Sustained Potential ,Accelerating Growth
Annual Report 2014

Contents
2

At a Glance

4

President Interview

8

Sumitomo Realty’s Competitive Advantages

14

8

Basic Policy—Direct Involvement in All Operations

10

Specific Projects in Sixth Management Plan

Review of Operations
14

LEASING

18

SALES

20 CONSTRUCTION
23

24

BROKERAGE

CSR

26 Corporate Governance
28

Board of Directors and Statutory Auditors

29

Financial Section

64 Corporate Data / Investor Information
65

History

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 forwardlooking statements. Such factors include but are not limited to macroeconomic
conditions, supply and demand in the real estate market and interest rate trends.

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

0

12

13

14

Operating Income

20

100

10

50

15

0

0

(Forecast)

Operating Margin (right scale)

10

11

12

13

14

Ordinary Profit*

135.0
77.0

11

150

165.0

10

Billions of Yen

30

130.5
69.7

15

(Forecast)

160.5

14

151.3

13

21.4 20.5 20.6 20.4

147.5

12

18.6 18.6

138.5

11

810.0

10

%

134.0

0

780.3

60

736.7

300

688.7

120

744.8

600

719.6

180

114.9
59.8

Billions of Yen

900

107.9
53.2

Billions of Yen

Ordinary Profit * andNet Income

106.3
50.9

Operating Income andOperating Margin

100.5
52.7

Revenue from Operations

15(Forecast)

Net Income* 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.

Annual Report 2014

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To Our Shareholders,

We would first like to take this opportunity to express ourthanks on behalf of the Sumitomo Realty & Development
Group for your ongoing support. Sumitomo Realty’s business has expanded in scope and continued to grow since our establishment in 1949. We are currently
a core company of the Sumitomo Group and a leading comprehensive developer within the Japanesereal estate industry, with operations in a wide range of areas including office building leasing, condominium sales, custom homes and remodeling (Shinchiku Sokkurisan), and real estate brokerage.

We have formulated a medium-term management plan every three years since 1997, and haveachieved sustained growth through the achievement of these plans. In April 2013, we began operating under the Sixth Management Plan, which targets record cumulative earnings for the three years
covered by the Plan.

In the March 2014 fiscal year, we were able to achieve record high single-year results and made solid
progress toward the achievement of the Plan’s targets, but the future of the economy remains uncertain with rising construction costs and the effect of the consumption tax increase. Going forward, theGroup will continue to flexibly respond to changes in our operating environment, and make every
effort to achieve the targets in the Sixth Management Plan and sustained growth under thefollowing Management Plan and beyond. We ask for your continued support.

Junji Takashima

Kojun Nishima

ChairmanPresident

Total Assets

Shareholders’ Equity andEquity Ratio

Billions of Yen

Billions of Yen

ROE and ROA

%

750

4,500

30

%
12

11.4

500

3,000

16.3

14.3

15.3

16.8

4,220.4
14* SPEs have been included in the scope of consolidation
since the March 2012 fiscal year.

0

707.9

4,105.5
13

627.0

3,859.7
12553.8

3,234.2
11

526.2

3,168.1
10

488.9

250

1,500

0

15.4

10

11

12

13

14

20

8

10

4

0

0

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

10.0

9.9

10.1

10.4

4.4

4.4

4.3

3.9

4.0

10

11

12

13

14

ROE (Net Income / Shareholders’ Equity)
ROA (Operating Income + Interest andDividend Income / Total Assets)

Sumitomo Realty & Development Co., Ltd.

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At a Glance

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 fromOperations

Operating
Income

35.8%

55.7%

Major Consolidated
Subsidiaries– Sumitomo Fudosan Tatemono Service
Co., Ltd.
– Sumitomo Fudosan Villa Fontaine Co., Ltd.
– Sumitomo Fudosan Bellesalle Co., Ltd.

Revenue fromOperations

Operating
Income

29.5%

22.3%

History

History

Sumitomo Realty made its full-scale entry into the leasing business in

Having entered the condominium sales business in the ﬁrst half of thethe latter half of the 1970s. We demonstrated our strong business

1960s, Sumitomo Realty is a pioneer in the domestic market for condo-

development capabilities by being the ﬁrst company in the industry to

minium development and sales. We have become a leading company

restart construction work on ofﬁce buildings following the collapse offor condominium sales in Japan by staying ahead of our competitors,

Japan’s economic bubble in the 1990s. Our competitive strength andstrategically focusing on city centers and proactively developing large,

focus on large-scale redevelopment projects have enabled us to build

high-rise properties.

our current leading position in the domestic real estate industry.

Unique Features and Competitive Advantages

Unique Features and Competitive Advantages‒ The fact that we primarily engage in all aspects ourselves, from land

– We have businesses in cities across Japan, and 70% of our portfolio

purchases and tenant acquisition to property management, meansthat we can quickly address tenant needs in our developments.
‒ We have an extensive track record in redevelopment.
Please refer to page 8.

is in the Tokyo metropolitan area.
– In order to maintain asset value for the future, we are bolstering distinct characteristics such as modern appliances and stylish designs,
including landmark exteriors, a rich array of common facilities, and‒ Our “close, new, large” leasing portfolio gives us strong market
competitiveness.

elegant entrances.
– We are employing a unique sales strategy in order for the customer tounderstand the value of our condominiums.

Please refer to page 16.

Please refer to page 9.

Balanced Portfolio
CapitalLEASING
High level of capital,
low level of human resources

SALES
Relatively high level of capital,
relatively low level of humanresources

CONSTRUCTION
Relatively low level of capital,
relatively high level of humanresources

BROKERAGE
Low level of capital,
high level of human resources
Human Resources

2

Annual Report 2014

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CONSTRUCTIONBROKERAGE

Custom home construction and remodeling andBrokerage and sales on consignment of real estate andrelated activities

related activities by Sumitomo Real Estate Sales Co., Ltd.

Revenue fromOperations

Operating
IncomeMajor Consolidated
Subsidiaries

Revenue fromOperations

Operating
Income– Sumitomo Fudosan Syscon Co., Ltd.

25.4%

10.6%

Major Consolidated
Subsidiaries– Sumitomo Real Estate Sales Co., Ltd.

7.2%

10.2%

History

History

Remodeling—Shinchiku Sokkurisan

Sumitomo Real Estate Sales Co., Ltd., was established in 1975 to

Sumitomo Realty launched the Shinchiku Sokkurisan full remodelingconduct sales of condominiums developed by Sumitomo Realty. After

package in 1996. It has become the top brand in the market with aentering the real estate brokerage sector in 1979, Sumitomo Realcumulative total of more than 80,000 units contracted.

Estate Sales achieved signiﬁcant success and was listed on the

Custom Homes

Tokyo Stock Exchange in 1998. We are strengthening our sales

We launched the American Comfort line in 1995. To keep up with the

network to further increase our market share.

needs of the times, we followed this with the J∙URBAN line in 2003 andJ∙RESIDENCE in 2012. We are also enhancing our marketing strengthwith a nationwide network of over 100 model house units.

Unique Features and Competitive Advantages
Please refer to page 21 for detailsof Shinchiku Sokkurisan and Custom Homes.

Remodeling—Shinchiku Sokkurisan‒ We can remodel a home in half the time and at 50–70% of the costof rebuilding.

Unique Features and Competitive Advantages‒ Our network of brokerage ofﬁces has close ties to local communities.
‒ The network has steadily expanded to 251 ofﬁces as of the end of
March 2014.
‒ Because all brokerage ofﬁces are directly operated, the network
boasts efﬁcient operations and the industry’s high proﬁt margins.

‒ With a ﬁxed price per unit of ﬂoor area, customers do not need toworry about additional charges.

Custom Homes‒ We use our expertise in condominium development to offer homes
with both functionality and an attractive design.
‒ We develop original earthquake-resistant technologies, and wecontinue to enhance our technical capabilities.

Our achievement of sustained growth has been the result of ourorder-based businesses that do not require upfront investment

well-balanced operations. We have a balanced portfolio in fourand have a short operational cycle of less than one year, but

operational ﬁelds—leasing, sales, construction and brokerage—

require substantial human resources.

that have different risk proﬁles and capital requirements.

Our steady growth to date is the result of complementary

The leasing and sales businesses involve projection-based

core businesses with different individual characteristics, which

production that requires large upfront investment for land. Risk

has led to balanced growth. We will work to achieve sustained

and returns are high, and the operational cycle is long at

growth going forward by strengthening our existing businesses,

roughly 3–10 years, but human resource levels are relatively

and also establishing new core businesses.

low. The construction and brokerage businesses are
Sumitomo Realty & Development Co., Ltd.

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President Interview

We will not rest on our past achievements
as we continue to endeavor toward the achievementof the targets in the Sixth Management Planand sustained growth beyond that.

Q.1

A.1

We launched the Sixth Management Plan in April 2013. The details are outlined
below, but the main points are to increase cumulative ordinary proﬁt for thethree-year period to ¥400 billion, and to achieve record revenue and proﬁt for

Please give us an overview
of the March 2014
fiscal year, the first year
under the Sixth
Management Plan.

the three-year period.
During the March 2014 ﬁscal year, the ﬁrst year under the new Plan, we recorded revenue
and proﬁt growth at all four main business segments, resulting in revenue from operations of¥780.3 billion, with operating income of ¥160.5 billion, ordinary proﬁt of ¥130.5 billion, and net
income of ¥69.7 billion. These revenue and proﬁt ﬁgures correspond to roughly one-third of
the Plan’s cumulative targets, for an acceptable result. With record-high single-year results,
we have already achieved one of the targets of the Sixth Management Plan.
Sixth Medium-Term Management Plan (April 2013 to March 2016)
1. Surpass single-year record and achieve 3-year cumulative ordinary profit of ¥400 billion
For single-year business results, we will work to surpass, at an early date, our record high for ordinary proﬁt,
which was set in the March 2008 ﬁscal year (ordinary proﬁt of ¥125.2 billion). In addition, we will aim for a further increase in the level of cumulative ordinary proﬁt under the new plan, compared with what we achieved
under the previous management plans, to ¥400 billion.
vs. 5th Plan

Billions of Yen

2,500

15.2%

Operating income

500

14.3%

Ordinary profit

400

21.5%

Revenue from operations

2. Strengthen financial position
We will strengthen our ﬁnancial position by bolstering internal reserves and extending repayment periods.
We have not set speciﬁc numerical targets, but aim to maintain continuously higher credit ratings.

