs are low and there are investment opportunities. Consequently, our site acquisition has proceeded according
to plan, and we were able to achieve substantial growth in revenue and profit over a decade.
Investing in Line with Changes in the Market Environment andStrengthening Financial Position
Since the second half of the 2000s, it has become increasingly
difficult to acquire large prime sites that meet our investment
criteria. In this setting, Sumitomo Realty has implemented apolicy centered on urban redevelopment for future site acquisition. Consequently, we have already acquired the land needed

ND including Debt of Non-consolidated
SPEs and ND/E Ratio

Long-term Debt Ratio and
Fixed-interest Rate Debt Ratio(Billions of Yen)

(Times)

(%)

3,000

9

100

2,000

6

Interest Coverage Ratio(Billions of Yen)

(Times)

180

12

80
80

79

120

8
6.2

ANNUAL REPORT 2012

4

0

08

09

10

11

12

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

0

151.2
35.8

0

142.0
30.0

20
136.5
29.8

12

4.2

150.1
30.4

11

4.7

158.1
25.6

2,407.6

10

4.6

60

93

2,444.2

09

4.9

40

89

2,363.708

3

83

2,390.4

4.3

2,188.9

4.6

76

4.8

ND (Net Interest-bearing Debt)
ND/E Ratio (right scale)

30

81

5.5

1,000

0

77

83

5.1

85

60

08

09

10

11

12

0

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

Site acquisition is essential to the achievement of ongoinggrowth. Moving forward, we will continue to strengthen our
financial position through the generation of profit and work toachieve increased fund-raising stability as we continue to invest
in growth, centered on the core leasing business.

Our fundamental policy for the distribution of profit is to maintain a stable base level of dividends and, while retaining a sufficient level of earnings for stable, long-term operational growth,
to increase dividends in line with growth in profit.
We have implemented four plans since April 1997. We
steadily strengthened our profit foundation under two management plans—the First Plan and the Second Plan. In addition, we
worked to respond to various changes in accounting standards
and to reduce unrealized losses. Over this period, due to comparatively large special losses, net income fluctuated, but wemaintained annual dividends at ¥6.00 per share. At the conclusion of the Second Plan, we raised dividends to the bubbleperiod level: ¥9.00 per share.
Under the Third Plan, which began in April 2004, we completed the implementation of measures to deal with unrealized
losses, and laid the foundation for full-scale growth in EPS.
Thereafter, we continued to increase the dividend in line withearnings growth to the extent that we raised the dividend for the
March 2009 fiscal year, the year after we recorded record earnings, to ¥20.00 per share.
However, earnings subsequently declined due to the Lehman
Shock. Nevertheless, we focused on the continuation of stabledividends and maintained the dividend per share at ¥20.00. In
the March 2012 fiscal year, the second year of the Fifth Plan,
while operating income and ordinary profit increased, we maintained a stable dividend of ¥20.00 per share. In addition, weplan to pay a per-share cash dividend of ¥20.00 for the March2013 fiscal year. Moving forward, in accordance with our judgment that we need to further bolster equity, we will continue tofollow a policy of implementing dividend increases in accordancewith growth in profit.

Overview of Perpetual Subordinated Loan and New Stock
Subscription Rights
The perpetual subordinated loan entails the allotment of new
stock subscription rights with the objective of the creditor tosecure a method of recovering its investment. In regard to the
new stock subscription rights, consideration has been given to
limiting the possibility of dilution upon execution.
Overview of Perpetual Subordinated Loan
Amount:¥120.0 billion

Borrower:

Sumitomo Realty & Development Co., Ltd.

Lender:Sumitomo Mitsui Banking Corporation(Trust Account)

Effective date:February 22, 2008

Maturity date:No fixed date*1

Applicableinterest rate*2:(1) From February 22, 2008 to February 21, 2013:
3 Month Yen TIBOR + 1.10%(2) From February 22, 2013:
3 Month Yen TIBOR + 2.10%

Overview of New Stock Subscription Rights
Sumitomo Mitsui Banking Corporation(Trust Account)

Number of shares fromsubscription rights*2:

49,180,327 shares

New share subscription
right exercise period:

February 22, 2008, to February 22, 2058*3
95% of market price (average of the closing price overthe previous 20 business days), minimum exercise
price: ¥1,087*1	However, voluntary repayment is possible in the event that five years havepassed from the date of the loan (i.e., February 22, 2013 and thereafter),and certain other conditions are met.
*2	As of the effective date of the perpetual subordinated loan.
*3	Prior to February 22, 2014, the rights cannot be exercised unless perpetual
subordinated loan interest payments have been stopped. Voluntary repayment is possible on or after February 22, 2013. In the event of repayment,
the new stock subscription rights will become unexercisable, and theCompany will acquire the new stock subscription rights at no cost.

Leasing Cash Flows(Billions of Yen)

(Times)

150

22.2

(%)

30

3,000

12

150

45

20

2,000

8

100

30

10

1,000

5.3

4

50

0

0

0

0

123.6

12

Leasing Cash Flows
ND*/Leasing Cash Flows Ratio (right scale)* Including debt of non-consolidated SPEs

08

09

10

11

12

Leasing Assets
Return on Leasing Assets (right scale)

20.0

20.0

20.0

20.0

08

09

10

11

12

18.0

20.0

15

109.0
99.0

110.3

11

5.6

107.9
97.2

114.3

10

6.1

106.3
87.8

121.5

09

6.8

2,840.5

109.3

08

6.4

100.5
91.2

19.5

50

0

(Billions of Yen)

2,170.9

20.7(%)

2,088.0

19.7(Billions of Yen)

1,993.6

20.0

Cash Dividends per Share, Ordinary
Profit and Income Before Income Taxes

1,949.8

100

Leasing Assets andReturn on Leasing Assets

113.6
79.3

Exercise price:

125.2
114.0

Allotted to:0

13(Forecast)Ordinary Profit
Income before Income Taxes
Cash Dividends per Share (right scale)

SUMITOMO REALTY & DEVELOPMENT CO., LTD.

31

Consolidated Balance Sheets
Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
As of March 31, 2012 and 2011

Thousands of
U.S. dollars (Note 1)

Millions of yen

ASSETS
Current assets:Cash, time and notice deposits (Notes 3, 6 and 7) ������������������������������������
Notes and accounts receivable—trade (Note 7) ������������������������������������������
Allowance for doubtful accounts (Note 7) ��������������������������������������������������
Inventories (Note 4) ��������������������������������������������������������������������������������
Deferred income taxes (Note 17) ��������������������������������������������������������������
Other current assets ��������������������������������������������������������������������������������
Total current assets ������������������������������������������������������������������������������

2012

2011

2012

¥  146,476
17,058(511)
586,170
10,58841,361
801,142¥  119,749
14,284(947)
558,091
12,823
101,958
805,958$ 1,783,465
207,695(6,222)
7,137,100
128,918
503,604
9,754,560

Investments and loans:
Investments in and loans to unconsolidated subsidiaries
and affiliates (Notes 5 and 7) ����������������������������������������������������������������
Investments in securities and other (Notes 7 and 8) ����������������������������������
Allowance for doubtful accounts ��������������������������������������������������������������
Total investments and loans ������������������������������������������������������������������

1,044
178,394(15,068)
164,370

5,699
239,666(15,471)229,894

12,712
2,172,093(183,466)
2,001,339

2,005,364
899,281
24,8542,656
59,8182,991,973

1,523,347
587,659
19,052
1,804
64,252
2,196,114

24,416,949
10,949,483
302,618
32,339728,332
36,429,721

Accumulated depreciation ������������������������������������������������������������������������
Net property and equipment ������������������������������������������������������������������

(319,451)
2,672,522(217,451)
1,978,663(3,889,577)
32,540,144

Other assets:
Guarantee and lease deposits paid to lessors (Note 7) ��������������������������������
Leasehold rights and other intangible assets ����������������������������������������������
Deferred income taxes (Note 17) ��������������������������������������������������������������
Other ����������������������������������������������������������������������������������������������������
Total other assets ��������������������������������������������������������������������������������
Total assets ��������������������������������������������������������������������������������������

134,067
51,587
18,565
17,445
221,664¥3,859,698

145,70751,815
11,605
10,561
219,688¥3,234,203

1,632,376
628,114226,044
212,4072,698,941$46,994,984

Property and equipment:
Land (Notes 4, 6 and 24) ������������������������������������������������������������������������
Buildings and structures (Notes 4, 6 and 24) ��������������������������������������������
Machinery and equipment (Notes 6 and 24) ����������������������������������������������
Leased assets �����������������������������������������������������������������������������������������
Construction in progress (Notes 4, 6 and 24) ��������������������������������������������

See accompanying notes.

32

ANNUAL REPORT 2012

Thousands of
U.S. dollars (Note 1)

Millions of yen

Liabilities and Net Assets
Current liabilities:
Short-term debt (Notes 7 and 9) ��������������������������������������������������������������
Long-term debt due within one year (Notes 6, 7 and 9) ������������������������������
Long-term non-recourse debt due within one year (Notes 6, 7 and 9) ����������
Notes and accounts payable—trade (Note 7) ����������������������������������������������
Accrued income taxes ������������������������������������������������������������������������������
Accrued bonuses ������������������������������������������������������������������������������������
Allowance for loss on disaster (Note 12) ����������������������������������������������������
Deposits received (Notes 7 and 18) ����������������������������������������������������������
Other current liabilities (Note 18) ������������������������������������������������������������
Total current liabilities ��������������������������������������������������������������������������

2012

2011

2012

¥  169,694
307,623
137,438
34,66324,066
3,137—
121,81482,373880,808¥  215,739
374,792—
31,756
17,1093,184
1,930
169,719
76,112890,341$ 2,066,163
3,745,562
1,673,420
422,050
293,023
38,196—
1,483,185
1,002,960
10,724,559

Long-term liabilities:
Long-term debt due after one year (Notes 6, 7 and 9) ��������������������������������
Long-term non-recourse debt due after one year (Notes 6, 7 and 9) ������������
Guarantee and deposits received (Notes 7 and 18) ������������������������������������
Allowance for employees’ severance and retirement benefits (Note 10) ��������
Other long-term liabilities (Note 18) ����������������������������������������������������������
Total long-term liabilities ����������������������������������������������������������������������

1,545,045
394,315426,785
5,102
24,9762,396,223

1,431,068—
332,304
4,882
30,2791,798,533

18,812,188
4,801,108
5,196,457
62,121
304,103
29,175,977

122,805
132,748
313,041(3,704)564,890

122,805
132,748
290,260(3,645)542,168

1,495,251
1,616,316
3,811,531(45,100)
6,877,998(1,933)(972)(8,141)(11,046)
28,823582,667¥3,859,698(6,701)(1,925)(7,315)(15,941)
19,102545,329¥3,234,203(23,536)(11,835)(99,123)(134,494)
350,9447,094,448$46,994,984

Contingent liabilities (Note 26)
Net assets (Note 19):
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 loss
Net unrealized holding losses on securities ��������������������������������������������
Net deferred losses on hedges ��������������������������������������������������������������
Foreign currency translation adjustments ������������������������������������������������
Total accumulated other comprehensive loss ��������������������������������������
Minority interests ������������������������������������������������������������������������������������
Total net assets ������������������������������������������������������������������������������������
Total liabilities and net assets ������������������������������������������������������������SUMITOMO REALTY & DEVELOPMENT CO., LTD.