3. Diversify our businesses
We will look for new directions and develop new businesses (including overseas development) in our four
existing areas of operations (leasing, sales, construction and brokerage). We will also pursue completely new
areas of operations.

4

Annual Report 2014

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Kojun Nishima
President

Progress of 6th Management Plan
Targets of 6th Plan
(Cumulative
three-year total)

2014 (Result)(First year)

Achievement ratio

Amount toachieve target(Remaining two years)

2,500

780

31%

1,720

Operating income

500

160

32%

340

Ordinary profit

400

131

33%

270

Billions of Yen

Revenue from operations

Progress under Medium-Term Management Plans
Billions of Yen

Billions of Yen

1,000

200

Record high

750

150

500

100

250

50

0

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

1st Plan*

2nd Plan

3rd Plan

4th Plan

5th Plan

6th Plan

1999–2001

2002–2004

2005–2007

2008–20102011–20132014–2016(Forecast)(Years ended March 31)

1,270

1,606

1,939

2,107

2,170

2,500

Operating income (right scale)

202

265

350

435

437

500

Ordinary profit (right scale)

87

170

274

339

329

400

Revenue from operations

0

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.

Sumitomo Realty & Development Co., Ltd.

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President Interview

Q.2

Our main issue right now is to build a platform that will make it possible toA.2

maintain sustained growth into the future. With changes in the operating environment, such as Japan’s falling birthrate and aging population, we recognize

What issues do you see
the company facing at
this time?

that it will be difficult to maintain the same pace of growth using our current
business platform as is.
We are therefore focusing on building a platform for growth under the following
Management Plan and beyond. I became president in June 2013, and I consider “building
a platform for growth” to be my mission as president.

Q.3

First, we are thoroughly reviewing our existing businesses. When I joined

A.3

Sumitomo Realty, the Company had roughly 500 employees and owned 10
buildings, but today we have more than 10,000 employees and own or manage

What specifically do you
mean by “building aplatform for growth”?

more than 200 buildings. Given this degree of change in both the size of theCompany and the operating environment, we need to go back to the starting point in all areasof our business. I believe it is important to review our existing businesses and see if there are
any things that we could be doing as extensions of those businesses.
Along with this thorough review of existing businesses, we also need to put effort intodeveloping new business areas. For example, the Shinchiku Sokkurisan business that welaunched in 1996 has grown to become one of our core businesses, with cumulative contracts of 80,000 units and annual revenue from operations surpassing ¥100 billion. We areaiming to develop businesses in new areas as successors to Shinchiku Sokkurisan, and wehave set up a dedicated unit to study new businesses.

Q.4

We have an investment policy of not letting a good pitch go by. In other words,

A.4

if there is an attractive development site for our company, we will reliably acquire
it. Competition has intensified, and market conditions for the acquisition of landfor development are difficult at this time, but we will use the expertise we havebuilt up to date to create a pipeline with a focus on redevelopment projects.
For office buildings in leasing operations, the Sixth Management Plan calls for completing
construction of 140,000 tsubo of floor space, and we are currently securing land to continue
this pace of construction under the Seventh Management Plan. We plan to invest for the Sixth

LEASING

SALES

Gross Floor Area (Years ended March 31)

Revenue from Operations
and Units Delivered (Years ended March 31)

Thousands of Tsubo

Billions of Yen

2,000

1,000

Record high 40

750

30

Thousands of Units+140,000 tsubo

07

10

13

16

(Forecast)

15

18
12

14

670

870
04

437
0

01

1,250

1st Plan 2nd Plan 3rd Plan 4th Plan 5th Plan 6th Plan

680
0

1,160

250

500

1,020

1,390

11

13

605

500

660

1,000

567

%

+11

1,500

820

Would you tell us about
your investment policy
and financial strategy
going forward?

1st Plan 2nd Plan 3rd Plan 4th Plan 5th Plan 6th Plan

01

04

07

Revenue from Operations

10

13

16

20

10

0

(Forecast)

Units Delivered* Cumulative totals for the period covered by each plan.

6

Annual Report 2014

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Management Plan and subsequent development to be approximately ¥400 billion during thethree years covered by the Sixth Management Plan, and we intend to cover this with cash
flow on hand.
At the condominium sales operations, we have acquired the land to accommodate theplanned increase in cumulative sales to 18,000 units under the Sixth Management Plan, andare already acquiring land for more than 20,000 cumulative units under the SeventhManagement Plan and beyond.
In addition, one of the targets under the Sixth Management Plan is to “strengthen our
financial position,” and we intend to improve the ND/E ratio through the accumulation of profit.
Furthermore, given the favorable financial environment, we are increasing our long-termborrowings and bond issuance at tenors of roughly 10 years, enhancing the long-term stabilityof our liabilities.

Q.5

A.5

Our basic policy is to first maintain a stable dividend, while also striving to supplement internal reserves needed for stable business growth.
Our current annual dividend of ¥20 per share was set in the March 2008

What is your policy for
returns to shareholders?

fiscal year, and we maintained this amount despite profit declines in the following two years from the effects of the Lehman crisis. Even though we recorded record profit in
the March 2014 fiscal year, we are keeping the annual dividend at ¥20 per share, including aninterim dividend of ¥10 per share, based on a decision that giving priority to long-term investment for the future will lead to long-term shareholder returns. We intend to maintain the fullyear dividend at ¥20 per share, including an interim dividend of ¥10 per share, again in the
March 2015 fiscal year.

Q.6

A.6

In terms of the economic situation, the policies known as “Abenomics” arebringing about an improvement in business sentiment, and conditions are also
benefitting from expectations regarding Tokyo’s hosting of the Olympic andWhat is your forecast
for market developments and Sumitomo
Realty’s results for the
March 2015 fiscal year
and beyond?

Paralympic Games and deregulation through the establishment of national strategic special zones. There are also causes of concern, however, including the effect of the consumption tax increase on the economy and rising construction costs. Nevertheless, despite
this uncertain outlook, we will flexibly respond to changes in our operating environment.
We are aiming for another year of record earnings in the March 2015 fiscal year, the second year under the Sixth Management Plan, and are projecting revenue from operations of¥810.0 billion, operating income of ¥165.0 billion, ordinary profit of ¥135.0 billion, and net
income of ¥77.0 billion. Going forward, we will not rest on our past achievements as we continue to endeavor toward the achievement of the targets in the Sixth Management Plan andsustained growth beyond that.
I ask for the continued support of our shareholders as we move forward onthese initiatives.
Outlook for the March 2015 Fiscal Year2014 (Result)2015 (Forecast)

YoY

Revenue from operations

780

810

+30

Operating income

160

165

+ 5

Ordinary profit

131

135

+ 4

Billions of Yen

Sumitomo Realty & Development Co., Ltd.

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Sumitomo Realty’s Competitive Advantages
The Company’s business activities are based on the principle of direct involvement in all operations. As a result,
Sumitomo Realty has unique strengths in each stage of the value chain, from acquiring land for building to develop-

1ment and sales. These strengths create our competitive advantages, and allow us to achieve sustained growth.

Basic Policy—Direct Involvement in All Operations

LEASING
Strength1

Our Value Chain
Information Collection
Land Acquisition

SALES

Proprietary Expertise in Assembling
Commercial Land for Leasing

We did not inherit assets from the Sumitomo zaibatsu busi-

Large parcels of land in Tokyo have become increasingly

ness group, and made our full-scale entry into the leasing

scarce in recent years, and there are limits to what can bebusiness in the second half of the 1970s, somewhat later

achieved through bidding. Using the expertise we have culti-

than the major, zaibatsu-affiliated, domestic real estate com-

vated to date, we will continue to grow by building a pipeline

panies. At that time we did not own buildings that were gen-focused on redevelopment projects.

erating cash flow, which meant that instead of bidding on one
large site, we needed to focus on the low-cost approach of

Redevelopment Case

assembling small pieces of land.
Against that backdrop, we began purchasing land one
lot at a time. Our employees implemented a variety of initiatives, such as visiting landowners and negotiating land purchases as well as creating associations through which landowners can also participate in the project. In this way, we
built up our expertise in “assembling land” for redevelopment.
Assembling these scattered lots increases their asset value,and buildings constructed on the land generate cash flow.
This expertise will be the source of our strength going
forward.

8

Annual Report 2014

Before redevelopment

Sumitimo Fudosan
Iidabashi First Tower(completed in April 2010)

3

1

LEASING
SALES

2Planning
Development

Sales
Property Management

LEASING
Strength2

4Sumitomo Fudosan Shinjuku Grand Tower 2 Mita Twin Building West (Entrance hall)
3 World City Towers 4 City Tower Azabu Juban
1

Product Planning in Office
Building Development

SALES
Strength

3

Marketing Activities in
Condominium Sales

Our office building development is based on product planning

We aim to develop condominiums that retain their value in thethat incorporates the changing needs of tenants. In addition

future. We also take the time to ensure the customer under-

to being chosen by tenants for unique, attractive features andstands that value. To that end, we employ a unique sales

added value, we aim to help revitalize the area surrounding

strategy that clearly sets us apart from the industry standard

the property.

of aiming to sell all units prior to the completion of construc-We develop office buildings that incorporate functionality,tion. We believe that being able to actually show a completed

safety in the event of a disaster, and comfort. These build-property is the best way to promote the property. We under-

ings’ main features include entrances that project a sense ofstand this may create some inventory risk, but as a compre-

high quality as the face of the tenant, and the use of seismic

hensive developer that has core businesses with different

isolation and vibration control structures that are compatible

individual characteristics, including an office leasing business,with advanced business continuity planning. We also strive to

we are able to comprehensively control this risk. This strategy

improve the surrounding environment by creating open

in turn contributes to stable profits in the sales business.

spaces that can be used as evacuation sites in emergencies.

Sumitomo Realty & Development Co., Ltd.

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Sumitomo Realty’s Competitive Advantages

Thousands of Tsubo

LEASING
Under the Sixth Management Plan, we are aiming for cumulative revenue and profit growth for the 3-year period, with record
profit as well as record-setting business results on a single-yearbasis. Including redevelopment projects in Nihonbashi andRoppongi scheduled for completion during the period of the
Sixth Management Plan, we expect to make a solid contribution to business results with the addition of 140,000 tsubo ofgross floor area. Going forward, we will continue to work forprofit growth by expanding the earnings base and enhancing
the quality of our buildings.

Sumitomo Fudosan
Onarimon Ekimae Building+140,000
tsubo

1,390

1,250

1,160

680

Specific Projects
in Sixth Management Plan

1,020

+11%

870

2

Gross Floor Area (Years ended March 31)

1st Plan 2nd Plan 3rd Plan 4th Plan 5th Plan 6th Plan
2001

2004

2007

2010

2013

2016

(Forecast)

Principal Projects during the 6th Management Plan (2014–2016*1)
Name

Total gross floor area of projects
completed in 2014*1
Sumitomo Fudosan
Onarimon Ekimae Building
Hanzomon Rebuilding Project
Nihonbashi 2-Chome Project
Total: 2015*1
Mita Rebuilding Project
Roppongi 3-Chome Project
Nibancho Project
3 Other Buildings
Total: 2016*1
Total: 6th Management Plan

Location
Gross floor Expected(Tokyo CBD*2) area (Tsubo*3) completion
4,496
Minato Ward

2,691

Apr. 2014

Chiyoda Ward
Chuo Ward

3,700
42,00048,391
7,400
61,0006,000
13,00087,400140,287

Dec. 2014
Feb. 2015

Minato Ward
Minato Ward
Chiyoda Ward

Aug. 2015
Mar. 2016
Mar. 2016*1. Fiscal year ending March 31*2. Tokyo CBD (Central Business District): 7 wards, comprising Chiyoda, Minato, Chuo,
Shinjuku, Shibuya, Shinagawa and Bunkyo*3. 1 tsubo = 3.3 m2

Hanzomon Rebuilding Project
Location
Chiyoda Ward

Location
Minato Ward

Gross floor area
2,691 tsubo

Completion
Apr. 2014

No. of floors

Gross floor area
3,700 tsubo

Expected completion
Dec. 2014

No. of floors
10 above ground
1 below ground

11 above ground10

Annual Report 2014

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Nihonbashi 2-Chome Project

Roppongi 3-Chome Project

Located at Nihonbashi intersection, one of Japan’s leading

On a large site of about 2.7 hectares adjacent to bothbusiness districts, this site is about 8,800 square meters. This

Roppongi 1-chome Station and our flagship property

large-scale project will have a gross floor area of approxi-

Izumi Garden Tower, this large-scale project will have a grossmately 138,000 square meters, or 42,000 tsubo, and include

floor area of approximately 200,000 square meters, oroffice space, commercial space and multipurpose halls.

61,000 tsubo. It will include three types of facilities—office,

on
gi
S
Ro
pp

Officebuilding

Project site

Roppongi 1-chome Station

Ginza Line, Nihonbashi Station

Section 8

Commercial
building

Izumi
GardenTower

Residentialbuilding

Chuo St.

Section 7

Asakusa Line, Nihonbashi Station

Eitai St.

Tozai Line, Nihonbashi Stationt.

Showa St.

residential and commercial—in north and south sections.

Project site

Location

Location

Chuo Ward

Minato Ward

Gross floor area

Gross floor area

42,000 tsubo

61,000 tsubo

Expected completion

Expected completion

Feb. 2015

Mar. 2016

No. of floors

No. of floors

35 above ground
4 below ground40 above ground5 below ground

Sumitomo Realty & Development Co., Ltd.

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Sumitomo Realty’s Competitive Advantages

Revenue from Operations(Billions of Yen)
Units Delivered(Thousands of Units)

18

820

670

14

12

1st Plan 2nd Plan 3rd Plan 4th Plan 5th Plan 6th Plan

SALES

* Cumulative totals for the period covered by each plan.

Under the Sixth Management Plan, we aim to increase deliveries

Principal Projects during the 6th Management Plan (2015–2016*)

volume to achieve growth in cumulative revenue and profit for

2001

2004

Name

the 3-year period. We are targeting cumulative deliveries of
18,000 condominium units under the Sixth Management Plan,

Sky Forest Residence

a roughly 30% increase from 14,000 units delivered during the

The Grand Millennia

period of the Fifth Management Plan. This target is equivalent to

Sky Tiaradeliveries of roughly 6,000 units annually, which would be a

Grove Avenue Kunitachi
City Terrace Imafuku Tsurumi

record level for the Company.
During the period covered by the Fifth Management Plan,

Deux Tours

we launched the Grand Mansion Gallery and Custom-order

City Tower Kanamachi

Service as new initiatives to strengthen our product planning

City Terrace Kichijoji Minami
City Tower Musashi Kosugi

and sales structure. We aim to achieve our new targets bymaking maximum use of the results of these initiatives.

12

15

605

567

11

Record
high

660

13

437

2

Specific Projects
in Sixth Management Plan

Revenue from Operations and Units Delivered (Years ended March 31)

The Tennoji Residence

2007

2010

2013

2016

(Forecast)

Location

No. of units
for sale

Scheduleddelivery*Shinjuku Ward,
Tokyo

361

2015

411

2015

621

2015

277
294

2015
2015

1,450

2016

840

2016

268
800

2016
2016

413

2016

Toshima Ward,Tokyo
Itabashi Ward,Tokyo
Kunitachi, Tokyo
Osaka
Chuo Ward,Tokyo
Katsushika Ward,Tokyo
Mitaka, Tokyo
KawasakiOsaka* Fiscal years ending March 31

Sky Forest Residence

Sky Tiara

Location

Location

Shinjuku Ward, Tokyo

Itabashi Ward, Tokyo

No. of units for sale

No. of units for sale

361

621

No. of floors

No. of floors

26 above ground2 below ground

West: 19 above ground
East: 13 above ground

Scheduled delivery

Scheduled delivery

2015

2015

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Deux Tours
Deux Tours is one of our flagship projects, located in the Harumi district of Tokyo’s Chuo Ward, an area that is expected to see
an increasing pace of development. In addition to being a competitive condominium property in a prime location, the project isbeing designed as a condominium package that aims to deliver customer satisfaction through residential functionality andlifestyle enrichment.

Key Features

Location

Large, earthquake-resistant twin towers soaring
180 meters highNo. of units for saleWith 52 floors and a total of 1,450 units, the scale of the twin tower complex makes a powerful statement as a landmark property. The extensive
use of glass and materials that blend in beautifully with the waterfront landscape creates a striking exterior design that sets the development apartfrom other nearby towers.

Chuo Ward, Tokyo
1,450

No. of floors
52 above ground
1 below ground

Scheduled delivery
2016

Offering both convenient downtown access andthe waterfront’s feeling of relaxing at a resort
Harumi, the district in Chuo Ward where
Deux Tours is being built, is roughly 2.2
kilometers from Ginza for convenient acUrban Area
cess to central Tokyo, while the Tokyo
Bay location feels like a waterfront resort.
As part of its program to boost Tokyo’s
Tokyo Bay Area
international competitiveness, the Tokyo
Metropolitan Government’s Bureau of
DEUX TOURS
Urban Development has designated
Harumi as a priority zone, and the area is
expected to become increasingly developed.

Sky Deck

Waterfront Location

Diverse public facilities include spa andView Lounge & Bar
In addition to the waterfront scenery and lush, green surroundings,
Deux Tours has a diverse offering of public facilities possible only in alarge-scale property, including a large entrance that conveys theproperty’s landmark status, a large spa with sauna, the View Lounge &Bar, and a parent’s salon with kids’ room.

Entrance
Sumitomo Realty & Development Co., Ltd.

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Review of Operations

LEASING
Basic Growth Strategy

Overview of the Fiscal Year

Continuing new investment to build a platform

The Tokyo office building market, which represents more thanfor growth, by further increasing the portfolio’s

90% of the segment’s portfolio, experienced steady tenantportion of prime properties that are “Close, New,

demand against a backdrop of improved economic sentimentand Large”

and a recovery in corporate earnings. This led to a continued
trend of improvement in vacancy rates, and in addition to actual
rents for new buildings, rents under new leases for existingbuildings began to rise as well. With new demand for additional

Revenue from Operations¥283.7% of Revenue from Operations

floor space and relocation for expansion gradually increasing,
there was a growing sense of recovery throughout the entire
market.

billionAgainst this backdrop, revenue from operations rose 1.9%

35.8%

from the previous year, to ¥283.7 billion, and operating income
grew 4.0%, to ¥98.0 billion. This revenue and profit growthreflected improved vacancy rates at existing buildings, as well
as full-year contributions from buildings completed during theprevious year, including Sumitomo Fudosan Shibuya Garden

Operating Income¥98.0% of Operating Income

Tower and Sumitomo Fudosan Tamachi First Building.
The vacancy rate for existing buildings continued to improve,from 7.1% at the end of the previous fiscal year to 5.9% at thebillionend of the year under review. Tenant solicitations for new build-

55.7%

ings were also solid, including for Sumitomo Fudosan Chiyoda
First Wing and Sumitomo Fudosan Motoakasaka Building,which were completed during the year under review, and for the
Nihonbashi 2-Chome Project and the Hanzomon Rebuilding
Project, which are scheduled for completion during the March
2015 fiscal year.

14

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Sumitomo Fudosan
Chiyoda First Wing

Sumitomo Fudosan
Motoakasaka Building

Location

Location

Chiyoda Ward

Minato Ward

Gross floor area

Gross floor area

8,888 m2

5,974 m2

Completion

Completion

Jan. 2014

Feb. 2014

No. of floors

No. of floors

7 above ground
1 below ground

9 above ground
1 below ground

OutlookAs a result, we are projecting a 1.2% increase in revenue

We are forecasting revenue and profit growth in the March 2015

from operations, to ¥287.0 billion, with a 4.1% increase in oper-

fiscal year, on improved earnings from existing buildings andating income, to ¥102.0 billion.

full-year contributions from Sumitomo Fudosan Motoakasaka
Building and Sumitomo Fudosan Chiyoda First Wing, whichwere completed during the year under review.

Revenue from Operations

Operating Income andOperating Margin

Billions of Yen

Billions of Yen

Gross Floor Area%

Thousands of m2

300

120

90

4,500

200

80

60

3,000

100

40

30

1,500

0

0

14

Operating Income

15(Forecast)

4,094

13

4,145

12

4,160

11

102.0

10

3,977

0

3,825

15

(Forecast)

98.0

14

94.2

13

89.6

283.7

12

88.2

278.3

11

97.6

271.8

10

287.0

292.9

0

293.5

33.3 30.1 33.0 33.8 34.5 35.5

10

11

12

13

14

Operating Margin (right scale)

Sumitomo Realty & Development Co., Ltd.