33

Consolidated Statements of Income
Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
For the years ended March 31, 2012, 2011 and 2010

Thousands of
U.S. dollars (Note 1)

Millions of yen

2012

2011

2010

2012

Revenue from operations �������������������������������������������������������
Costs and expenses:
Cost of revenue from operations (Note 15) ���������������������������
Selling, general and administrative expenses �������������������������

¥688,662¥744,756¥719,636$8,385,024

490,437
50,760541,197551,364
54,929606,293534,270
51,387585,657

5,971,472
618,0456,589,517

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 11) �����������������������
Loss on disposal of property and equipment �������������������������
Gain on sale of investments in securities �����������������������������
Loss on sale of investments in securities ������������������������������
Loss on devaluation of investments in securities �������������������
Dividend to partnership investors �����������������������������������������
Gain on prior periods adjustment (Note 14) �������������������������
Gain on adjustment of accrued rent payable (Note 13) �����������
Compensation income ���������������������������������������������������������
Loss on devaluation of common stocks of affiliates ���������������
Provision for allowance for loss on disaster ���������������������������
Other, net �������������������������������������������������������������������������

147,465

138,463

133,979

1,795,507(35,748)
3,684
429
(399)
(5,618)(555)——(3,740)(2,853)
—
—
—
(854)
—
(4,644)(50,298)(29,789)
3,344
120
(19)
(7,602)(2,188)4(33)(6,710)(3,043)413—
78—(1,930)(3,350)(50,705)(29,591)
2,339
53—(7,826)(93)
1(56)(1,837)(2,944)
—
645
147
(10)
—
(3,599)(42,771)(435,261)
44,856
5,223(4,858)(68,404)(6,758)——(45,538)(34,738)———(10,398)—(56,543)(612,419)

Income before income taxes and minority interests �������������������
Income taxes (Note 17):
Current �����������������������������������������������������������������������������
Deferred ���������������������������������������������������������������������������
Total �����������������������������������������������������������������������������
Income before minority interests ���������������������������������������������
Minority interests �������������������������������������������������������������������

97,16787,75891,2081,183,088

37,616
4,224
41,84055,327
2,091

35,138(128)35,01052,7481,840

35,137
1,805
36,94254,2661,604

458,006
51,430509,436
673,652
25,460Net income ���������������������������������������������������������������������������

¥ 53,236¥ 50,908¥ 52,662$  648,192

2012

2011

2010

¥112.28
99.83
20.00

¥107.35
94.73
20.00

¥111.04
92.11
20.00

Yen

Amounts per share of common stock:
Net income:—Basic �������������������������������������������������������������������������
—Diluted �����������������������������������������������������������������������Cash dividend applicable to the year �����������������������������������

U.S. dollars (Note 1)

2012

$1.37
1.22
0.24

Consolidated Statements of Comprehensive Income
Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
For the years ended March 31, 2012, 2011 and 2010
Thousands of
U.S. dollars (Note 1)

Millions of yen

2012

2011

2010

Income before minority interests ���������������������������������������������
Other comprehensive income (loss) (Note 23)
Net unrealized holding gains (losses) on securities ���������������
Net deferred gains (losses) on hedges �����������������������������������
Foreign currency translation adjustments �����������������������������
Total other comprehensive income (loss) ���������������������������
Comprehensive income ���������������������������������������������������������

¥55,327¥52,748¥54,266$673,652

4,780
1,212
(1,067)
4,925¥60,252(3,308)534(1,610)(4,384)¥48,364

12,380(167)(319)
11,894¥66,160

58,20014,757(12,992)
59,965$733,617

Comprehensive income attributable to:
Owners of the parent ���������������������������������������������������������
Minority interests ���������������������������������������������������������������

¥58,352
1,900¥46,917
1,447¥64,565
1,595$710,483
23,134

See accompanying notes.

34

ANNUAL REPORT 20122012

Consolidated Statements of Changes in Net Assets
Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
For the years ended March 31, 2012, 2011 and 2010

Thousands

Millions of yen
Shareholders’ equity

Accumulated Other Comprehensive Loss

Retainedearnings

Treasury
stock

Total
shareholders’equityNet
Total
unrealizedNet
Foreignaccumulated
holding gains
deferredcurrency
other(losses) on gains (losses) translation comprehensive
securities
on hedges adjustments income (loss)

Minority
interests

Total
net assets

Number ofshares ofcommon stock

Commonstock

Balance at April 1, 2009 ���������������������������

476,086¥122,805¥132,750¥208,458¥(3,493)¥460,520¥(15,773)¥(2,318)¥(5,762)¥(23,853)¥17,758¥454,425

Net income �������������������������������������������

—

—

—

52,662—

52,662

—

—

—

—

—

52,662Foreign currency translation adjustments ���

—

—

—

—

—

—

—

—

(204)

(204)

—

(204)

Capitalsurplus

Net unrealized holding gains
on securities ���������������������������������������

—

—

—

—

—

—

12,380——12,380—12,380Acquisition of treasury stock �������������������

—

—

—

—

(55)

(55)

—

—

—

—

—

(55)

Disposal of treasury stock �����������������������

—

—

(2)

—

5

3

—

—

—

—

—

3

Change of scope of consolidation �������������

—

—

—

(2,799)—(2,799)

—

—

—

—

—

(2,799)Final for prior year (¥10 per share) �������

—

—

—

(4,743)—(4,743)

—

—

—

—

—

(4,743)

Interim for current year(¥10 per share) ���������������������������������

—

—

—

(4,742)—(4,742)

—

—

—

—

—

(4,742)

Minority interests �����������������������������������

—

—

—

—

—

—

—

—

—

—

746

746

Net deferred losses on hedges �����������������

—

—

—

—

—

—

—

(273)

—

(273)

—

(273)

Balance at April 1, 2010 ���������������������������

476,086

122,805

132,748

248,836(3,543)500,846(3,393)(2,591)(5,966)(11,950)

18,504507,400

Net income �������������������������������������������

—

—

—

50,908—50,908

—

—

—

—

—

50,908Foreign currency translation adjustments ���

—

—

—

—

—

—

—

—

(1,349)(1,349)—(1,349)Cash dividends paid:

Net unrealized holding losses
on securities ���������������������������������������

—

—

—

—

—

—

(3,308)——(3,308)—(3,308)Acquisition of treasury stock �������������������

—

—

—

—

(102)

(102)

—

—

—

—

—

(102)

Final for prior year (¥10 per share) �������

—

—

—

(4,742)—(4,742)

—

—

—

—

—

(4,742)

Interim for current year(¥10 per share) ���������������������������������

—

—

—

(4,742)—(4,742)

—

—

—

—

—

(4,742)

Minority interests �����������������������������������

—

—

—

—

—

—

—

—

—

—

598

598

Net deferred gains on hedges �����������������

—

—

—

—

—

—

—

666

—

666

—

666

Balance at April 1, 2011 ���������������������������

476,086

122,805

132,748

290,260(3,645)542,168(6,701)(1,925)(7,315)(15,941)

19,102545,329

Net income �������������������������������������������

—

—

—

53,236—53,236

—

—

—

—

—

53,236

Foreign currency translation adjustments ���

—

—

—

—

—

—

—

—

(826)

(826)

—

(826)

Net unrealized holding gains
on securities ���������������������������������������

—

—

—

—

—

—

4,768

—

—

4,768

—

4,768

Acquisition of treasury stock �������������������

—

—

—

—

(61)

(61)

—

—

—

—

—

(61)

Disposal of treasury stock �����������������������

—

—

—

—

2

2

—

—

—

—

—

2

Change of scope of consolidation �������������

—

—

—

(20,971)—(20,971)

—

—

—

—

—

(20,971)

Final for prior year (¥10 per share) �������

—

—

—

(4,742)—(4,742)

—

—

—

—

—

(4,742)

Interim for current year(¥10 per share) ���������������������������������

—

—

—

(4,742)—(4,742)

—

—

—

—

—

(4,742)

Minority interests �����������������������������������

—

—

—

—

—

—

—

—

—

—

9,721

9,721

Net deferred gains on hedges �����������������

—

—

—

—

—

—

—

953

—

953

—

953

Balance at March 31, 2012 �����������������������

476,086¥122,805¥132,748¥313,041¥(3,704)¥564,890¥ (1,933)¥  (972)¥(8,141)¥(11,046)¥28,823¥582,667

Minority
interests

Total
net assets

Cash dividends paid:

Cash dividends paid:

Thousands of U.S. dollars (Note 1)

Commonstock

Balance at April 1, 2011 �����������������������������������������������

Shareholders’ equity

Accumulated Other Comprehensive Loss

Retainedearnings

Net
Total
unrealizedNet
Foreignaccumulated
holding gains
deferredcurrency
other(losses) on gains (losses) translation comprehensive
securities
on hedges adjustments income (loss)

CapitalsurplusTreasury
stock

Total
shareholders’equity$1,495,251 $1,616,316 $3,534,154 $(44,381) $6,601,340$(81,590) $(23,439) $(89,066) $(194,095) $232,582 $6,639,827

Net income ���������������������������������������������������������������

——648,192—

648,192

—

—

—

—

—

648,192

Foreign currency translation adjustments ���������������������

—

—

—

—

—

—

—

(10,057)(10,057)—(10,057)

Net unrealized holding gains on securities �������������������

—

—

—

—

—

58,054——58,054—58,054

Acquisition of treasury stock ���������������������������������������

—

—

—

(743)

(743)

—

—

—

—

—

(743)

Disposal of treasury stock �������������������������������������������

—

—

—

24

24

—

—

—

—

—

24

Change of scope of consolidation ���������������������������������

——(255,339)—(255,339)

—

—

—

—

—

(255,339)(57,738)

Cash dividends paid:
Final for prior year ($0.12 per share) �����������������������

——(57,738)—(57,738)

—

—

—

—

—

Interim for current year ($0.12 per share) �����������������

——(57,738)—(57,738)

—

—

—

—

—

(57,738)

Minority interests �������������������������������������������������������

—

—

—

—

—

—

—

—

—

118,362

118,362

—

—

—

—

—

—

11,604—

11,604—

11,604

Net deferred gains on hedges �������������������������������������
Balance at March 31, 2012 �������������������������������������������

$1,495,251 $1,616,316 $3,811,531 $(45,100) $6,877,998$(23,536) $(11,835) $(99,123) $(134,494) $350,944 $7,094,448

See accompanying notes.

SUMITOMO REALTY & DEVELOPMENT CO., LTD.

35

Consolidated Statements of Cash Flows
Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
For the years ended March 31, 2012, 2011 and 2010

Thousands of
U.S. dollars (Note 1)

Millions of yen

2012

2011

2010

2012

¥  97,167
36,049
5,618
—
(839)

¥  87,758
23,705
7,602
1,930
776

¥  91,208
18,065
7,826—
325$ 1,183,088
438,926
68,404—(10,216)

219
(30)
555
—
3,740
854
(3,761)35,825(2,867)(14,347)
2,908(2,145)
5,798
164,744

(87)
(101)
2,188
29
6,710
—
(3,525)29,9692,935(30,830)(22,407)(2,936)(23,894)
79,822

(17)
(53)
93
55
1,837
10
(2,560)29,812(5,671)(5,190)14,478
10,876(4,653)
156,441

2,667
(365)
6,758
—
45,538
10,398(45,793)436,199(34,908)(174,686)
35,407(26,117)70,5942,005,894

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

3,761(36,360)(30,742)
101,403

3,525(30,261)(38,644)
14,442

2,560(29,142)(36,057)
93,80245,793(442,713)(374,309)
1,234,665

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 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 ���������������������������������������

(112,294)
1,485(8,316)52(2,291)
10,713(18,305)
19,115
91,115(51,971)(1,403)(72,100)(98,059)
1,040(7,301)
7,074(2,241)
21,642(26,385)
20,15688,996(78,133)(2,301)(75,512)(114,060)
54(15,243)
2,713(1,445)
4,125(23,319)
15,38230,907(65,487)(1,220)(167,593)(1,367,271)
18,081(101,254)
633(27,895)
130,440(222,878)
232,741
1,109,400(632,789)(17,084)(877,876)

Cash flows from financing activities:
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 �������������������������
Increase (Decrease) in assignment of receivables �������������������
Increase in treasury stocks, net �������������������������������������������Cash dividends paid �����������������������������������������������������������
Other, net �������������������������������������������������������������������������
Net cash provided by (used in) financing activities �������������������

(46,045)
30,000(90,000)
4,900(6,140)390,895(284,087)
42,340(50,985)(1,878)(60)(10,334)(8,672)(30,066)(112,486)
60,000(80,000)——
413,300(194,381)——(20,090)(102)(10,334)(24,072)
31,835(117,645)
90,000(40,000)——
279,000(123,816)
—
—
6,711
(52)
(10,334)
14,57398,437(560,636)
365,275(1,095,824)
59,662(74,760)
4,759,467(3,458,992)
515,524(620,784)(22,866)(731)(125,825)(105,588)(366,078)

Effect of exchange rate changes on cash and cash equivalents ���

(464)

(331)

(230)

(5,650)Net increase (decrease) in cash and cash equivalents ���������������

(1,227)(29,566)

24,416(14,939)

Cash and cash equivalents at beginning of year �����������������������
Increase in cash and cash equivalents of newly
consolidated subsidiaries �����������������������������������������������������Cash and cash equivalents at end of year (Note 3) �������������������

119,749

149,315

124,897

1,458,042

21,678¥ 140,200—¥ 119,749

2¥ 149,315

263,947$ 1,707,050

Cash flows from operating activities:
Income before income taxes and minority interests ���������������
Depreciation and amortization ���������������������������������������������
Loss on impairment of fixed assets (Note 11) �����������������������
Provision for allowance for loss on disaster ���������������������������
Provision for (Reversal of) allowance for doubtful accounts �����
Increase (Decrease) in allowance for employees’ severance
and retirement benefits �����������������������������������������������������
Loss on sale of property and equipment, net �������������������������
Loss on disposal of property and equipment �������������������������
Loss on sale of investments in securities, net �����������������������
Loss on devaluation of investments in securities �������������������
Loss on devaluation of common stocks of affiliates ���������������
Interest and dividend income ���������������������������������������������
Interest expense �����������������������������������������������������������������
Decrease (Increase) in notes and accounts receivable—trade ���Increase in inventories �������������������������������������������������������
Increase (Decrease) in notes and accounts payable—trade �����
Increase (Decrease) in advances received �����������������������������
Other, net �������������������������������������������������������������������������
Total �����������������������������������������������������������������������������

See accompanying notes.