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Review of Operations: LEASING

Ueno Station

Our Leasing Portfolio

Iidabashi Station(as of March 31, 2014)

Shinjuku Station
Tokyo Station

In the Tokyo CBD (Central
Business District)*, where buildings
ShibuyaStationthat meet the three conditions forprime properties—close, new and

Hamamatsu-cho Station

large—are in strong demand, ourcompetitive portfolio will provide a

Bunkyostrong foundation for us to utilize
our strengths—development ofhigh-value-added office buildings,

Tamachi Station

Tokyo CBD*
Shinjuku

Shinagawa Station

ChiyodaShibuya

Other buildings

Chuo
Minato* Only buildings ownedby the Company are
shown on this map.

tenant leasing and property management. We will utilize that foun-

Major ﬂagship buildings(See the table below)

Shinagawadation 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.

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

Over

200

buildings

Gross Floor Area

4.09

million m2

Major Flagship Buildings
No. of floors

Name
1. Izumi Garden Tower
2. Shinjuku Sumitomo Building
3. Sumitomo Fudosan Shinjuku Grand Tower
4. Shinjuku Central Park City
5. Shinjuku Oak City
6. Shiodome Sumitomo Building
7. Sumitomo Fudosan Mita Twin Building West
8. Tokyo Shiodome Building
9. Shinjuku NS Building
10. Sumitomo Fudosan Iidabashi First Tower
11. Sumitomo Fudosan Shibakoen First Building
12. Chiyoda First Building West
13. Sumitomo Fudosan Shibuya Garden Tower
14. Sumitomo Fudosan Aobadai Tower
15. Sumitomo Fudosan Iidabashi Building No.3
16. Sumitomo Fudosan Shibuya First Tower
17. Sumitomo Fudosan Iidabashi First Building
18. Sumitomo Fudosan Shiodome Hamarikyu Building
19. Chiyoda First Building East
20. Sumitomo Fudosan Nishi Shinjuku Building

Location (Tokyo CBD)

(Above ground/
Below ground)

Completion

Gross floorarea (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
Shibuya Ward
Meguro Ward
Shinjuku Ward
Shibuya Ward
Bunkyo Ward
Chuo Ward
Chiyoda Ward
Shinjuku 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
24/3
33/3
24/2
25/3
14/2
21/2
17/2
33/2

Oct. 02Mar. 74
Dec. 11
Feb. 10Jan. 03
July 04
Sept. 06
Jan. 05
Sept. 82
Apr. 10
June 00
Jan. 04
June 12
Aug. 09
Oct. 02
Aug. 10
Mar. 00
Aug. 09
Oct. 98
Apr. 09204,268
177,467
168,295
130,355
117,446
99,91398,33895,12875,046
68,382
63,822
61,20959,41755,77353,047
52,942
52,74747,951
37,59337,317

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

16

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Our Portfolio’s Strengths(as of March 31, 2014)

Sumitomo Realty’s leasing portfolio is highly competitive, in terms of the three distinct features of being“close, new, and large.” Going forward, we will endeavor to maintain and enhance our competitive
strength by focusing on providing high-quality office buildings with these qualities.

Close

Locations in the Tokyo CBDTokyo CBD*

87% is in the Tokyo CBD (Central Business District)*. A location near other office buildings and major train and87%

subway stations is a key condition for a prime property, and our properties’ locations are one of our competitive

23 Wards

Our leasing portfolio emphasizes locations in central Tokyo; 94% of our portfolio is in Tokyo’s 23 wards, andstrengths. In particular, the Tokyo CBD is being developed as an area with a high concentration of office buildings, and stable demand can be expected in this area going forward. We will therefore work to enhance our94%

competitive strength by continuing to acquire land in this area.

New

Brand-new and Recently Constructed Buildings

Completedsince 2000

estate companies, and about 57% of the buildings in our portfolio have been completed since 2000. New

57%

making the relative age of the buildings in a portfolio a key factor affecting leasing businesses.

New quakeresistance*ular among tenants for their functionality, comfort, and safety in the event of a major disaster. Approximately99%

key yardstick for earthquake safety. In recent years, emergency generators that provide electricity in the event* New standards thattook effect in 1981

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

The average age of the buildings in our portfolio is 15 years, the lowest figure among major Japanese realbuildings are able to generate strong demand by meeting tenant needs in areas like facilities and design,
As shown in the table below, our buildings are equipped with the latest facilities and features, and are pop99% of our portfolio meets or exceeds earthquake-resistance standards that took effect in 1981, which are aof a power outage have also become a feature sought by tenants as part of their business continuity planning.

State-of-the-art Facilities
Earthquake protection

Before 1981

1982–1996

1997 and after

Previous quake-resistant structure

New quake-resistant structure

Anti-sway structure

Ceiling height*
Floor load
Air conditioning
Power capacity

2.5 m

2.7 m

2.9–3.3 m

300 kg/m2

300–500 kg/m2

500–1,000 kg/m2

Central air conditioning system

Climate control zones

Separate climate control systems

45 VA/m2

60–70 VA/m2

85 VA/m2 and over

* Includes raised floors

Large

Large-scale Buildings

Over 10,000m2(gross floor area)

When a tenant moves, being able to consolidate multiple business offices on one floor facilitates internal commu-

85%

behind the increased demand in recent years for large-scale buildings with large amounts of floor space per floor.

Large-scale buildings with gross floor area of at least 10,000 square meters make up 85% of our portfolio.
nication and reduces space redundancies, helping to make operations more efficient. These types of needs are

Sumitomo Realty & Development Co., Ltd.

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Review of Operations

SALES
Basic Growth Strategy

Overview of the Fiscal Year

Enhancing our brand strength by providing high-In the condominium market, which represents more than 90%

quality properties via a unique sales strategy, toof the segment’s portfolio, the number of new units put on mar-build a strong position that is less susceptible

ket in greater Tokyo exceeded 50,000 units for the first time inchanges in market conditions

six years, as a favorable sales environment backed by improved
economic sentiment continued. With consumers showing
robust purchasing appetite from low mortgage interest rates
and an anticipation of higher prices going forward, the number

Revenue from Operations¥234.1% of Revenue from Operationsof visitors to our showrooms remained high.
Reflecting this environment, the number of condominium units,
detached houses and land lots delivered, including City Tower

billion

Kobe Sannomiya, City Tower Ageo Ekimae, and City Terrace

29.5%

Kaga, increased 270 from the previous year, to 4,958 units.
The number of condominium units sold increased 483,
to a record high of 5,634 units, surpassing our initial plan of
5,500 units.
As a result, revenue from operations grew 0.8%, to ¥234.1

Operating Income¥39.2% of Operating Income

billion, with a 0.7% increase in operating income, to ¥39.2 billion.
With the increase in the number of units sold, the segment
achieved an increase in revenue from operations for the second

billionconsecutive year, and operating income growth for the fourth

22.3%

year in a row.

Principal Condominium Development Projects (2014–2015)
Name

No. of units Scheduled
for saledelivery*

Location

City Tower Kobe Sannomiya

Kobe

594

2014

City Tower Ageo Ekimae

Ageo

293

2014

City Terrace Kaga

Itabashi Ward, Tokyo

385

2014

City Terrace Itabashi Hasune

Itabashi Ward, Tokyo

350

2014

City House Yokohama
Katakura-cho Station Court

Yokohama

112

2014

Sapporo101

2014

Sky Forest Residence

Shinjuku Ward, Tokyo

361

2015

The Grand Millennia

Toshima Ward, Tokyo

410

2015

Sky Tiara

Itabashi Ward, Tokyo

621

2015

Kunitachi, Tokyo

277

2015

Osaka

294

2015

City Towers Maruyama

Grove Avenue Kunitachi
City Terrace Imafuku Tsurumi* Fiscal years ending March 31

18

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City Tower
Kobe Sannomiya

City Tower
Ageo Ekimae

Location

Location

Kobe

Ageo

No. of units for sale

No. of units for sale

594

293

No. of floors

No. of floors

54 above ground
1 below ground

28 above ground

Scheduled delivery*

2014

Scheduled delivery*

2014* Fiscal year ending March 31

OutlookOf the 5,500 condominium units and detached houses that

We are aiming for revenue and profit growth in the March 2015

we expect to deliver during the March 2015 fiscal year, contracts

fiscal year, with a plan to deliver a total of 5,600 condominium

had already been concluded for approximately 45% as of April 1,

units, detached houses and land lots, for an increase of2014, which was five percentage points higher year on year.
We are therefore forecasting a 13.2% increase in revenue

642 units year on year.

from operations, to ¥265.0 billion, with a 7.1% rise in operating
income, to ¥42.0 billion.

Revenue from Operations

Operating Income andOperating Margin

Billions of Yen

Billions of Yen

Units Delivered*
%

Units

30

4,000

100

15

15

2,000

0

0

14

Operating Income

15(Forecast)

Operating Margin (right scale)

10

11

12

13

14

5,600

13

4,958

12

4,688

11

4,119

10

4,841

0

4,222

15

(Forecast)

42.0

14

39.2

13

38.9

12

19.1 16.8
16.7 15.8

37.9

11

13.9
33.4

10

8.9
19.6

0

265.0

30

234.1

200

232.1

6,000

198.2

45

239.7

45

219.7

300

15

(Forecast)* Number of units includes condominium units, detachedhouses and land lots.

Sumitomo Realty & Development Co., Ltd.

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Review of Operations

CONSTRUCTION
Basic Growth Strategy

Overview of the Fiscal Year

Further raising our competitiveness by refining our

Due to a reactionary decrease following the expiry of transitional

planning, technical, and sales capabilities without

measures that accompanied the consumption tax increase, thebeing bound by conventional thinking

number of units contracted during the second half declined
year on year at both the Shinchiku Sokkurisan remodeling business and custom homes operations, and as a result for the fullyear the number of units contracted at both businesses wasroughly flat with the previous year.

Revenue from Operations% of Revenue from Operations

At the same time, the number of units delivered and revenue from operations at the Shinchiku Sokkurisan remodeling¥201.2business both rose to record levels, surpassing 8,000 units andbillion¥100.0 billion for the first time. The number of units delivered

25.4%

rose 10.7%, to 8,038 units, and revenue from operations grew
13.5%, to ¥105.4 billion.
Custom homes operations also recorded large year-onyear earnings growth, with a 27.1% increase, to 2,376 units, inthe number of units delivered, and a 31.6% increase in revenue

Operating Income¥18.7% of Operating Income

from operations, to ¥69.3 billion.
As a result, the construction segment recorded large, double-digit revenue and profit growth, with record revenue frombillionoperations and operating income. Revenue from operations rose

10.6%

17.6%, to ¥201.2 billion, and operating income grew 18.7%, to¥18.7 billion.

OutlookDuring the March 2015 fiscal year, we will strive to continuously
enhance our product lineups and strengthen our marketing
structures for both the Shinchiku Sokkurisan remodeling business and custom home operations, with the aim of bringing
about an early recovery in the number of units contracted.
Our March 2015 fiscal year projections are for a 5.6% decline
in revenue from operations, to ¥190.0 billion, and a 14.5% decline
in operating income, to ¥16.0 billion.

20

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Remodeling—Shinchiku Sokkurisan
Key Features
BeforeAfter

Cost Comparison

Rebuilding

100 %Shinchiku
Sokkurisan

50 ~70 %

0

50

100

– Sales engineer system: Most of our sales personnel haveengineering qualifications.
– Carpenters: We use carpenters who work exclusively for
Sumitomo Realty.
– Fixed price: We provide the customer with a fixed priceper unit of floor area, so there are no concerns about
additional construction charges.
– No need for temporary moves: We remodel homes
while the customers continue to live in them, which isa major advantage.
– Earthquake resistance: We incorporate earthquakeresistance strengthening measures based on
a computerized analysis of the home as well as measures to prevent damage from termites and moisture.

Custom Homes
Key Features– Advanced performance: We have developed proprietary earthquake-resistanttechnologies, 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 strengths in the form of our
track record in condominiums and economies of scale as a comprehensive developer,
we employ high-grade condominium interior materials as a standard specification.
– Complete after-sales support: Our homes are backed by a 30-year guarantee, andwe have a dedicated contact line for customers.

Please refer to page 22 for information about
new custom homes initiatives.

70

7

15

(Forecast)

0

18.7

14

9.3

15.8

13

9.2

16.5

201.2

12

9.9

16.7

171.1

11

10.2

17.1

166.0

10

190.0

162.9

0

158.2

10.8

10

11

12

13

14

Operating Income

8.4

Units

9,000

3,000

10

6,000

2,000

5

3,000

1,000

15

0

0

(Forecast)

Operating Margin (right scale)

7,000
2,500

14

%

7,623
2,430

140

Units

15

16.0

21

7,651
2,389

Billions of Yen

210

7,228
1,968

Billions of Yen

Shinchiku Sokkurisan andCustom Home Units Contracted

7,463
1,840

Operating Income andOperating Margin

7,521
1,779

Revenue from Operations

10

11

12

13

14

15

Shinchiku Sokkurisan

0(Forecast)

Custom Home (right scale)

Sumitomo Realty & Development Co., Ltd.

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Review of Operations: CONSTRUCTION

Custom Homes

TOPICS

Building a Structure for 3,000 Contracts by Expanding a
Nationwide Network

To further expand its operations, the custom homes operations
business is enhancing both its marketing and product strength.

Aoyama Model House

During the March 2014 ﬁscal year, we opened 17 new model
houses across Japan, creating a network of 100 model houses.
We plan to open at least 10 new locations again in the March
2015 ﬁscal year, and with this structure in place we aim to meet
our target of annual contracts for 3,000 units under the Sixth
Management Plan.
Our model houses to date have primarily displayed our
ﬂagship J∙URBAN series launched in 2003, and J∙RESIDENCE,
which has had a strong reception since its launch in 2012.
During the March 2014 ﬁscal year, we opened the new Aoyama
Model House as a new concept that clearly differentiates itself
from previous model houses in terms of interior, exterior, andﬂoor plans. This will broaden our appeal in terms of productFeatures- Located in Tokyo’s prestigious Aoyama neighborhood to attract
discerning buyers- Features a unique, modern exterior design- Provides a relaxing space with amenities including a light garden,
covered terrace, and spa

planning and design to a wider range of customers, and we
expect this to attract a new customer base.

J∙RESIDENCE

Features- Accommodates people of all ages and can blend in with any location- A residential style that incorporates the equipment and speciﬁcations
found in high-grade condominiums- The proprietary earthquake-resistant technology New Power Cube isincorporated as a standard speciﬁcation

22

Light Garden

Roof Balcony

A glassed-in atrium between theentrance and living room with plants
and natural sunlight provides a bright,
warm feeling.

A large, private balcony extends beyond the bedroom. A space for a sofabed at the far end offers the relaxed
feeling of being at a resort.

Garden and Terrace

Spa

An open space provides a seamless
transition from indoor to outdoor,
while giving a sense of the season.

Relax in this open area connected to
the garden and terrace through a rowof columns.

Annual Report 2014

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BROKERAGE
Overview of the Fiscal Year
Japan’s existing home market was solid during the year, reﬂecting
a low mortgage interest rate and anticipation of higher prices
going forward. This resulted in a third consecutive year of growthin the number of contracts in greater Tokyo, and a turnaround tothe ﬁrst rise in average transaction prices in three years.
Given this environment, the segment, which is handled by
Sumitomo Real Estate Sales Co., Ltd., recorded a 6.9%
increase, to 35,455 units, in the number of transactions in our
mainstay brokerage operations, primarily for retail transactions forexisting homes, for a ﬁfth consecutive record result. With anadditional contribution from higher transaction prices on growthin the number of large corporate transactions, transaction value
increased 15.0% from the previous year.
As a result, there was a double-digit increase in both revenue and proﬁt. Revenue from operations rose 12.3%, to ¥57.2
billion, and operating income grew 23.9%, to ¥18.0 billion.
With the addition of two directly operated ofﬁces during theyear – one in Sapporo and one in Nagoya – the network boasted
a total of 251 ofﬁces nationwide as of March 31, 2014.

Basic Growth Strategy
Strengthening our business platform by further
expanding our network and pursuing closer ties
between existing ofﬁces and their local communities% of Revenue from Operations

Revenue from Operations¥57.2

billion

7.2%

Operating Income¥18.0% of Operating Income

Outlook
Our brokerage operations will continue to open new ofﬁces andupgrade existing ofﬁces, while at the same time striving to raisemarketing efﬁciency, with the aim of achieving revenue andproﬁt growth on a record number of brokerage transactions.
We are therefore forecasting a 6.6% increase in revenue
from operations, to ¥61.0 billion, with a 5.8% increase in operating income, to ¥19.0 billion, for the March 2015 ﬁscal year.

billion

10.2%

Revenue from Operations

Operating Income andOperating Margin

Billions of Yen

Billions of Yen

75

Number of Transactions andTransaction Value
%

21

60

Billions of Yen

Transactions

1,200

48,00035,455 36,993

12

13

14

Operating Income

15

0

0

(Forecast)

Operating Margin (right scale)

10

11

12

13

14

Transaction Value

1,078.2

11

19.0

10

400

32,000

987.8

0

20

31,44329,97433,18031,293858.9

15(Forecast)

18.0

14

14.5

13

14.5

57.2

12

12.2

51.0

11

10.8

49.4

10

61.0

46.4

7

44.6
0

29.4 28.4 31.4 31.1

800

892.8

24.1
25

26.3

40

834.6

14

769.9

50

15

16,0000(Forecast)

Number of Transactions (right scale)

Sumitomo Realty & Development Co., Ltd.

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CSR

Basic Approach to CSR
Sumitomo’s Business Philosophy
The Sumitomo Group’s business philosophy is encapsulated by the following precepts—“Place prime importance on integrity andsound management in the conduct of its business” and “Under no circumstances, shall it pursue easy gains or act imprudently.”
These have been inherited as teachings since the time of the Sumitomo Group’s founder. They are still regarded as the touchstone for the Sumitomo Realty Group’s business activities.

The Sumitomo Realty Group’s Fundamental Mission
Guided by Sumitomo’s business philosophy, we have set forth our fundamental
mission as being “to create even better social assets for the next generation”
through our business. Based on this fundamental stance, we engage in business with the aim of creating cities and urban spaces that are resilient to disasters and friendly to people and the environment.

Create even bettersocial assets
for the next generation

DisasterResistant

PeopleFriendly

2 People Friendly
Enhancing regional convenience andpromoting barrier-free accessOur redevelopment business makes peoplefriendly cities. A case in point is the Roppongi
3-Chome Project (East District), where anunderground walkway is being built so thatpedestrians of all abilities can move moreeasily from city areas to train stations.

AEDs
In order to be better prepared for a
medical emergency at an ofﬁce building,hotel or other key facility we run andmanage, we have installed automatedexternal deﬁbrillators (AEDs). What’smore, all personnel undertakeﬁrst-aid training.

24

1

1 Disaster ResistantProtecting office workers and businesses
Sumitomo Realty’s latest ofﬁce buildings
actively employ earthquake-resistant featuresto protect ofﬁce workers. Furthermore, we
install emergency generators in buildings to
supply power for a certain period of time during a blackout, enabling tenants to continue
operations.

Contributing to regional disasterprevention

2
3

Environment
Friendly

Sumitomo Realty has contributed to regional
development through various redevelopment
projects in cities. By redeveloping areas with
densely packed wooden houses, we recreate
cities so they are more resistant to disasters.
The open spaces that are a feature of our redevelopment projects also serve as places for
temporary refuge in a disaster.

3 Environment Friendly
Improving the environmental
performance of buildings
When we build condominiums, we giveconsideration to theenvironment, including by planting trees,adding greenery torooftops and creating open green
areas. Furthermore, the soil excavated during
construction is processed into soil blocks.

We have developed technology for reusing soil from condominium construction sites
to create blocks with few CO2 emissions. The
blocks are environmentally friendly because
they are made of natural materials, which will
eventually return to the ground at the end of
their life. The blocks are used in planted 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.

Annual Report 2014

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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, underthe basic concept of creating a multipurpose urban area combining ofﬁces, residences, an event hall and shops with a gross ﬂoor
area of 168,295 m2.

Redevelopment of an Area of Densely Packed Old
Wooden Houses

Creating Green and Open Spaces

Prior to redevelopment, the area was disaster-prone, with old wooden

mate 4,000 m2 open area along the road.

houses densely packed around narrow streets. The redevelopment has

Our aim was to create an urban spaceturned it into a safe and pleasant area with the infrastructure expectedwith a pleasant environment that is easy toof a modern city, such as ﬁre-resistant buildings, public spaces and roads.

work in. We also endeavored to ease the

The redevelopment features an approxi-“heat island” effect and improve the envi-

Disaster Preparedness

ronment by adding greenery to the roofs ofWe have created open spaces that can serve as refuge areas for locals

buildings. Furthermore, by equipping thein a disaster, and provided spaces for temporary toilets as well as emer-

area with community roads primarily forgency water wells. Furthermore, we will open the large, multipurpose

non-automobile use and walkways, we

Belle Salle hall to provide shelter for people who cannot return homehave enhanced convenience and safety

in a disaster.

for pedestrians.