36

ANNUAL REPORT 2012

Notes to Consolidated Financial Statements
Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
As of and for the years ended March 31, 2012, 2011 and 2010

1. Basis of presenting consolidated financial 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 Law and its related accounting regulations, and in conformity with accounting principles generally accepted inJapan (“Japanese GAAP”), which are different in certain respects as toapplication and disclosure requirements from International Financial
Reporting Standards.
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 expanded disclosure) fromthe consolidated financial statements of the Company prepared in accordance with Japanese GAAP and filed with the appropriate Local Finance
Bureau of the Ministry of Finance as required by the Financial Instruments
and Exchange Law. Certain supplementary information included in thestatutory Japanese-language consolidated financial statements, but notrequired for fair presentation, is not presented 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, 2012, which was ¥82.13 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 the accountsof the Company and significant companies over which the Company has
power of control through majority voting rights or existence of certain­conditions 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 the Company
acquired control of the respective subsidiaries.
All significant intercompany balances, transactions and profits havebeen eliminated in consolidation.
Effective from the year ended March 31, 2012, the Company early
adopted the new accounting standard, revised “Accounting Standard forConsolidated Financial Statements” (Statement No. 22 revised by the
Accounting Standards Board of Japan on March 25, 2011), “Guidance on
Disclosures about Certain Special Purpose Entities” (Guidance No. 15
revised by the Accounting Standards Board of Japan on March 25, 2011),“Guidance on Determining a Subsidiary and an Affiliate” (Guidance No. 22
revised by the Accounting Standards Board of Japan on March 25, 2011)and “Practical Solution on Applications of the Control Criteria and Influence
Criteria to Investment Associations” (PIFT No. 20 issued by the AccountingStandards Board of Japan on March 25, 2011).
Accordingly, 23 Special Purpose Entities, including Shiodome
Hamarikyu Special Purpose Company, Ltd., and 1 limited partnership(“Tokumei kumiai ”) have been newly included within the scope of consolidation at April 1, 2011.
This early adoption of the new accounting standard is according to therules under paragraph 44-4, item (3) of “Accounting Standard for Consolidated Financial Statements,” and assets or liabilities belonging to newly
consolidated subsidiaries are evaluated by their fair carrying amount at
April 1, 2011.

As a result, retained earnings decreased by ¥19,386 million ($236,040
thousand) at April 1, 2011.
(2) Foreign currency translation
Receivables and payables denominated in foreign currencies are translated
into Japanese yen at the year-end rates.
Financial statements of consolidated overseas subsidiaries are translated into Japanese yen at the year-end rate, except for shareholders’ equity
accounts, which are translated at historical rates, and income statement
items resulting from the transactions with the Company, which are translated at the rates used by the Company.
Differences arising from translation are presented as “Foreign currencytranslation 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 are considered to be cash and cash equivalents.
(4) Recognition of revenue
Revenues from sales operations of condominiums, detached houses andland lots are recognized when units are delivered and accepted by customers.
Revenues from leasing operations of office buildings, residences and other­properties are recognized as rent accrues over the lease term.
(5) Inventories
Inventories are stated at cost, determined by the specific identification
method principally. The carrying amount of inventories is written down due
to a decline of their profitability.
(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 losses on thesale of such securities are computed using moving-average cost.
Senior securities are stated at cost determined by the specific identification method and securities with no available fair value are stated atmoving-average cost.
Investments in limited partnerships, which are regarded as securities
under the Financial Instruments and Exchange Law, are accounted for in amanner similar to the equity method based on 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 affiliatedcompanies not accounted for using the equity method is not readily available, such securities should be written down to net asset value with acorresponding charge in the income statement in the event net asset value
declines significantly. In these cases, such fair value or the net asset value
will be the carrying amount of the securities at the beginning of the next
fiscal year.

SUMITOMO REALTY & DEVELOPMENT CO., LTD.

37

(7) Property and equipment
The Company and its consolidated domestic subsidiaries depreciate buildings using the straight-line method, and other property and equipmentusing 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.
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 evaluation ofcertain identified doubtful and bankrupt receivables plus an amount calculated 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 a straight-line method over the lease periods as theiruseful lives with no residual value.
The Company uses the accounting procedures that conform to methods
related to normal lease transactions with respect to finance lease trans­
actions without title transfer with a lease transaction start date prior to
March 31, 2009.
(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 and income tax
purposes are recognized as deferred income taxes.
(12) Employees’ severance and retirement benefits
The Company and certain of its 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 andthe conditions under which termination occurs.
The liabilities and expenses for severance and retirement benefits are
determined based on the amounts actuarially calculated using certain
assumptions.
The Company and certain of its consolidated subsidiaries provided anallowance for employees’ severance and retirement benefits at March 31,
2012, 2011 and 2010 based on the estimated projected benefit obligation
at those dates.
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.

38

ANNUAL REPORT 2012

Effective from the year ended March 31, 2010, the Company and its
consolidated subsidiaries adopted “Partial Amendments to AccountingStandard for Retirement Benefits (Part 3)” (Statement No. 19 issued by the
Accounting Standards Board of Japan on July 31, 2008).
This accounting change has no impact on operating income and income
before income taxes and minority interests.
(13) Comprehensive income
Effective from the year ended March 31, 2011, the Company and its consolidated subsidiaries adopted the new accounting standard, “AccountingStandard for Presentation of Comprehensive Income” (Statement No. 25
issued by the Accounting Standards Board of Japan on June 30, 2010).
The amounts of “Accumulated other comprehensive loss” and “Total accumulated other comprehensive loss” for the year ended March 31, 2010
represent the amounts of “Valuation and transaction adjustments” and“Total valuation and transaction adjustments,” respectively.
(14) Asset retirement obligations
Effective from the year ended March 31, 2011, the Company and its consolidated subsidiaries adopted the new accounting standard, “AccountingStandard for Asset Retirement Obligations” (Statement No. 18 issued by
the Accounting Standards Board of Japan on March 31, 2008), and“­Guidance on Accounting Standard for Asset Retirement Obligations”(Guidance No. 21 issued by the Accounting Standards Board of Japan on
March 31, 2008).
This accounting change has an immaterial impact on operating income
and income before income taxes and minority interests.
(15) Construction contracts
The Company previously applied the completed-contract method for­recognizing revenues and costs of construction contracts.
Effective from the year ended March 31, 2010, the Company and its
consolidated subsidiaries adopted the new accounting standard, “AccountingStandard for Construction Contracts” (Statement No. 15 issued by the
Accounting Standards Board of Japan on December 27, 2007), and“­Guidance on Accounting Standard for Construction Contracts” (GuidanceNo. 18 issued by the Accounting Standards Board of Japan on December
27, 2007).
Accordingly, the construction projects that were commenced in andafter the year ended March 31, 2010 and their percentage of completionby the end of the fiscal year under review that can be reliably estimatedare accounted for by the percentage-of-completion method (the degree ofcompletion of each construction project is estimated using the cost-­
comparison method), while other construction projects are accounted for by
the completed-contract method.
This accounting change has no impact on revenue from operations,operating income and income before income taxes and minority interests
because there were no construction projects to which the percentage-ofcompletion method was applied in the year ended March 31, 2010.
(16) Financial instruments
Effective from the year ended March 31, 2010, the Company and its consolidated subsidiaries adopted the new accounting standard, “AccountingStandard for Financial Instruments” (Statement No. 10 issued by the
Accounting Standards Board of Japan on March 10, 2008), and “Guidanceon Disclosures about Fair Value of Financial Instruments” (Guidance No. 19
issued by the Accounting Standards Board of Japan on March 10, 2008).
This accounting change has an immaterial impact on net assets and has
no impact on operating income and income before income taxes and­minority interests.

(17) 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 orlosses 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 derivative financial instruments until the related gains or losses on the hedged
items are recognized.
However, in cases where foreign exchange forward contracts are used ashedges and meet certain hedging criteria (regarding foreign exchange
contracts), the foreign exchange forward contracts and hedged items areaccounted for in the following manner:
1. If a foreign exchange forward contract is executed to hedge an existing
foreign currency receivable or payable,(a) the difference, if any, between the Japanese yen amount of thehedged foreign currency receivable or payable translated using the
spot rate at the inception date of the contract and the carrying
amount of the receivable or payable is recognized in the income
statement in the period which includes the inception date; and(b) the discount or premium on the contract (that is, the difference
between the Japanese yen amount of the contract translated using
the contracted forward rate and that translated using the spot rate
at the inception date of the contract) is recognized over the term of
the contract.
2. If a foreign exchange forward contract is executed to hedge a futuretransaction denominated in a foreign currency, the future transaction
will be recorded using the contracted forward rate, and no gains orlosses on the foreign exchange forward contract 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 towhich the swap contract was executed as a hedge.
(18) Investment and rental properties
Effective from the year ended March 31, 2010, the Company and its consolidated subsidiaries adopted the new accounting standard, “AccountingStandard for Disclosures about Fair Value of Investment and Rental­Property” (Statement No. 20 issued by the Accounting Standards Board ofJapan on November 28, 2008), and “Guidance on Accounting Standard forDisclosures about Fair Value of Investment and Rental Property” (Guidance
No. 23 issued by the Accounting Standards Board of Japan on November
28, 2008).
(19) Amounts per share of common stock
The computation of net income per share is based on the weighted-average
number of shares of common stock outstanding during each year.
Diluted net income per share is computed based on the amount of net
income available to the shareholders and the weighted-average number ofshares of common stock outstanding during each year after giving effect tothe dilutive potential of shares of common stock to be issued upon theexercise of stock options.
Cash dividends per share represent actual amounts applicable to therespective year.
(20) Reclassifications and restatement
Certain prior year amounts have been reclassified to conform to the 2012
presentation.
“Investments in SPEs holding properties for sale” of the consolidatedbalance sheets and “Increase in investments in SPEs holding properties forsale” of the consolidated statements of cash flow for the prior years are
deemed immaterial and thus reclassified to “Other current assets” of theconsolidated balance sheets and “Other, net” of operating activities of theconsolidated statements of cash flow, respectively.
These reclassifications had no impact on previously reported results ofoperations or retained earnings.
(21) Accounting changes and error corrections
Effective from the year ended March 31, 2012, the Company and its consolidated subsidiaries adopted the new accounting standard, “AccountingStandard for Accounting Changes and Error Corrections” (Statement No. 24
issued by the Accounting Standards Board of Japan on December 4, 2009)
and “Guidance on Accounting Standard for Accounting Changes and Error
Corrections” (Guidance No. 24 issued by the Accounting Standards Boardof Japan on December 4, 2009.)

3. Cash and cash equivalents
Cash and cash equivalents at March 31, 2012 and 2011 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2012

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

¥146,476(6,276)¥140,200

2011

2012

¥119,749—¥119,749$1,783,465(76,415)$1,707,050

4. Inventories
Inventories at March 31, 2012 and 2011 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 ��������������������������������������������������������������������������������������������������������������

2012

2011

2012

¥172,679
407,955
4,272
1,264¥586,170¥206,339
345,165
5,570
1,017¥558,091$2,102,508
4,967,186
52,015
15,391$7,137,100

SUMITOMO REALTY & DEVELOPMENT CO., LTD.