To further enhance our disaster preparedness, in March 2012 we
installed an electric power supply system that uses the battery thatdrives the Nissan LEAF electric car. This will be used as an auxiliary
power source in the event of a disaster, and the battery for one Nissan

Introduction of Solar Power Generationand Energy-saving Facilities

LEAF vehicle will be able to supply power to the multipurpose hall for

To supply electricity to some common areas, we installed solar panels

approximately 42 hours, or emergency-use well pumps and water puri-on the roof for generating power. And we are working to reduce energy

ﬁcation equipment for roughly eight hours.

use as well by employing a highly efﬁcient electrical air-conditioning
system and LED lighting, as well as 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 demand.

Earthquake Reinforcement, Extended Life andEnergy Conservation for Housing

Harmony with Building’s History

Shinchiku Sokkurisan is contributing to efforts to promote earthquake-new life into old houses. We add value

prooﬁng of existing homes through low-cost remodeling. It also extends

suited to modern living, while taking carethe life of existing housing through earthquake reinforcement work

to preserve the history and character of arequiring no dismantlement, while leaving the main structural elements

house that may have been home to many

intact. The process also does not waste resources and generates little

generations of a family. Sumitomo Realty is

industrial waste; for instance, old tatami mats are reused as material

giving its all to reinvigorate old houses more

for cement.

than 100 years old, helping to ensure that

Shinchiku Sokkurisan can also breathe

tradition stays alive.

Sumitomo Realty & Development Co., Ltd.

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Corporate GovernanceFundamental Approach to Corporate Governance

The Internal Audit Division, which has seven staff members, moni-

To achieve sound management, Sumitomo Realty believes that it istors the operational execution of divisions throughout the Group andimportant to share information on a Companywide basis, ensure thatthe operation of internal control systems. The division also works toeveryone is aware of problems, enhance internal management supervi-

prevent misconduct and mistakes, and proposes operational improve-sion and achieve highly transparent management through appropriate

ments. Moreover, the division reports the results of its audits to the stat-

information disclosure. We have implemented a number of corporate

utory auditors and the independent auditors and exchanges opinions

governance initiatives to realize these practices efﬁciently.

with them in an appropriate manner. These activities help to improve
the quality and efﬁciency of the audit work of the Internal Audit Division,
the statutory auditors and the independent auditors. At the same time,

Corporate Governance Bodies

the Internal Audit Division, the statutory auditors and the independent

The Board of Directors is made up of ten directors. The Board

auditors provide timely advice and guidance to internal departments

makes decisions on important Company matters, and oversees thethat are associated with internal control.

directors’ execution of duties. Furthermore, internal information, awareness of issues and other matters are shared through the Board of
Directors, internal meetings and other forums, promoting quick andIndependent Auditors

rational decision-making.

In accordance with the Corporate Law and the Financial Instruments

The Board of Statutory Auditors has ﬁve members, including threeoutside statutory auditors. To strengthen management oversight, we
continue working to enhance outside auditing. The statutory auditors
attend meetings of the Board of Directors and other important meet-and Exchange Law, the Company has concluded an auditing contract
with KPMG AZSA & Co. for the auditing of the Company’s accounts.
There are no conﬂicts of interest between Sumitomo Realty andthe independent auditing company or its employees.

ings, and track internal issues that are important for robust auditing.
Each of the three outside statutory auditors has abundant management experience at other companies, and they were nominatedReason for Adopting the Current Structure

because their character and knowledge were considered to be appro-

The current Board of Directors is comprised of directors who are familiar

priate for the Company’s statutory auditors. The outside statutory audi-

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

tors fulﬁll their roles by expressing objective opinions on governancebelieves that the current Board of Directors is most suitable for promoting

from an independent standpoint from the Company without being inﬂu-

management. While Sumitomo Realty has not appointed any outside

enced by executives responsible for operational execution. They also

directors, the Company ensures corporate governance is maintained bywork together to improve auditing by, for example, exchanging opinions

enhancing management oversight through the Board of Statutory Auditors

as needed with other statutory auditors, the Internal Audit Division andand through proper information disclosure. The Company has judged thatthe independent auditors. At the same time, they provide timely advice

corporate governance is functioning effectively with a system of ﬁve statu-

and guidance to internal departments associated with internal control.

tory auditors at present, three of whom are outside statutory auditors.

Sumitomo Realty does not have standards or a policy regarding
independence from the Company for selecting outside statutory auditors. However, the Company does refer to the Tokyo Stock Exchange’s

Internal Control and Risk Management Systems

evaluation standards regarding the independence of directors andTo efﬁciently institute sound management practices, the Company

corporate auditors when appointing such individuals.

has established a range of internal control systems and is working toenhance those systems.

General Meeting of Shareholders

Board of Statutory Auditors
Board of Directors
Independent Auditors
President

Executive Officers Committee

Internal Audit Division
Departments, Divisions, etc.

26

Annual Report 2014

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To further enhance our compliance with laws and regulations andthe medium and long term, we have determined that it promotes theto ensure ethical business practices, we established the Risk

common interests of shareholders to take certain measures to avoid

Management Committee. In addition, through the Compliancedisturbance by abnormal speculations to our business approach, which

Department, we have established internal auditing and internal reportinghas brought signiﬁcant achievements. The Company therefore intro-

systems. In these ways, we are working to prevent inappropriate andduced a policy for responding to large-scale purchases of its shares,

illegal actions.

and at the ordinary General Meeting of Shareholders held on June 28,

In regard to information management, to ensure proper storage

2007 the policy was approved by more than 70% of shareholders,and control of documents, we have established internal standards forwhich is the level of support required for the approval of special resolu-

document control. Furthermore, in terms of risk management systems,

tions. With the approval of shareholders at the 77th General Meeting ofeach department tracks and manages the risks associated with its

Shareholders held in 2010, and again at the 80th General Meeting ofoperations on a daily basis, while important issues are discussed andShareholders held in 2013, the policy has been extended to the conclu-

decided upon by the Board of Directors and the Executive Ofﬁcers

sion of the 83rd General Meeting of Shareholders, scheduled to be held

Committee. In the future, we will consider further enhancement of regu-

in June 2016.

lations and systems as needed.

Compensation of Directors and Statutory Auditors

Overview of Takeover Defense Measures
and Board of Directors’ Judgment

At the ordinary General Meeting of Shareholders held in June 2004, we

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

introduced a new performance-based compensation system for direc-

shares is initiated, the shareholders, in principle, should decide totors. Under this system, the annual compensation for directors is based

accept or reject the large-scale purchase. To enable the shareholders toon the Company’s performance. The new system combines the threecorrectly understand the large-scale purchase’s effect on the corporate

elements that made up the previous system—monthly compensation,

value and the common interests of shareholders, however, it is neces-annual bonuses and retirement allowances.

sary that both the party making the large-scale purchase and the Board

Under the new system, total annual (July to June) compensationof Directors of the Company provide to the shareholders necessary andfor directors is set at 1% of consolidated ordinary proﬁt. In the year

sufﬁcient information, opinions, alternative proposals, etc. and that theunder review, compensation for directors was ¥1,131 million, compen-shareholders are given sufﬁcient time to consider the provided informa-sation for statutory auditors (excluding outside statutory auditors)

tion, opinions, alternative proposals, etc.

was ¥30 million and compensation for outside statutory auditorswas ¥39 million.

The large-scale purchase rules stipulate that the large-scale purchase shall begin after necessary and sufﬁcient information is provided
to the Board of Directors by the large-scale purchaser and a certain

Takeover Defense Measures

period for evaluation by the Board of Directors has elapsed.
To ensure the objectivity, fairness and rationality of decisions of the

The Group endeavors to increase corporate value through integrated

Board of Directors, a special committee will be established that consists

Group management. This entails striving for well-balanced growthof members selected from among external academic experts, lawyers,

whereby mainstay businesses of a different nature—leasing, sales, con-certiﬁed public accountants, etc.

struction and brokerage—complement each other.
Of our business segments, the real property leasing business andIf the large-scale purchase will signiﬁcantly damage the corporate
value and common interests of shareholders, after considering thethe real property sales business are “development businesses based on

opinions of external experts, including lawyers and ﬁnancial advisors,market anticipation” requiring anticipatory investments. In other words,

and taking into the fullest account the recommendations of the special

we need to acquire land and construct a building within a planned

committee, the Board of Directors may take countermeasures to deter

period before we are allowed to record revenue. The Company’s main

the purchase, such as the issuance of stock options.

business is to always make appropriate anticipatory investments for the

Based on the above basic conceptions, we set out rules on large-

future. The characteristic of the two businesses mentioned above isscale purchases and request the large-scale purchaser to comply withthat investments lead to revenues and enhancement of our corporate

the large-scale purchase rules. The Board of Directors shall take certain

value after an interval.

measures if the large-scale purchaser does not comply with the large-

However, considering the existence of a large number of market

scale purchase rules, or even though the large-scale purchaser com-

participants who are capable of making huge investments, we are cau-plies with the large-scale purchase rules, if it is clear that the large-scaletious about the risk of abnormal investment activity in the stock of thepurchase will cause unrecoverable damage to the Company or if theCompany amid an enormous variety of decisions and speculations.

large-scale purchase signiﬁcantly damages the corporate value andHence as a company aiming to improve shareholder value steadily overcommon interests of shareholders.

Sumitomo Realty & Development Co., Ltd.

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Board of Directors and Statutory Auditors
As of June 27, 2014

Chairman of the Board

Deputy Chairman of the Board

President

Junji Takashima*

Kenichi Onodera

Kojun Nishima*

Deputy President

Deputy President

Director

Nobuaki Takemura*

Masato Kobayashi*

Yoshiyuki Odai** Executive Managing Director

Director

Director

Director

Director

Yoshinobu Sakamoto

Hiroshi Kato

Koji Ito

Toshikazu Tanaka

Statutory Auditors
Shoichi Abbe
Yozo Izuhara
Hiroshi Tomoyasu
Tadashi Kitamura
Yoshifumi Nakamura

28

Annual Report 2014

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Financial Section
30 Eleven-year Financial Summary
32 Management’s Discussion and Analysis
36 Consolidated Balance Sheets
38 Consolidated Statements of Income andConsolidated Statements of Comprehensive Income
39 Consolidated Statements of Changes in Net Assets
40 Consolidated Statements of Cash Flows
41 Notes to Consolidated Financial Statements
63 Independent Auditor’s Report

Sumitomo Realty & Development Co., Ltd.