39

The Company transferred amounts between inventories and property and equipment. Such transfers at March 31, 2012 and 2011 are as follows:
Thousands of
U.S. dollars

Millions of yen

Inventories:
Transferred from property and equipment ������������������������������������������������������

2012

2011

2012

¥13,819¥12,961$168,258

5. Investments in and loans to unconsolidated subsidiaries and affiliates
Investments in and loans to unconsolidated subsidiaries and affiliates at March 31, 2012 and 2011 consisted of the following:Thousands of
U.S. dollars

Millions of yen

Investments in �����������������������������������������������������������������������������������������������
Loans to ��������������������������������������������������������������������������������������������������������
Total ��������������������������������������������������������������������������������������������������������������

2012

2011

2012

¥1,044—¥1,044¥2,8492,850¥5,699$12,712—$12,712

6. Pledged assets
Assets pledged as collateral at March 31, 2012 and 2011 are as follows:
Thousands of
U.S. dollars

Millions of yen

2012

Buildings and structures ����������������������������������������������������������������������������������
Land ������������������������������������������������������������������������������������������������������������
Machinery and equipment ������������������������������������������������������������������������������
Total ��������������������������������������������������������������������������������������������������������������

2012

2011

¥168,789
353,848
1,509¥524,146¥12,238
27,72788¥40,053$2,055,144
4,308,389
18,374$6,381,907

Secured liabilities at March 31, 2012 and 2011 are as follows:
Thousands of
U.S. dollars

Millions of yen

2012Long-term debt due within one year ������������������������������������������������������������������
Long-term non-recourse debt due within one year:
Bonds ��������������������������������������������������������������������������������������������������������
Loans ��������������������������������������������������������������������������������������������������������
Long-term debt due after one year ��������������������������������������������������������������������
Long-term non-recourse debt due after one year:
Bonds ��������������������������������������������������������������������������������������������������������
Loans ��������������������������������������������������������������������������������������������������������
Total ��������������������������������������������������������������������������������������������������������������

2012

2011

¥ 20,500¥ 1,750$  249,604

2,248
31,510———20,50027,371
383,661—

48,520345,795¥448,573——¥22,250

590,771
4,210,337$5,461,744

Specified assets for non-recourse debts at March 31, 2012 are as follows:
Millions of yen

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

Thousands of
U.S. dollars

2012

2012

¥ 30,480
176,627
446,11317
1,506¥654,743$  371,119
2,150,578
5,431,791
207
18,337$7,972,032(Note) “Specified assets for non-recourse debts” includes a portion of the amount of “Assets pledged as collateral” for the year ended March 31, 2012.

40

ANNUAL REPORT 2012

7. 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 and commercial paper.
The Group utilizes derivative financial instruments only for the purposeof hedging the foreign exchange risk associated with foreign currencydenominated transactions or hedging the interest rate risk associated with
the Companies’ loans payable, and does not utilize derivative financial
instruments for any speculative purposes.
2. Details of financial instruments, risks, and policies and systems of risk
management
Operating receivables such as notes and accounts receivable—trade areexposed to customers’ credit risk, but this risk is generally avoided throughthe 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, and continuously reviews whether it keeps to hold securities with consideration 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, the Group
constantly checks the financial condition of principal borrowers and theirperformance using the funds lent to those borrowers even after
accommodation.
The majority of due dates of operating debt, such as notes and accounts
payable, are within one year.

Interest rate swap contracts are used to hedge risks arising from fluctuations in interest rates on certain loans, corporate bonds, commercial paperand deposits.
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 currency-denominatedtransactions. Interest rate swap contracts are exposed to the risks ofinterest rate changes, and foreign exchange forward contracts and crosscurrency swap contracts are exposed to the risks of foreign exchange ratechanges. The derivative financial instruments are executed with creditworthy financial institutions, and the Group’s management believes there isinsignificant 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 21 “Derivativetransactions,” are not representing the market risks related to derivativetransactions.
The carrying amounts of financial instruments on the consolidated balance sheets, their fair values and the differences between them as of March
31, 2012 and 2011 are as follows. (Financial instruments whose fair value isextremely difficult to estimate are not included; please see (Note 2).)

For 2012
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) ��������
(5)	Deposits received*2 ������������������������
(6)	Guarantee and deposits received*2 ����
Total liabilities ��������������������������������������
Derivative transactions*3:
Non-hedge accounting ����������������������
Hedge accounting ����������������������������
Total derivative transactions ������������������

Thousands of U.S. dollars

Carrying amount

Fair value

Difference

Carrying amount

Fair value

Difference¥  146,476
17,058¥  146,476
17,058¥——$  1,783,465
207,695$ 1,783,465
207,695$——135,458

135,458—

1,649,312

1,649,312

—

1,269
676
¥  300,937

1,278
676
¥  300,946

9—¥     915,4518,231$  3,664,154

15,5618,231$ 3,664,264110—$    110¥   34,663
169,694¥   34,663
169,694¥——$    422,050
2,066,163$   422,050
2,066,163$——

1,852,668

1,865,955

13,28722,557,750

22,719,530

161,780

531,753
9,000
66,000¥2,663,778

539,082
9,000
66,000¥2,684,394

7,329
—
—
¥20,616

6,474,528
109,583
803,604$32,433,678

6,563,765
109,583
803,604$32,684,695

89,237——$251,017¥—(1,569)¥(1,569)¥—(1,569)¥(1,569)

¥—
—
¥—

$—
(19,104)$(19,104)$—(19,104)$(19,104)

$—
—
$—

SUMITOMO REALTY & DEVELOPMENT CO., LTD.

41

For 2011
Millions of yen

Assets:(1) Cash, time and notice deposits ��������������������������������������������������������������������������������
(2) Notes and accounts receivable—trade ����������������������������������������������������������������������
Allowance for doubtful accounts*1 ����������������������������������������������������������������������������
Balance ����������������������������������������������������������������������������������������������������������������������
(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) ����������������������������������������������������������
(5) Deposits received*2 ������������������������������������������������������������������������������������������������
Total liabilities ��������������������������������������������������������������������������������������������������������������
Derivative transactions*3:
Non-hedge accounting ����������������������������������������������������������������������������������������������
Hedge accounting ����������������������������������������������������������������������������������������������������
Total derivative transactions ������������������������������������������������������������������������������������������

Carrying amount

Fair value¥  119,749
14,284(119)
14,165¥  119,749

14,165—

123,854

123,854

—

1,270
510
¥  259,548

1,281
510
¥  259,559

11—¥    11¥    31,756
215,739
1,805,860
67,500¥2,120,855¥    31,756
215,739
1,822,223
67,500¥2,137,218¥

——16,363—¥16,363

¥

¥

¥

¥

—
(3,309)(3,309)¥

—(3,309)(3,309)Difference

¥

¥

—

—
—
—

*1 The carrying amount of notes and accounts receivable—trade is stated at net of allowance for doubtful accounts.
*2 The amounts only included in financial liabilities are disclosed.
*3 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 their carrying
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
8 “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 and securities classified by purpose of holding, please see
Note 8 “Securities.”42

ANNUAL REPORT 2012

Liabilities:(1) Notes and accounts payable—trade, (2) Short-term debt
The fair value of these items approximates their carrying amounts becauseof 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 shorttime period and because the credit standing of the Company is the sameafter borrowing. The fixed-coupon debt is calculated by discounting the
combined total of principal and interest at an interest rate assumed forsimilar new borrowings.
The specific matching criteria of interest rate swaps and cross currencyinterest rate swaps are applicable to some long-term debts with floatinginterest rates (please see Note 21 “Derivative transactions”). The fair valueof these items is calculated by discounting the combined total of interest
and principal, with which the interest rate swap and cross currency interest
rate swap have been accounted for, at an interest rate rationally estimatedfor similar borrowings.
The fair value of corporate bonds issued by the Company (includedin (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 shorttime period and the value of its non-exempt properties hasn’t been changed.
The fixed-coupon debt is calculated by discounting the combined totalof 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 21 “Derivative transactions”). The fair value of these items is calculated by discounting the combined total of interest and principal, withwhich the interest rate swap has been accounted for, at an interest rate
rationally estimated for similar borrowings or bonds.

(5) Deposits received and (6) Guarantee and deposits received
The fair value of these items approximates their carrying amounts because
the market interest rate is reflected in deposits with floating interest rates
within a short time period and the credit standing of the Company is thesame after borrowing.

Derivative transactions:
Please see Note 21 “Derivative transactions.”(Note 2) Financial instruments whose fair value is extremely difficult to estimate
Carrying amountThousands of
U.S. dollars

Millions of yen

Investments in subsidiaries and affiliates*1 ������������������������������������������������������
Unlisted equity securities*1 ����������������������������������������������������������������������������
Senior securities, etc.*1 ����������������������������������������������������������������������������������
Investments in limited partnerships, etc.*1 ��������������������������������������������������������
Guarantee and lease deposits(excluding held-to-maturity securities and available-for-sale securities)*2 ������������
Guarantee and deposits received*3 ������������������������������������������������������������������

2012

2011

2012

¥  5,659
18,953550
96¥  7,414
18,95399,09838,261$   68,903
230,768
6,697
1,169

132,122
165,002

143,927
164,318

1,608,694
2,009,034*1 These items are not included in “Assets (3) Investments in securities” 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 the assessment of their fair value is deemed extremely difficult and their remaining terms cannot be determined.
*3 The fair value of guarantee and deposits received are not disclosed because the assessment of their fair value is deemed extremely difficult and their remaining
terms cannot be determined.

(Note 3) Redemption schedule of pecuniary claims and held-to-maturity securities
For 2012
Millions of yen
1 year or lessCash, time and notice deposits �����������������������������������������������������������
Notes and accounts receivable—trade �������������������������������������������������
Investments in securities
Available-for-sale securities with maturities (Corporate bonds) �����������
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¥146,476
16,620

¥—
438

¥—
—

¥—
—

—

—

700

—

505

775

—

—

—
¥163,601—¥1,213651¥1,351—¥—For 2011
Millions of yen

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

1 year or less

1 to 5 years

5 to 10 years¥119,749
13,612

¥

¥

—
672

Over 10 years

—
—

¥—
—

—

1,100

700

—

10

1,280

—

—

—
¥133,371—¥3,052503¥1,203—¥—

SUMITOMO REALTY & DEVELOPMENT CO., LTD.

43

For 2012
Thousands of U.S. dollars
1 year or lessCash, time and notice deposits �����������������������������������������������������������
Notes and accounts receivable—trade �������������������������������������������������
Investments in securities
Available-for-sale securities with maturities (Corporate bonds) �����������
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$1,783,465
202,362

$—
5,333

$—
—

$—
—

—

—

8,524

—

6,149

9,436

—

—

—
$1,991,976—$14,769

7,926$16,450—$—(Note 4) Repayment schedule of corporate bonds, long-term debt, long-term non-recourse debt and other interest-bearing debt
For 2012
Millions of yen

Short-term debt ������������������������������������
Long-term debt(including due within one year) ������������
Long-term non-recourse debt(including due within one year) ������������
Deposits received ��������������������������������
Guarantee and deposits received ������������
Total ����������������������������������������������������

2013

2014

2015

2016

2017

2018
and thereafter¥169,694

¥—

¥—

¥—

¥—

¥—

307,623

278,092

284,785

372,485

305,962

303,721

137,438
9,000—¥623,755

82,258——¥360,350

73,763——¥358,548

64,769——¥437,254

116,570—
66,000¥488,532

56,955——¥360,676

2016

2017
and thereafter

For 2011
Millions of yen
2012

Short-term debt ������������������������������������
Long-term debt(including due within one year) ������������
Deposits received ��������������������������������
Total ����������������������������������������������������

2013

2014

¥215,739¥—374,792
67,500¥658,031

306,223—¥306,223

¥

2015

—

277,692—¥277,692¥—

264,548—¥264,548

¥

—

¥

—

352,439—¥352,439

230,166—¥230,166

For 2012
Thousands of U.S. dollars

Short-term debt ������������������������������������
Long-term debt(including due within one year) ������������
Long-term non-recourse debt(including due within one year) ������������
Deposits received ��������������������������������
Guarantee and deposits received ������������
Total ����������������������������������������������������

44

ANNUAL REPORT 2012

2013

2014

2015

2016

2017

2018
and thereafter$2,066,163

$—

$—

$—

$—

$—

3,745,562

3,385,998

3,467,491

4,535,310

3,725,338

3,698,051

1,673,420
109,583—$7,594,728

1,001,559——$4,387,557

898,125——$4,365,616

788,616——$5,323,926

1,419,335—
803,604$5,948,277

693,473——$4,391,524

8. Securities
For 2012
A. The following tables summarize the acquisition costs, carrying amounts and fair values of securities with available fair values as of March 31, 2012:(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 ������������������������������������������������

Fair value

Thousands of U.S. dollars
Difference

Carrying amount

Fair value

Difference¥1,269¥1,277¥8$15,451$15,549$98—¥1,269—¥1,277—¥8—$15,451—$15,549—$98

Carrying amount

Acquisition cost

¥ 66,867
583
249
67,69966,380795
1,261
68,436¥136,135(b) Available-for-sale securities:
Millions of yen

Securities whose carrying amountexceeds acquisition cost:
Equity securities ��������������������������
Debt securities*1 ��������������������������
Other ������������������������������������������
Subtotal ��������������������������������������
Securities whose carrying amount
does not exceed acquisition cost:
Equity securities ��������������������������
Debt securities*2 ��������������������������
Other ������������������������������������������
Subtotal ��������������������������������������
Total ������������������������������������������������

Thousands of U.S. dollars
Difference

Carrying amount

Acquisition cost

Difference¥ 45,039
556
247
45,842¥ 21,82827
221,857$  814,160
7,099
3,032
824,291$  548,387
6,770
3,007
558,164$ 265,773
329
25
266,127

91,028795
1,436
93,259¥139,101(24,648)—(175)(24,823)¥ (2,966)

808,231
9,680
15,354
833,265$1,657,556

1,108,340
9,680
17,485
1,135,505$1,693,669(300,109)—(2,131)(302,240)$ (36,113)*1 Debt securities in securities whose carrying amount exceeds acquisition cost are included in “Guarantee and lease deposits paid to lessors” on the consolidatedbalance sheets.
*2 ¥95 million ($1,157 thousand) of debt securities in securities whose carrying amount does not exceed acquisition cost is included in “Guarantee and lease­deposits paid to lessors” on the consolidated balance sheets.
(Note) The Company recognized ¥3,740 million ($45,538 thousand) of impairment loss on investments in securities (¥3,740 million ($45,538 thousand) on equity
securities in available-for-sale securities).

B. Total sales of available-for-sale securities sold in the year ended March 31, 2012 amounted to ¥8 million ($97 thousand).
C. The Company lent the equity securities temporarily to a financial institution under a securities lending agreement. Lent securities, included in investments
in securities and other, were ¥89,061 million ($1,084,391 thousand) as of March 31, 2012.

SUMITOMO REALTY & DEVELOPMENT CO., LTD.

45

For 2011
A. The following tables summarize the acquisition costs, carrying amounts and fair values of securities with available fair values as of March 31, 2011:(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 �����������������������������������������������������������������������������������������������������������������������

Fair value

Difference¥1,078¥1,089¥11

192¥1,270192¥1,281—¥11

Carrying amount

Acquisition cost

¥ 49,095
1,539
50,634¥ 31,559
1,508
33,067¥ 17,536
31
17,567

71,33992
2,299
73,730¥124,364

99,958
95
2,483
102,536¥135,603(28,619)(3)(184)(28,806)¥(11,239)(b) Available-for-sale securities:
Millions of yen

Securities whose carrying amount exceeds acquisition cost:
Equity securities �������������������������������������������������������������������������������������������������
Debt securities*1 �������������������������������������������������������������������������������������������������
Subtotal �������������������������������������������������������������������������������������������������������������
Securities whose carrying amount does not exceed acquisition cost:
Equity securities �������������������������������������������������������������������������������������������������
Debt securities*2 �������������������������������������������������������������������������������������������������
Other �����������������������������������������������������������������������������������������������������������������
Subtotal �������������������������������������������������������������������������������������������������������������
Total �����������������������������������������������������������������������������������������������������������������������

Difference*1 ¥418 million of debt securities in securities whose carrying amount exceeds acquisition cost is included in “Guarantee and lease deposits paid to lessors” on the
consolidated balance sheets.
*2 ¥92 million of debt securities in securities whose carrying amount does not exceed acquisition cost is included in “Guarantee and lease deposits paid to lessors”
on the consolidated balance sheets.
(Note) The Company recognized ¥6,710 million of impairment loss on investments in securities (¥5,422 million on equity securities in available-for-sale securities).

B. Total sales of available-for-sale securities sold in the year ended March 31, 2011 amounted to ¥285 million, and the related gains and losses amounted to¥4 million and ¥33 million, respectively.
C. The Company lent the equity securities temporarily to a financial institution under a securities lending agreement. Lent securities, included in investments
in securities and other, were ¥81,281 million as of March 31, 2011.

9. Short-term debt and long-term debt
Short-term debt at March 31, 2012 and 2011 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2012

Loans, principally from banks �����������������������������
Commercial paper ���������������������������������������������
Total �����������������������������������������������������������������

¥149,700
19,994¥169,694

Averageinterest rate (%)

0.64
0.11

2011

¥185,750
29,989¥215,739

Averageinterest rate (%)

0.72
0.18

2012

$1,822,720
243,443$2,066,163

The interest rates represent weighted-average rates in effect at March 31, 2012 and 2011, regardless of borrowing currencies, though the range of theinterest rate varies by borrowing currency.

46

ANNUAL REPORT 2012

Long-term debt at March 31, 2012 and 2011 consisted of the following:Thousands of
U.S. dollars

Millions of yen

1.29% domestic straight bonds, due 2012 ������������������������������������������������������
1.28% domestic straight bonds, due 2012 ������������������������������������������������������
1.85% domestic straight bonds, due 2011 ������������������������������������������������������
1.86% domestic straight bonds, due 2011 ������������������������������������������������������
1.84% domestic straight bonds, due 2011 ������������������������������������������������������
1.87% domestic straight bonds, due 2012 ������������������������������������������������������
1.58% domestic straight bonds, due 2011 ������������������������������������������������������
1.89% domestic straight bonds, due 2013 ������������������������������������������������������
1.70% domestic straight bonds, due 2013 ������������������������������������������������������
1.80% domestic straight bonds, due 2012 ������������������������������������������������������
1.76% domestic straight bonds, due 2012 ������������������������������������������������������
1.68% domestic straight bonds, due 2013 ������������������������������������������������������
1.63% domestic straight bonds, due 2013 ������������������������������������������������������
2.50% domestic straight bonds, due 2019 ������������������������������������������������������
1.81% domestic straight bonds, due 2014 ������������������������������������������������������
1.87% domestic straight bonds, due 2014 ������������������������������������������������������
1.48% domestic straight bonds, due 2014 ������������������������������������������������������
1.28% domestic straight bonds, due 2015 ������������������������������������������������������
1.17% domestic straight bonds, due 2015 ������������������������������������������������������
0.96% domestic straight bonds, due 2015 ������������������������������������������������������
0.94% domestic straight bonds, due 2015 ������������������������������������������������������
0.80% domestic straight bonds, due 2015 ������������������������������������������������������
0.74% domestic straight bonds, due 2016 ������������������������������������������������������
0.68% domestic straight bonds, due 2016 ������������������������������������������������������
0.75% domestic straight bonds, due 2017 ������������������������������������������������������
Loans, principally from banks and insurance companies, interest at weighted
average rates of 0.91% in 2012, and 1.02% in 2011, respectively:
Secured ������������������������������������������������������������������������������������������������������
Unsecured* ������������������������������������������������������������������������������������������������
Subtotal ��������������������������������������������������������������������������������������������������������
Amount due within one year ����������������������������������������������������������������������������
Total ��������������������������������������������������������������������������������������������������������������

2012

2011

2012

¥—
30,000———20,000—10,00020,00020,00020,00020,00020,00010,00020,00010,00010,00010,00030,00030,00010,00020,00010,00010,00010,000¥   20,000
30,00020,00020,00020,00020,00010,00010,00020,00020,00020,00020,00020,00010,00020,00010,00010,00010,00030,00030,00010,00020,000———$—
365,276———
243,516—
121,758
243,516
243,516
243,516
243,516
243,516
121,758
243,516
121,758
121,758
121,758
365,276
365,276
121,758
243,516
121,758
121,758
121,758

20,5001,492,168
1,852,668(307,623)¥1,545,045

22,2501,383,610
1,805,860(374,792)¥1,431,068

249,604
18,168,368
22,557,750(3,745,562)$18,812,188* Unsecured long-term debt as of March 31, 2012 and 2011 includes a perpetual subordinated loan of ¥120,000 million ($1,461,098 thousand) and ¥120,000
million, respectively.

Non-recourse debt at March 31, 2012 consisted of the following:
Millions of yen

Thousands of
U.S. dollars

2012

2012

Non-recourse bonds, with interest at weighted average rate of 0.87%
Due within one year �����������������������������������������������������������������������������������������������������������
Due after one year �������������������������������������������������������������������������������������������������������������
Subtotal ���������������������������������������������������������������������������������������������������������������������������
Non-recourse loans, with interest at weighted average rate of 1.12%
Due within one year �����������������������������������������������������������������������������������������������������������
Due after one year �������������������������������������������������������������������������������������������������������������
Subtotal ���������������������������������������������������������������������������������������������������������������������������
Total �������������������������������������������������������������������������������������������������������������������������������������

¥ 89,828
48,520138,348$1,093,729
590,771
1,684,500

47,610345,795
393,405¥531,753

579,691
4,210,337
4,790,028$6,474,528

Secured �����������������������������������������������������������������������������������������������������������������������������
Unsecured �������������������������������������������������������������������������������������������������������������������������
Total �������������������������������������������������������������������������������������������������������������������������������������

¥428,073
103,680¥531,753$5,212,139
1,262,389$6,474,528

SUMITOMO REALTY & DEVELOPMENT CO., LTD.

47

The aggregate annual maturities of long-term debt at March 31, 2012 are as follows:Year ending March 31

Millions of yen

Thousands of
U.S. dollars

2013 �����������������������������������������������������������������������������������������������������������������������������������
2014 �����������������������������������������������������������������������������������������������������������������������������������
2015 �����������������������������������������������������������������������������������������������������������������������������������
2016 �����������������������������������������������������������������������������������������������������������������������������������
2017 �����������������������������������������������������������������������������������������������������������������������������������
2018 and thereafter �������������������������������������������������������������������������������������������������������������
Total �������������������������������������������������������������������������������������������������������������������������������������

¥  307,623
278,092
284,785
372,485
305,962
303,721¥1,852,668$ 3,745,562
3,385,998
3,467,491
4,535,310
3,725,338
3,698,051$22,557,750

Year ending March 31

Millions of yen

Thousands of
U.S. dollars

2013 �����������������������������������������������������������������������������������������������������������������������������������
2014 �����������������������������������������������������������������������������������������������������������������������������������
2015 �����������������������������������������������������������������������������������������������������������������������������������
2016 �����������������������������������������������������������������������������������������������������������������������������������
2017 �����������������������������������������������������������������������������������������������������������������������������������
2018 and thereafter �������������������������������������������������������������������������������������������������������������
Total �������������������������������������������������������������������������������������������������������������������������������������

¥137,438
82,25873,76364,769116,570
56,955¥531,753$1,673,420
1,001,559
898,125
788,616
1,419,335
693,473$6,474,528

The aggregate annual maturities of non-recourse debt at March 31, 2012 are as follows:

It is customary in Japan that security must be given if requested by lending banks under certain circumstances, and generally banks have the right to offset
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 has never received such a request.

10. Employees’ severance and retirement benefits
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.
The allowance for severance and retirement benefits included in the liabilities section of the consolidated balance sheets as of March 31, 2012 and 2011
consisted of the following:Thousands of
U.S. dollars

Millions of yen

Projected benefit obligation ����������������������������������������������������������������������������
Fair value of plan assets ����������������������������������������������������������������������������������
Unrecognized actuarial differences ������������������������������������������������������������������
Allowance for employees’ severance and retirement benefits ������������������������������

2012

2011

2012

¥ 8,519(3,024)(393)¥ 5,102¥ 8,019(2,909)(228)¥ 4,882$103,726(36,820)(4,785)$ 62,121

Included in the consolidated statements of income for the years ended March 31, 2012, 2011 and 2010 are severance and retirement benefit expenses
comprised of the following:Thousands of
U.S. dollars

Millions of yen

2012

Service costs—benefits earned during the year ����������������������������
Interest cost on projected benefit obligation ��������������������������������
Expected return on plan assets ��������������������������������������������������
Amortization of actuarial differences ������������������������������������������
Other ��������������������������������������������������������������������������������������
Severance and retirement benefit expenses ��������������������������������
Other of ¥311 million ($3,786 thousand) for the year ended March 31,
2012, ¥309 million for the year ended March 31, 2011 and ¥320 million
for the year ended March 31, 2010 is the amount paid for a defined contribution plan that one of the Company’s consolidated subsidiaries adopted in
September 2008.