29

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

Millions of yen

2014

2013

2012

2011

2010

¥ 780,273
283,730
234,093
201,190
57,211¥ 736,652
278,317232,149
171,082
50,957¥ 688,662
271,812
198,154
165,995
49,397¥ 744,756
292,875
239,709
162,924
46,430¥ 719,636
293,533
219,662
158,21444,621

Cost of revenue from operations

558,987

529,913490,437

551,364

534,270

SG&A expenses

60,815
7.8%

55,394
7.5%

50,760
7.4%

54,9297.4%

51,3877.1%

160,471
20.6%

151,345
20.5%

147,465
21.4%

138,46318.6%

133,979
18.6%% of revenue from operations

130,537
16.7%

114,916
15.6%

107,91215.7%

106,29614.3%

100,464
14.0%

Net income

69,697

59,82553,23650,90852,662

Depreciation and amortization

35,311

37,761

36,04923,70518,065¥ 924,452
715,779
4,220,429
707,948
2,652,929¥ 965,786
679,496
4,105,500
627,0122,424,932¥ 801,142
586,1703,859,698
553,8442,407,639¥ 805,958
558,091
3,234,203
526,227
1,901,850¥ 802,693
521,871
3,168,098
488,896
1,785,854

¥

¥

¥

¥

¥

For the Year
Revenue from operations
Leasing
Sales
Construction
Brokerage% of revenue from operations
Operating income% of revenue from operations
Ordinary profit*2

At Year-end
Current assets
Inventories
Total assets
Shareholders’ equity*3
Net interest-bearing debt

Per Share Amounts (Yen)
Net income
Shareholders’ equity
Cash dividend applicable to the year

147.02
1,493.48
20.00

126.181,322.52
20.00

112.281,168.11
20.00

107.35
1,109.78
20.00

111.04
1,030.93
20.00

Key Ratios
Equity ratio (%)
ND/E ratio*4 (Times)
ROE (%)ROA (%)
Long-term debt ratio (%)
Fixed-interest rate debt ratio (%)
Interest coverage ratio*5 (Times)

16.8
3.7
10.4
4.0
95
82
6.1

15.3
3.9
10.1
3.9
93
80
4.9

14.3
4.3
9.9
4.3
93
80
4.2

16.3
3.6
10.0
4.4
89
79
4.7

*1. U.S. dollar amounts in this report are translated, for convenience only, at the rate of ¥102.88 = U.S.$1, the prevailing exchange rate at March 31, 2014.
*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 importantrole in the calculation of incentive payments for directors.
*3. Shareholders’ equity = Net assets – Minority interests*4. ND/E ratio = Net interest-bearing debt (Interest-bearing debt – Cash, time and notice deposits) / Shareholders’ equity*5. Interest coverage ratio = (Operating income + Interest and dividend income) / Interest expense

30

Annual Report 2014

15.4
3.7
11.4
4.4
83
81
4.6

Thousands of U.S. dollars*1

2009

2008

2007

2006

2005

2004

2014

¥ 695,240
298,359
191,224
160,134
43,105¥ 691,928
279,568
193,575
156,606
58,542¥ 676,834
262,620
211,035
142,564
56,532¥ 646,525
234,280
224,735
135,158
49,217¥ 616,115
221,234
224,191
127,388
43,445¥ 573,862
202,776
213,303
125,086
39,809$ 7,584,302
2,757,873
2,275,399
1,955,579
556,094

496,547

488,202490,491

487,805

470,636

435,078

5,433,388

52,327
7.5%

49,118
7.1%

49,167
7.3%

46,6977.2%

45,1887.3%

42,8077.5%

591,126—

146,366
21.1%

154,608
22.3%

137,176
20.3%

112,02317.3%

100,291
16.3%

95,97716.7%

1,559,788—

113,582
16.3%

125,17618.1%

112,406
16.6%

87,03813.5%

74,39312.1%

65,97611.5%

1,268,828—

46,205

63,13350,30032,506

15,5486,320

677,459

17,886

17,15015,677

16,33014,01912,211

343,225¥ 759,816
518,885
3,006,412
436,667
1,722,733¥ 784,195
511,868
2,894,004
427,423
1,548,509¥ 756,488
489,093
2,747,900
409,197
1,343,824¥ 619,219
330,700
2,460,080
375,656
1,150,880¥ 481,341
211,180
2,136,329
320,098
935,155¥ 503,911
189,547
2,090,970
303,875
916,156$ 8,985,731
6,957,416
41,022,832
6,881,299
25,786,635

¥

¥

¥

¥

¥

¥

$

97.39
920.74
20.00

14.5
3.9
10.7
5.1
76
77
4.9

133.00900.57
18.00

14.8
3.6
15.1
5.6
83
85
6.2

105.92861.93
14.00

14.9
3.3
12.8
5.4
79
83
6.8

68.33
790.74
10.00

15.3
3.1
9.3
5.0
80
77
6.5

32.64
673.40
9.00

15.0
2.9
5.0
4.8
83
87
5.2

15.34
639.01
9.00

14.5
3.0
2.5
4.7
80
82
4.1

1.43
14.52
0.19

—
—
—
—
—
—
—

Sumitomo Realty & Development Co., Ltd.

31

Management’s Discussion and Analysis

Review of the March 2014 Fiscal Year and Progressunder the Sixth Management Plan

Results of Operations
Revenue from Operations and Operating Income

Sumitomo Realty began operating under the Sixth Management Plan from

Both revenue and profit grew at all four main business segments during theApril 2013. The Plan sets cumulative three-year targets of ¥400 billion of

fiscal year under review, thanks to factors including solid leasing operations

ordinary profit, with single-year record revenue and profit.

on continued improvement in office leasing market conditions and an

During the March 2014 fiscal year, the first year of the Sixth Management

encouraging pace of condominium sales in sales operations. As a result,Plan, improved economic and business conditions contributed to revenue

revenue from operations grew ¥43.6 billion, or 5.9%, to ¥780.3 billion, andand profit growth at all four of our main business segments, resulting in reve-

operating income rose ¥9.1 billion, or 6.0%, to ¥160.5 billion.

nue from operations of ¥780.3 billion, with operating income of ¥160.5

Please refer to “Review of Operations” on pages 14 to 23 for detailed

billion and ordinary profit of ¥130.5 billion. These results correspond tosegment information.

roughly one-third of the Plan’s cumulative targets, for a solid start for the
Sixth Management Plan. In addition, we recorded record ordinary profit for

Other Income and Expenses

the first time in six years, surpassing the previous record set in the March

Net other expenses decreased ¥9.9 billion, to ¥45.3 billion, mainly from a2008 fiscal year. This marked the achievement of one of the Plan’s targets—¥4.9 billion decline in interest expense, net.

for record single-year ordinary profit—during the Plan’s first year.

Net Income

At the same time, the future of the economy remains uncertain with rising
construction costs and the effect of the consumption tax increase. Going

Income before income taxes and minority interests grew 19.8%, to ¥115.1

forward, we will flexibly respond to changes in the operating environment,

billion. After the payment of income taxes in the amount of ¥42.6 billion, net

while redoubling our efforts to achieve the targets set in the Sixth Manage-

income rose 16.5%, to ¥69.7 billion, and the net profit margin improved toment Plan and chart a course for sustained growth.

8.9% from 8.1%.

Please refer to “President Interview” on pages 4 to 5 for detailed information regarding the Sixth Management Plan.

Cash Flows
Cash and cash equivalents at the end of year totaled ¥146.2 billion, adecrease of ¥78.5 billion from the end of the previous fiscal year. Cash flows
were as follows.

Cash Flows from Operating Activities
Net cash provided by operating activities was ¥117.0 billion, which was¥83.4 billion more than in the previous year. In addition to the recording of¥130.5 billion in ordinary profit, this reflected an improvement in cash flow
due to the reduction of decline in inventories compared to last year.

0

11

12

13

14

Operating Income

20

100

10

50

15

0

0

(Forecast)

Operating Margin (right scale)

10

11

12

13

14

Ordinary Profit*

Net Income* Please see note *2 on page 30.

32

Annual Report 2014

135.0
77.0

10

20.4

150

165.0

20.6

Billions of Yen

30

130.5
69.7

15

(Forecast)

20.5

160.5

14

21.4

151.3

13

18.6

147.5

12

18.6

138.5

11

810.0

10

%

134.0

0

780.3

60

736.7

300

688.7

120

744.8

600

719.6

180

114.9
59.8

Billions of Yen

900

107.9
53.2

Billions of Yen

Ordinary Profit * andNet Income

106.3
50.9

Operating Income andOperating Margin

100.5
52.7

Revenue from Operations

15(Forecast)Cash Flows from Investing Activities

Millions of yen

2014

2013

Amountchange%change113,000¥ 137,500¥ –24,500– 17.8%Net cash used in investing activities was ¥295.4 billion. In addition to ¥181.5
billion of payments for purchases of property and equipment, primarily to

Short-term debt:

strengthen leasing operations, net receipts of deposits from partnership

Principally from banks

investors were ¥103.3 billion.

¥

Commercial paper

31,99659,977–27,981– 46.7%

Subtotal

144,996

197,477–52,481–26.6%

Bonds

410,000

340,000

70,00020.6%

of ¥283.4 billion in redemption of bonds and repayment of long-term loans

Non-recourse bonds

49,67250,520

–848

–1.7%

payable, and net decrease in short-term debt, including commercial paper

Loans principallyfrom banks

1,690,403

1,549,295

141,108

9.1%

amount raised, the year-end balance of long-term nonrecourse loans andNon-recourse loans

445,125

453,415–8,290–1.8%

nonrecourse bonds by SPC was a net decrease of ¥9.1 billion.