48

ANNUAL REPORT 2012¥  492
152
(58)
228
311
¥1,125

2011

¥ 514
146
(57)
(163)
309
¥ 749

2010

2012

¥  517
147
(51)
174
320
¥1,107$ 5,991
1,851
(706)
2,776
3,786
$13,698

The discount rate and the rate of expected return on plan assets for theyears ended March 31, 2012, 2011 and 2010 used by the Company isprimarily 2.0%, and the discount rate used by one of its consolidated
subsidiaries is 1.0% for the year ended March 31, 2012. The estimatedamount of all retirement benefits to be paid at future retirement dates isallocated equally to each service year using the estimated number of total
service years.

11. 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, 2012, 2011 and2010, respectively.
For 2012
Use

Land for development

Location

Number of properties

Setagaya-ku, Tokyo, etc.

3

For 2011
Use

Land for development
Ancillary facility

Location

Number of properties

Katsushika-ku, Tokyo
Minami-Uonuma-shi, Niigata

1
1

Location

Number of properties

Taito-ku, Tokyo, etc.
Minami-Uonuma-shi, Niigata
Fujisawa-shi, Kanagawa
Setagaya-ku, Tokyo, etc.

7
1
1
3

For 2010
Use

Land for development
Rights to use ancillary facilities
Idle asset
Assets leased to others

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 treated as common assets.
As a result of transferring inventories from property and equipment, the carrying values of the land holdings summarized above have been reduced to theirrecoverable amounts by ¥5,618 million ($68,404 thousand), ¥7,602 million and ¥7,826 million for the years ended March 31, 2012, 2011 and 2010,
respectively. These write-downs were recognized as impairment losses in other expenses.
Details of loss on impairment of fixed assets are as follows:
Thousands of
U.S. dollars

Millions of yen

Land ��������������������������������������������������������������������������������������
Intangible assets ����������������������������������������������������������������������
Buildings, structures and others ������������������������������������������������
Total ����������������������������������������������������������������������������������������

2012

2011

2010

2012

¥5,618——¥5,618¥7,602——¥7,602¥7,304489
33¥7,826$68,404——$68,404

The recoverable amounts of these assets were determined as the net disposal value. The net disposal value for land for leased buildings and lands fordevelopment are based on the income approach, and that for the others is based mainly on the sales comparison approach.

12. Allowance for loss on disaster

16. Asset retirement obligations

Allowance for loss on disaster of ¥1,930 million for the year ended March
31, 2011 is to prepare for expenditure to restore any fixed assets or­inventories damaged by the Great East Japan Earthquake.

Even though removing asbestos is required for some buildings the Company
and its consolidated subsidiaries (“the Group”) operate at the time ofdemolishing, it is difficult to estimate the fair value of obligations associatedwith 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, 2012 and 2011, asset retirement obligations related tosuch a case are not recorded (except for the asset retirement obligations
recorded on the financial statements).
In addition, under the partial lease contracts, the Group has obligations
for restoring office spaces when tenants 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, 2012 and 2011, asset retirement
obligations related to such a case are not recorded (except for the asset
retirement obligations recorded on the financial statements).

13. Gain on adjustment of accrued rent payable
Gain on adjustment of accrued rent payable of ¥645 million for the year
ended March 31, 2010 is incurred for the holding property of a consolidated subsidiary in the United States because the subsidiary purchased theleased land from the lessor, and as a result, the subsidiary is no longer
required to make rent payments.

14. Gain on prior periods adjustment
Gain on prior periods adjustment of ¥413 million for the year ended March
31, 2011 is due to the adjustment of useful life of depreciable assets.

15. Loss on devaluation of inventories
The ending inventory at March 31, 2010 represents the amount after
recognition of decline in profitability, and the loss on devaluation of inventories of ¥13,145 million for the year ended March 31, 2010 is included incost of revenue from operations.

SUMITOMO REALTY & DEVELOPMENT CO., LTD.

49

17. Income taxes
The normal effective statutory income tax rate in Japan arising out of the aggregation of corporate, enterprise and inhabitants’ taxes was approximately 40.69%
for the years ended March 31, 2012, 2011 and 2010.
Details of deferred tax assets and liabilities at March 31, 2012 and 2011 are as follows:
Thousands of
U.S. dollars

Millions of yen

2012

2011

2012

Deferred tax assets:
Depreciation and amortization of consolidated adjustment ������������������������������
Loss on impairment of fixed assets ����������������������������������������������������������������Net operating loss carryforwards ������������������������������������������������������������������
Loss on devaluation of real estate for sale ������������������������������������������������������
Accrued enterprise tax and business office tax ����������������������������������������������
Allowance for employees’ severance and retirement benefits ����������������������������
Accrued bonuses ����������������������������������������������������������������������������������������
Elimination of unrealized profit ��������������������������������������������������������������������
Allowance for doubtful accounts ������������������������������������������������������������������
Loss on devaluation of investments in securities ��������������������������������������������
Net unrealized holding losses on securities ����������������������������������������������������
Net deferred losses on hedges ����������������������������������������������������������������������
Other ��������������������������������������������������������������������������������������������������������
Subtotal of deferred tax assets ����������������������������������������������������������������������
Valuation allowance ������������������������������������������������������������������������������������
Total deferred tax assets ������������������������������������������������������������������������������

¥11,967
5,242
4,002
2,934
2,140
1,823
1,324
1,223
1,171
1,151
1,113
591
5,569
40,250(6,393)33,857

¥—
5,679
3,237
4,108
1,803
1,984
1,431
1,204
1,083
1,225
4,605
1,229
8,394
35,982(6,088)29,894$145,708
63,826
48,72835,724
26,05622,197
16,121
14,891
14,25814,014
13,552
7,196
67,806490,077(77,840)
412,237

Deferred tax liabilities:
Retained earnings appropriated for tax allowable reserves ��������������������������������
Other ��������������������������������������������������������������������������������������������������������
Total deferred tax liabilities ��������������������������������������������������������������������������
Net deferred tax assets ������������������������������������������������������������������������������������

(4,343)(361)(4,704)¥29,153(4,959)(507)(5,466)¥24,428(52,880)(4,395)(57,275)$354,962“Amendment to income tax law, etc. in response to the changing
economic structure” and “Special measures to secure the financial
resources to implement the restoration from the Great East Japan Earthquake” were enacted into law on December 2, 2011 and became effectivefrom April 1, 2012, the Company and its consolidated subsidiaries will be

subject to the new corporate tax rate based on these laws. As a result, netdeferred tax assets decreased by ¥3,354 million ($40,838 thousand) anddeferred income taxes increased by ¥3,161 million ($38,488 thousand) for
the year ended March 31, 2012.

The differences between the statutory tax rate and the Company’s ­effective tax rate for the year ended March 31, 2012 are as follows:Year ending March 31

2012

Statutory tax rate ������������������������������������������������������������������������������������������������������������������������������������������������
Adjustment:
Dividends and other income not taxable permanently ������������������������������������������������������������������������������������������
Inhabitant tax on per capita basis ��������������������������������������������������������������������������������������������������������������������
Elimination of dividend income ������������������������������������������������������������������������������������������������������������������������
Adjustment of deferred income taxes ����������������������������������������������������������������������������������������������������������������
Other ������������������������������������������������������������������������������������������������������������������������������������������������������������
Effective tax rate ������������������������������������������������������������������������������������������������������������������������������������������������

40.69 %
(1.33)
0.28
0.84
3.25
(0.67)
43.06 %The differences between the statutory tax rate and the Company’s effective tax rate for the years ended March 31, 2011 and 2010 were insignificant andnot presented.

50

ANNUAL REPORT 2012

18. Deposits received and accounts payable with interest rate
Guarantee and deposits received at March 31, 2012 and 2011 are as follows:
Thousands of
U.S. dollars

Millions of yen

2012

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 �����������������������������������������������������������������

Averageinterest rate (%)

Averageinterest rate (%)

2011

2012

¥112,814
9,000
121,814—0.36¥102,219
67,500169,719—0.51$1,373,602
109,583
1,483,185

165,002———164,318———

2,009,034—

195,783
66,000426,785¥548,599——

167,986—
332,304¥502,023——

2,383,819
803,604
5,196,457$6,679,642

Accounts payable with interest rate at March 31, 2012 are as follows:
Thousands of
U.S. dollars

Millions of yen
Averageinterest rate (%)

2012

Due within one year ����������������������������������������������������������������������������������������
Due after one year ������������������������������������������������������������������������������������������
Total ��������������������������������������������������������������������������������������������������������������

¥ 3,277
20,528¥23,805

1.53
1.53

2012

$ 39,900
249,945$289,845(Note) Accounts payable due within one year is included in “Other current liabilities,” and accounts payable due after one year is included in “Other long-term liabilities” on the consolidated balance sheets.

The aggregate annual maturities of deposits received at March 31, 2012 are as follows:Year ending March 31

Millions of yen

2013 �����������������������������������������������������������������������������������������������������������������������������������
2014 �����������������������������������������������������������������������������������������������������������������������������������
2015 �����������������������������������������������������������������������������������������������������������������������������������
2016 �����������������������������������������������������������������������������������������������������������������������������������
2017 �����������������������������������������������������������������������������������������������������������������������������������
2018 and thereafter �������������������������������������������������������������������������������������������������������������
Total �������������������������������������������������������������������������������������������������������������������������������������

¥ 9,000———
66,000—¥75,000

Thousands of
U.S. dollars$109,582———
803,604—$913,186

The aggregate annual maturities of accounts payable at March 31, 2012 are as follows:Year ending March 31

Millions of yen

2013 �����������������������������������������������������������������������������������������������������������������������������������
2014 �����������������������������������������������������������������������������������������������������������������������������������
2015 �����������������������������������������������������������������������������������������������������������������������������������
2016 �����������������������������������������������������������������������������������������������������������������������������������
2017 �����������������������������������������������������������������������������������������������������������������������������������
2018 and thereafter �������������������������������������������������������������������������������������������������������������
Total �������������������������������������������������������������������������������������������������������������������������������������

¥ 3,277
3,277
3,277
3,277
3,277
7,420
¥23,805

Thousands of
U.S. dollars$ 39,900
39,90039,90039,90039,90090,345$289,845

SUMITOMO REALTY & DEVELOPMENT CO., LTD.

51

19. 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 new sharesas 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 inretained 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 a resolution 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 capital and all legal
earnings reserve may be transferred to other capital surplus and retained
earnings, respectively, which are potentially available 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.

20. Information for certain lease transactions
Future lease payments and receipts under such non-cancelable operating leases at March 31, 2012, 2011 and 2010 are as follows:
Thousands of
U.S. dollars

Millions of yen

2012

2011

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

2012¥  2,056
15,448¥ 17,504¥  2,374
13,870¥ 16,244¥ 4,348
21,609¥25,957$   25,033
188,093$  213,126

Future lease receipts:
Due within one year ������������������������������������������������������������
Due after one year ��������������������������������������������������������������
Total ������������������������������������������������������������������������������������

¥ 57,989
94,602¥152,591¥ 48,884
53,597¥102,481¥28,331
29,941¥58,272$  706,064
1,151,856$1,857,920

2010

21. Derivative transactions
Hedge accounting was applied for all derivative transactions for the years ended March 31, 2012 and 2011.
The summary of these transactions is as follows:
For 2012(1) Foreign currency-related derivatives
Millions of yen
Hedging accounting

Deferred hedge
accounting

Types of derivative transactions

Foreign exchange forward contracts
Receipts in U.S. dollars / Payments in yen
Cross currency swap contracts
Receipts in U.S. dollars / Payments in yen

Hedged items

Foreign currency-­
denominatedtransactions

Total

Contract amounts

Contract amounts
due after one year

¥1,620

¥—

¥ (5)

7,794
¥9,414

—
¥—

(28)
¥(33)

Fair value

Thousands of U.S. dollars
Hedging accounting

Deferred hedge
accounting

Types of derivative transactions

Foreign exchange forward contracts
Receipts in U.S. dollars / Payments in yen
Cross currency swap contracts
Receipts in U.S. dollars / Payments in yen

Hedged items

Foreign currency-­
denominatedtransactions

Total(Note) Fair value is determined based on the quoted price obtained from relevant financial institutions.

52

ANNUAL REPORT 2012

Contract amounts

Contract amounts
due after one year

$ 19,725$—$ (61)

94,898$114,623

—
$—

(341)
$(402)

Fair value(2) Interest-related derivatives
Millions of yen
Hedging accounting

Types of derivative transactions

Hedged items

Interest rate swap contracts
Bank loans
Fixed rate payments / Floating rate receipts and bonds
Exceptional ­accounting Interest rate swap contracts
Bank loansfor ­interest rate swaps
Fixed rate payments / Floating rate receipts and bonds
Exceptional ­accounting Interest rate swap contracts
Foreign currencyfor ­interest rate andFixed rate payments / Floating rate receipts denominatedcurrency swaps
loans
Receipts in U.S. dollars / Payments in yen
Deferred hedge
accounting

Contract amounts

Contract amounts
due after one year

¥375,424¥180,000¥(1,537)

866,040

711,186

—(*)

4,000

4,000

—(*)

Fair value

Thousands of U.S. dollars
Hedging accounting

Types of derivative transactions

Hedged items

Interest rate swap contracts
Bank loans
Fixed rate payments / Floating rate receipts and bonds
Exceptional ­accounting Interest rate swap contracts
Bank loansfor ­interest rate swaps
Fixed rate payments / Floating rate receipts and bonds
Exceptional ­accounting Interest rate swap contracts
Foreign currencyfor ­interest rate andFixed rate payments / Floating rate receipts denominatedcurrency swaps
loans
Receipts in U.S. dollars / Payments in yen
Deferred hedge
accounting

Contract amounts

Contract amounts
due after one year

Fair value$ 4,571,095$2,191,647$(18,714)

10,544,746

8,659,272—(*)

48,70348,703—(*)(Note) Fair value is determined based on the quoted price obtained from relevant financial institutions.
(*) Interest rate swap contracts and cross currency 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 of 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 included in the fair value of the long-term debt.

For 2011(1) Foreign currency-related derivatives
Millions of yen
Hedging accounting

Deferred hedge
accounting

Types of derivative transactions

Foreign exchange forward contracts
Receipts in U.S. dollars / Payments in yen
Cross currency swap contracts
Receipts in U.S. dollars / Payments in yen

Hedged items

Foreign currency-­
denominatedtransactions

Total

Contract amounts

Contract amounts
due after one year

¥1,219¥—¥ (38)

8,310¥9,529—¥—(251)¥(289)

Fair value(Note) Fair value is determined based on the quoted price obtained from relevant financial institutions.

(2) Interest-related derivatives
Millions of yen
Hedging accounting

Types of derivative transactions

Hedged items

Interest rate swap contracts
Bank loans and
Fixed rate payments / Floating rate receipts deposits
Exceptional ­accounting Interest rate swap contracts
Bank loansfor ­interest rate swaps
Fixed rate payments / Floating rate receipts
Deferred hedge
accounting

Contract amounts

Contract amounts
due after one year

¥245,000¥135,000¥(3,020)570,645

391,665—(*)

Fair value(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 of income of the long-term debt as hedged items. Thus, the fair value of suchinterest rate swap contracts is included in the fair value of the long-term debt.

SUMITOMO REALTY & DEVELOPMENT CO., LTD.

53

22. Segment information
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 business including fitness business, restaurant
business and finance business.

Effective from the year ended March 31, 2011, the Company and its
consolidated subsidiaries adopted the new accounting standard, “AccountingStandard for Disclosures about Segments of an Enterprise and RelatedInformation” (Statement No. 17 issued by the Accounting Standards Boardof Japan on March 27, 2009), and “Guidance on Accounting Standard forDisclosures about Segments of an Enterprise and Related Information”(Guidance No. 20 issued by the Accounting Standards Board of Japan on
March 21, 2008).

Information by business segment for the years ended March 31, 2012, 2011 and 2010 is summarized as follows:
Millions of yen
Reportable segments
Leasingbusiness

Salesbusiness

Construction
business

Brokeragebusiness

Otherbusiness

Total

Adjustments

Consolidated
financialstatements
amounts

Revenue from operations:Customers �����������������������������������������
Intersegment �������������������������������������
Total �������������������������������������������������

¥  269,225
2,587¥  271,812¥198,070
84¥198,154¥163,246
2,749¥165,995¥48,882515¥49,397¥ 9,239
4,932¥14,171¥  688,662
10,867¥  699,529¥—(10,867)¥(10,867)¥  688,662—¥  688,662

Segment profit �������������������������������������

¥   89,636¥ 37,892¥ 16,476¥14,540¥ 1,757¥  160,301¥(12,836)¥  147,465

Segment assets �������������������������������������

¥2,840,515¥678,886¥ 13,824¥12,809¥39,236¥3,585,270¥274,428¥3,859,698¥   33,990—¥    2275,618¥    448—¥   215—¥   104—¥   34,984
5,618¥  1,065—¥   36,049
5,618

113,185

1,499

641

125

215

115,665299

115,964

For 2012

Other:
Depreciation and amortization �������������
Loss on impairment of fixed assets �������
Increase in property and equipment,
and intangible assets �����������������������

Millions of yen
Reportable segments
Leasingbusiness

Salesbusiness

Construction
business

Brokeragebusiness

Otherbusiness

Total

Adjustments

Consolidated
financialstatements
amounts

Revenue from operations:Customers �����������������������������������������
Intersegment �������������������������������������
Total �������������������������������������������������

¥  290,536
2,339¥  292,875¥239,620
89¥239,709¥160,771
2,153¥162,924¥45,840590¥46,430¥ 7,989
4,857¥12,846¥  744,756
10,028¥  754,784¥—(10,028)¥(10,028)¥  744,756—¥  744,756

Segment profit �������������������������������������

¥    88,241¥ 33,418¥ 16,698¥12,203¥   520¥  151,080¥(12,617)¥  138,463

Segment assets �������������������������������������

¥2,170,939¥721,957¥ 13,626¥12,959¥41,859¥2,961,340¥272,863¥3,234,203¥    22,017—¥    161
7,602¥    355—¥   242—¥    92—¥    22,867
7,602¥    838—¥    23,705
7,602

121,507

148

215

203

66

122,139315

122,454

For 2011

Other:
Depreciation and amortization �������������
Loss on impairment of fixed assets �������
Increase in property and equipment,
and intangible assets �����������������������

Millions of yen
Salesbusiness

Construction
business

Brokeragebusiness

Otherbusiness

Total

I Revenue form operations andoperating income:Revenue from operations
Customers �������������������������������������
Intersegment ���������������������������������
Total ���������������������������������������������

¥  291,420
2,113
293,533¥219,662—
219,662¥156,231
1,983
158,214¥44,121500
44,621¥ 8,202
4,539
12,741¥  719,636
9,135
728,771¥

—(9,135)(9,135)¥  719,636—
719,636

Costs and expenses ���������������������������
Operating income �������������������������������

195,915¥    97,618

200,070¥ 19,592

141,133¥ 17,081

33,866¥10,755

11,879¥   862

582,863¥  145,908

2,794¥(11,929)

585,657¥  133,979

II Identifiable assets, depreciation
expenses, loss on impairment of fixed
assets and capital expenditures:
Identifiable assets �����������������������������
Depreciation expenses �����������������������
Loss on impairment of fixed assets �������
Capital expenditures ���������������������������

¥2,088,000
16,726
5,912
105,995¥712,844
82
1,865
13,039¥ 11,233
312
49
216

¥13,738258—
83¥46,62782—
142¥2,872,442
17,4607,826
119,475¥295,656
605—
498¥3,168,098
18,065
7,826
119,973

For 2010

54

Elimination
and/or corporate

Leasingbusiness

ANNUAL REPORT 2012

Consolidated

Thousands of U.S. dollars
Reportable segments

Consolidated
financialstatements
amounts

Leasingbusiness

Salesbusiness

Construction
business

Brokeragebusiness

Otherbusiness

Revenue from operations:Customers �����������������������������������������
Intersegment �������������������������������������
Total �������������������������������������������������

$ 3,278,035
31,499$ 3,309,534$2,411,664
1,023$2,412,687$1,987,654
33,471$2,021,125$595,178
6,271$601,449$112,493
60,051$172,544$ 8,385,024 $— $ 8,385,024
132,315(132,315)—$ 8,517,339 $(132,315) $ 8,385,024

Segment profit �������������������������������������

$ 1,091,392$  461,366$  200,609$177,036$ 21,393$ 1,951,796 $(156,289) $ 1,795,507

Segment assets �������������������������������������

$34,585,596$8,265,993$  168,319$155,960$477,730$43,653,598 $3,341,386$46,994,984$   413,856—$    2,764
68,404$    5,455—$  2,618—$  1,266—$   425,959 $   12,967
68,404—$   438,926
68,404

1,378,120

18,252

7,805

1,522

2,617

For 2012

Other:
Depreciation and amortization �������������
Loss on impairment of fixed assets �������
Increase in property and equipment,
and intangible assets �����������������������

Distributions from SPEs and partnerships that operate real estate leasing
business are included in revenue from operations of the “Leasing business.”
Intercompany eliminations between the Company and its consolidated
subsidiaries and undistributed corporate expenses to each segment areincluded in adjustments of segment profit, and the Company classified
expenses of the general administrative division in the Company and certainof its consolidated subsidiaries to corporate expenses for the years ended
March 31, 2012 and 2011.

Adjustments

Total

1,408,316

3,641

1,411,957

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 general administrative division in the Company and certain of its consolidated subsidiaries tocorporate assets for the years ended March 31, 2012 and 2011.
For the year ended March 31, 2010, the Company classified expenses
and assets of the general administrative division in the Company and certain of its consolidated subsidiaries to unclassifiable operating expenses
and corporate assets in elimination and/or corporate.

23. Comprehensive Income
Amounts reclassified to net income in the current period that were recognized in other comprehensive income in the current or previous period and tax effects
for each component of other comprehensive income (loss) are as follows:

Unrealized holding gains on securities:
Increase during the fiscal year ���������������������������������������������������������������������������������������������
Reclassification adjustments �����������������������������������������������������������������������������������������������
Amounts before tax effect �����������������������������������������������������������������������������������������������Tax (expense) or benefit ���������������������������������������������������������������������������������������������������
Net unrealized holding gains on securities �������������������������������������������������������������������������
Deferred gains on hedges:
Decrease during the fiscal year �������������������������������������������������������������������������������������������
Reclassification adjustments �����������������������������������������������������������������������������������������������
Amounts before tax effect �����������������������������������������������������������������������������������������������Tax (expense) or benefit ���������������������������������������������������������������������������������������������������
Net deferred gains on hedges �������������������������������������������������������������������������������������������
Foreign currency transaction adjustments:
Decrease during the fiscal year �������������������������������������������������������������������������������������������Tax (expense) or benefit ���������������������������������������������������������������������������������������������������
Foreign currency transaction adjustments �������������������������������������������������������������������������
Total other comprehensive income �������������������������������������������������������������������������������������������

Millions of yen

Thousands of
U.S. dollars

2012

2012

¥ 4,479
3,814
8,293(3,513)
4,780$ 54,535
46,439100,974(42,774)
58,200

(293)
2,379
2,086
(874)
1,212

(3,568)28,96725,399(10,642)
14,757(1,067)—(1,067)¥ 4,925(12,992)—(12,992)$ 59,965

SUMITOMO REALTY & DEVELOPMENT CO., LTD.

55

24. Investment and rental properties
The Company and certain of its 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 certain of its
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 current fiscal year and their fair values at March 31,
2012 and 2011 are as follows:
Thousands of
U.S. dollars

Millions of yen

Investment andrental properties
A portion used as
investment andrental 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 ������������������������������������������

2012

2011

2012

¥1,903,295
540,7212,444,016
3,387,741¥   69,068
152,670
221,738
253,995¥1,833,481
69,814
1,903,295
2,426,030¥    65,066
4,002
69,06892,139$23,174,175
6,583,721
29,757,896
41,248,521$   840,959
1,858,882
2,699,842
3,092,597(Notes)* Carrying amounts on the consolidated balance sheets are the amounts determined by deducting accumulated depreciation from the acquisition costs.
* Fair values as of March 31, 2012 and 2011 are determined by the Company primarily based on their fair values according to the “Real Estate Appraisal Standards.”

Significant changes during the years ended March 31, 2012 and 2011 shown above are as follows:
Thousands of
U.S. dollars

Millions of yen

Increase:
Newly consolidated subsidiaries ��������������������������������������������������������������������
Acquired real estate ������������������������������������������������������������������������������������
Decrease:
Depreciation and amortization ����������������������������������������������������������������������
Transferred to real estate for sale in process ��������������������������������������������������
Loss on impairment of fixed assets ����������������������������������������������������������������

2012

2011

2012

¥633,985
113,548¥—
120,899$7,719,286
1,382,540¥ (32,456)(13,819)(5,618)¥(20,595)(12,961)(7,602)$ (395,178)(168,258)(68,404)

Income and expenses for investment and rental properties for the years ended March 31, 2012 and 2011 are as follows:
Thousands of
U.S. dollars

Millions of yen

2012

Investment andrental properties
A portion used as
investment andrental properties

Income ������������������������������������������������������������������������
Expenses ����������������������������������������������������������������������
Balance ������������������������������������������������������������������������
Other income (expenses) ������������������������������������������������
Income ������������������������������������������������������������������������
Expenses ����������������������������������������������������������������������
Balance ������������������������������������������������������������������������
Other income (expenses) ������������������������������������������������

¥166,201
86,50179,700(6,040)¥ 18,113
14,704
3,409
(88)

2011

¥138,048
77,60060,448(9,294)¥  8,024
5,935
2,089
(17)

2012

$2,023,633
1,053,220
970,413(73,542)$  220,541
179,034
41,507(1,071)(Notes)* As a portion used as investment and rental properties includes a portion used by the Company or certain of its consolidated subsidiaries for providing services as wellas 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 for a portion used as investment and rental properties is mostly the loss on disposal of property and equipment.

56

ANNUAL REPORT 2012

25. Relationships with Special Purpose Entities subject to disclosure(1) O verview of Special Purpose Entities (“SPEs”) subject to disclosure andoverview of SPEs’ transactions
As part of the real estate operations, the Company invests in SPEs (principally Tokutei Mokuteki Kaisha (“TMKs”) under the Asset Securitization Law).
The SPEs, which conduct real estate development and leasing projects,
are funded by investments from the Company and by borrowings fromfinancial institutions (non-recourse loans and bonds). At the termination ofthese projects, the Company plans to appropriately recover its investments,
and as of March 31, 2011, the Company judged that there is no risk of
future losses. Moreover, in the event that losses do arise in the future, theCompany’s exposure will be limited to the amount of its investment.
The Company does not have any investments with voting rights in any of
the SPEs, and the Company has not dispatched any directors or employees
to any of the SPEs.
Effective from the year ended March 31, 2012, the Company early
adopted the new accounting standard, revised “Accounting Standard forConsolidated Financial Statements” (Statement No. 22 revised by the
Accounting Standards Board of Japan on March 25, 2011), “Guidance on
Disclosures about Certain Special Purpose Entities” (Guidance No. 15
revised by the Accounting Standards Board of Japan on March 25, 2011),“Guidance on Determining a Subsidiary and an Affiliate” (Guidance No. 22
revised by the Accounting Standards Board of Japan on March 25, 2011)and “Practical Solution on Applications of the Control Criteria and Influence
Criteria to Investment Associations” (PIFT No. 20 issued by the AccountingStandards Board of Japan on March 25, 2011).
Accordingly, 23 Special Purpose Entities, including Shiodome Hamarikyu
Special Purpose Company, Ltd., and 1 limited partnership (“Tokumei
Kumiai ”) have been newly included within the scope of consolidation.
As a result of this consolidation, there were no more unconsolidated SPEs asof March 31, 2012 and no transactions with SPEs during the year ended
March 31, 2012.

At March 31, 2011, the Company had outstanding investments in 25 SPEs. Their assets, liabilities and net assets (simple sum) at their settlement dateduring the year ended March 31, 2011 are shown below.
Millions of yen

2011

Assets:Real property ����������������������������������������������������������������������������������������������
Other ��������������������������������������������������������������������������������������������������������
Total ��������������������������������������������������������������������������������������������������������������

¥687,896
44,185¥732,081

Liabilities and net assets:
Borrowings*1 ����������������������������������������������������������������������������������������������
Preferred capital, etc.*2 ������������������������������������������������������������������������������
Other ��������������������������������������������������������������������������������������������������������
Total ��������������������������������������������������������������������������������������������������������������

¥577,815
112,027
42,239¥732,081*1 Includes specified bonds of TMKs invested by the Company.
*2 Consists of preferred capital in TMKs and equity in limited partnerships (“Tokumei Kumiai”) invested by the Company.

In regard to the balance at March 31, 2011, see *3.
The carrying amounts of investment and rental properties held by SPEs on their balance sheets and their fair values at March 31, 2011 are as follows:
For 2011
Millions of yen

Investment and rental properties held by SPEs ����������������������������

Carrying amount

Fair value¥658,967¥1,114,133

SUMITOMO REALTY & DEVELOPMENT CO., LTD.

57

(2) Transactions with the SPEs
Millions of yen

2011

Investments, etc.*3:
Investments:
Marketable securities ������������������������������������������������������������������������������
Investments in securities ��������������������������������������������������������������������������
Investments in SPEs holding properties for sale ������������������������������������������
Total ������������������������������������������������������������������������������������������������������
Revenue from operations ������������������������������������������������������������������������������
Other income ����������������������������������������������������������������������������������������������

¥—72,67964,735
137,414
26,677
35

Real estate leasing*4:
Cost of revenue from operations ��������������������������������������������������������������������

44,396

Management services*5:
Revenue from operations ������������������������������������������������������������������������������

37

Real estate transactions*6:
Transaction payments ����������������������������������������������������������������������������������

18,700*3 Includes investments in preferred stocks and specified bonds issued by TMKs and equity in Tokumei Kumiai invested by the Company. In addition, dividends on
investments are recorded as revenue from operations, and interest on specified bonds is recorded as other income.
*4 The Company leases real estate from SPEs.
*5 The Company provides management services to SPEs.
*6 The Company has purchased real property (land, buildings, etc.) from SPEs.

26. Contingent liabilities
At March 31, 2012, the Company and its consolidated subsidiaries were
contingently liable as guarantors of borrowings by customers in an amountaggregating to ¥39 million ($475 thousand).

At March 31, 2011, the Company and its consolidated subsidiaries
were contingently liable as guarantors of borrowings by customers andothers in an amount aggregating to ¥118 million.

27. Subsequent events
The Company issued ¥10,000 million ($121,758 thousand) in 0.55%
unsecured bonds due 2017 on June 25, 2012, and ¥10,000 ($121,758
thousand) in 0.50% unsecured bonds due 2017 on August 1, 2012.

58

ANNUAL REPORT 2012

On June 28, 2012, the shareholders of the Company approved payments of a year-end cash dividend of ¥10 ($0.12) per share or a total of¥4,742 million ($57,738 thousand) to shareholders of record at March 31,
2012. Such appropriations are recognized in the period in which they areapproved by the shareholders.

Independent Auditor’s Report

To the Board of Directors of
Sumitomo Realty & Development Co., Ltd.:We have audited the accompanying consolidated financial statements of Sumitomo Realty & Development Co., Ltd. and its consolidated
subsidiaries, which comprise the consolidated balance sheets as at March 31, 2012 and 2011, and the consolidated statements of income,statements of comprehensive income, statements of changes in net assets and statements of cash flows for each of the years in the threeyear period ended March 31, 2012, and a summary of significant accounting policies and other explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these 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 preparationof consolidated financial statements that are free from material misstatements, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards require that we comply with ethical requirements and plan andperform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements.
The procedures selected depend on our judgement, including the assessment of the risks of material misstatement of the consolidated
financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s
preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in thecircumstances, while the objective of the financial statement audit is not for the purpose of expressing an opinion on the effectiveness ofthe entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness ofaccounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Sumitomo Realty &Development Co., Ltd. and its consolidated subsidiaries as at March 31, 2012 and 2011, and their financial performance and cash flows
for each of the years in the three-year period ended March 31, 2012, in accordance with accounting principles generally accepted in Japan.
Emphasis of Matter
Without qualifying our opinion, we draw attention to Note 2 to the consolidated financial statements. From the year ended March 31, 2012,
the Company early adopted the new accounting standard, revised “Accounting Standard for Consolidated Financial Statements” (Statement
No. 22 revised by the Accounting Standard Board of Japan on March 25, 2011), etc.
Convenience Translation
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31, 2012 are­presented solely for convenience. Our audit also included the translation of yen amounts into U.S. dollar amounts and, in our opinion,such translation has been made on the basis described in Note 1 to the consolidated financial statements.

August 30, 2012
Tokyo, JapanSUMITOMO REALTY & DEVELOPMENT CO., LTD.

59

Corporate Data/Investor Information
As of March 31, 2012

Corporate Data

Investor Information

Head Office
Shinjuku NS Building,
4-1, Nishi-Shinjuku 2-chome
Shinjuku-ku, Tokyo 163-0820, Japan
Phone: +81-3-3346-2342
Facsimile: +81-3-3346-1652

Paid-in Capital¥122,805 million

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

Number of Shareholders
14,710Date of Establishment
December 1, 1949

Stock Exchange Listings
Tokyo Stock Exchange
Osaka Securities Exchange

Breakdown of Shareholders

Number of Common Stock
Authorized: 1,900,000,000 shares
Issued: 476,085,978 shares■ Trust Accounts■ Financial Institutions■ Other Companies■ Foreign Companies■ Individuals and Others

Number of Employees
9,954 (Consolidated)
Major Consolidated Subsidiaries
Sumitomo Real Estate Sales Co., Ltd.
Sumitomo Fudosan Tatemono
Service Co., Ltd.
Sumitomo Fudosan Syscon Co., Ltd.
Sumitomo Fudosan Reform Co., Ltd.
Sumitomo Fudosan Esforta Co., Ltd.
Sumitomo Fudosan Villa FontaineCo., Ltd.
Sumitomo Fudosan Finance Co., Ltd.
Sumitomo Fudosan Bellesalle Co., Ltd.

24.67%
10.19%
27.65%
32.38%
5.11%

Major Shareholders
NameJapan Trustee Services Bank, Ltd. (Trust account)
The Master Trust Bank of Japan, Ltd. (Trust account)
Sumitomo Mitsui Banking Corporation
SSBT OD05 Omnibus Account – Treaty ClientsJapan Trustee Services Bank, Ltd. (Trust account 4)
Cbldn Stichting PGGM Depositary
Kajima Corporation
Shimizu Corporation
Mitsui Sumitomo Insurance Co., Ltd.
State Street Bank and Trust Company

Number of shares held(Thousands)

Percentage ofshares held

32,36022,382
11,99011,368
10,548
8,263
7,912
7,500
6,740
6,738

6.80%
4.70%
2.52%
2.39%
2.22%
1.74%
1.66%
1.58%
1.42%
1.42%

Stock Price and Trading Volume on Tokyo Stock Exchange
Stock Price (right scale)
TOPIX Average (left scale)

2,000

(Yen)
5,000

1,600

4,000

1,200

3,000

800

2,000

400

1,000

0

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

2007

2008

2009

2010

2011

(Millions of Shares)
250

2012
Trading Volume

200
150
100
50
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

2007

2008

2009

2010

2011

2012

SUMITOMO REALTY & DEVELOPMENT CO., LTD.

61

SUMITOMOLTD.
SUMITOMO REALTY
REALTY && DEVELOPMENTDEVELOPMENT CO.,CO., LTD.

ANNUAL2012
ANNUAL REPORTREPORT 2011

Shinjuku NS
Shinjuku
NS Building,
Building,4-1,
4-1, Nishi-Shinjuku
Nishi-Shinjuku2-chome
2-chomeShinjuku-ku, Tokyo
Shinjuku-ku,
Tokyo163-0820,
163-0820,Japan
Japan
Phone: +81-3-3346-2342
Phone:+81-3-3346-2342Facsimile:
Facsimile:+81-3-3346-1652+81-3-3346-1652
http://www.sumitomo-rd.co.jp/english/
http://www.sumitomo-rd.co.jp/english/

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