Subordinated loan

Cash Flows from Financing Activities
Net cash provided by financing activities was ¥97.5 billion. To enhance long-

Long-term debt:

term fund-raising stability, proceeds from the issuance of bonds and fromlong-term loans payable totaled ¥494.5 billion, exceeding the total amountwas ¥52.5 billion. In addition, as a result of the amount repaid exceeding theSubtotalInterest-bearing debt

Capital Resources and Liquidity
Assets60,00060,0000

0.0%

2,655,200

2,453,230

201,970

8.2%¥2,800,196¥2,650,707¥149,489

5.6%

Shareholders’ Equity*

Total assets as of March 31, 2014, were ¥4,220.4 billion, an increase of

Shareholders’ equity as of March 31, 2014, was ¥707.9 billion, a ¥80.9¥114.9 billion from the previous fiscal year-end. Current assets decreased

billion increase from the previous fiscal year-end. This included net income of¥41.3 billion, to ¥924.5 billion, mainly from a decrease in cash, time and¥69.7 billion, as well as a ¥37.8 billion net unrealized holding gains on secu-

notice deposits, and despite an increase in real estate for sale. Property andrities (a ¥17.8 billion increase from the previous fiscal year-end). As a result,equipment, net increased ¥115.8 billion, to ¥2,800.0 billion.

the equity ratio improved to 16.8%, from the previous year’s 15.3%. ROE
also improved to 10.4%, from 10.1%. ROA was 4.0%, compared with 3.9%

Liabilities

for the March 2013 fiscal year.

Total liabilities as of March 31, 2014, were ¥3,487.9 billion, an increase of* Shareholders’ equity = Net assets – Minority interests¥31.3 billion from the previous fiscal year-end. Consolidated interestbearing debt increased ¥149.5 billion, to ¥2,800.2 billion, while deposits
received decreased.

* SPEs have been included in the scope of consolidation since the March 2012 fiscal year.

Total Assets

Shareholders’ Equity andEquity Ratio

Billions of Yen

Billions of Yen

ROE and ROA

%

750

4,500

30

%
12

11.4

500

3,000

16.3

14.3

15.3

16.8

4,220.4
14

0

707.9

4,105.5
13

627.0

3,859.7
12553.8

3,234.2
11

526.2

3,168.1
10

488.9

250

1,500

0

15.4

10

11

12

13

14

20

8

10

4

0

0

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

10.0

9.9

10.1

10.4

4.4

4.4

4.3

3.9

4.0

10

11

12

13

14

ROE (Net Income / Shareholders’ Equity)
ROA (Operating Income + Interest andDividend Income / Total Assets)

Sumitomo Realty & Development Co., Ltd.

33

Management’s Discussion and Analysis

Financial Strategy

Investing in Line with Changes in the Market Environment
and Strengthening Financial Position

Characteristics of Operations and Diversification of Fund-raising

Since the second half of the 2000s, it has become increasingly difficult to

In leasing and sales, which are our mainstay business segments, several

acquire large prime sites that meet our investment criteria, in part because

years are required from the acquisition of a site to the completion of a build-of intensified competition. Given this situation, Sumitomo Realty has imple-

ing and the generation of revenue. In addition, significant advancemented a policy centered on urban redevelopment for future site acquisition.

investment is required. In consideration of these factors, under the three

As a result, we are making steady progress with the preparations for future

medium-term management plans from April 1997 to reinforce our financial

development projects in the pipeline. We plan to bring gross floor area of

position and achieve operational growth, we worked to diversify our fund-approximately 140,000 tsubo for leasing to market, mainly at large-scaleraising methods so as to control interest-bearing debt while making

redevelopment projects in Nihonbashi and Roppongi, during the Sixth

investments needed for growth.

Management Plan (please refer to pages 8 to 11 for more information
regarding Sumitomo Realty’s strength in land acquisition and projects

Specifically, we have aggressively introduced development securitization
methods using SPEs. With SPEs where off-balance sheet funds are raisedin the Sixth Management Plan). We intend to maintain this level under thethrough non-recourse loans, we have worked to conduct development on a

Seventh Management Plan, bringing gross floor area of 50,000 tsubo tolarge scale with a small amount of equity money without placing a burden on

market annually (150,000 tsubo per three-year plan) going forward, focusing

our balance sheet (SPEs have been included in the scope of consolidation

on redevelopment.

since the March 2012 fiscal year.). In addition, to diversify our fund-raising

For these future development projects, we plan to invest approximately

methods in order to control interest-bearing debt, we have formed SURF

¥400.0 billion during the three years covered by the Sixth Management Plan,(Sumitomo Realty & Development Fund) investment partnerships backed by

and we intend to cover this investment with operating cash flow. In additionleased buildings, making effective use of our assets in our fund-raising activi-

to this investment, we will consider bond issues or other debt financing if

ties. At the end of March 2014, the balance of investment received in SURF

additional investment opportunities arise, recognizing that current low inter-

investment partnerships was ¥119 billion, which was recorded on the

est rates present a favorable environment for financing.
As one of the goals of our Sixth Management Plan, we are working tobalance sheet as deposits received.

strengthen our financial position, and have been able to increase sharehold-

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 largeers’ equity through the accumulation of profit. Including the debt of SPEs,

amounts of funds without having to sell assets at low prices, and have

our net debt-equity (ND/E) ratio improved to 3.7 times as of the fiscal year-

aggressively acquired sites when site acquisition costs are low and there areend, compared with 4.8 times five years earlier. We believe we will be

investment opportunities. Consequently, our site acquisition has proceeded

able to continue to invest for growth while improving our financial balanceaccording to plan, and we were able to achieve substantial growth in reve-going forward.

nue and profit over a decade.

ND and ND/E Ratio

Billions of Yen

Times

3,000

9

2,000

6

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

Interest Coverage Ratio%

Billions of Yen

80

Times

180

100

81

79

80

80

12

82
120

8

60

0

10

11

12

13

14

0

10

11

12

13

14

ND (Net Interest-bearing Debt)

Short-term Loans and Commercial Paper

Operating Income + Interest and Dividend Income

ND/E Ratio (right scale)Long-term Loans and Bonds

Interest Expense

Fixed-interest Rate Debt Ratio

Interest Coverage Ratio (right scale)* ND up to the March 2011 fiscal year includes debt of
non-consolidated SPEs.

34

0

165.1
27.0

14

20

4

155.4
31.9

13

60

151.2
35.8

2,652.9

12

4.9

142.0
30.0

2,424.9

11

4.2

136.5
29.8

2,407.6

10

40

95

2,444.2032,363.7

1,000

4.7

4.6

3.7

93

3.9

93

4.3

89

4.6

83

4.8

6.1

Annual Report 20140

At the same time, we are enhancing the stability of our debt portfolio by

Dividend Policy

procuring funds for longer tenors and at fixed rates, to hedge against therisk of higher interest rates going forward. During the year under review, we

Our fundamental policy for the distribution of profit is to maintain a stableissued a total of ¥140.0 billion of corporate bonds, of which ¥70.0 billion

base level of dividends and, while retaining a sufficient level of earnings for

were10-year bonds that we were able to issue at an average rate of lessstable, long-term operational growth, to increase dividends in line withthan 1%. We will continue to closely observe market conditions and extend

growth in profit.

the tenor of our debt portfolio going forward. As of March 31, 2014, long-

We have implemented five plans since April 1997. We steadily strength-term debt accounted for 95% of consolidated interest-bearing debt, andened our profit foundation under two management plans—the First Plan and

fixed-rate debt for 82%.

the Second Plan. In addition, we worked to respond to various changes in

In addition, cash flow generated by our core leasing business was

accounting standards and to reduce unrealized losses. Over this period, due¥130.9 billion in the year under review, surpassing ¥100.0 billion for theto comparatively large special losses, net income fluctuated, but we main-

seventh consecutive year. This demonstrates the stability of our businesstained annual dividends at ¥6.00 per share. At the conclusion of the Second

performance, and although there has been a slight increase in net debt (ND)

Plan, we raised dividends to the bubble period level: ¥9.00 per share.

compared with five years earlier, the balance between ND and cash flow

Under the Third Plan, which began in April 2004, we completed theis improving.

implementation of measures to deal with unrealized losses, and laid theAlso, properties for leasing, including SPEs, have about ¥1 trillion in unre-foundation for full-scale growth in EPS. Thereafter, we continued to increase

alized gains (the difference between the carrying amount and the fair value).

the dividend in line with profit growth to the extent that we raised the divi-

Ratings agencies have evaluated these two strengths highly, and we havedend for the March 2009 fiscal year, the year after we recorded record highmaintained our rating even in difficult financial environments, such as after

profit, to ¥20.00 per share.

the Lehman Shock. Presently, we maintain A and A– ratings with JCR andHowever, profit subsequently declined due to the Lehman Shock. Never-

R&I, respectively.

theless, we focused on the continuation of stable dividends and maintained

Site acquisition is essential to the achievement of sustained growth.

the dividend per share at ¥20.00. Although revenue and profit grew, based

In the Sixth Management Plan, we will continue to strengthen our financial

on this dividend policy we will pay a full-year dividend of ¥20.00 per shareposition through the generation of profit and work to achieve increased

for the March 2014 fiscal year. In addition, we expect to pay a ¥20.00 per-fund-raising stability as we continue to invest in growth, centered on theshare dividend for the March 2015 fiscal year. Moving forward, we will makecore leasing business.

efforts to continue profit growth and advance the expansion of equity, whilefurther enhancing shareholder returns.

* SPEs have been included in the scope of consolidation since the March 2012 fiscal year.

Leasing Assets andReturn on Leasing Assets

129.7

130.9

11

12

13

14

6.1

10

1,200

0

0

5.6

5.3

4.8

8

100

30

4

50

0

0

4.7

10

11

12

13

14

20.0

20.0

20.0

20.0

20.0

20.0
15

10

11

12

13

14

Leasing Cash Flows

Leasing Assets

Ordinary Profit

ND / Leasing Cash Flows Ratio (right scale)

Return on Leasing Assets (right scale)

Cash Dividends per Share (right scale)

135.0
125.0

123.6

10

2,400

130.5
115.1

110.3

0

114.3

50

20

45

114.9
96.1

20.3

Yen

150

107.9
97.2

18.7

Billions of Yen

12

106.3
87.8

19.5

%

3,010.8

22.2

3,600

2,884.2

20.7

Billions of Yen

30

2,840.5

100

Times

2,170.9150

2,088.0

Billions of Yen

Cash Dividends per Share,
Ordinary Profit andIncome Before Income Taxes

100.5
91.2

Leasing Cash Flows

15

0(Forecast)

Income before Income Taxes* ND up to the March 2011 fiscal year includes debt of
non-consolidated SPEs.

Sumitomo Realty & Development Co., Ltd.

35

Consolidated Balance Sheets
Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
As of March 31, 2014 and 2013

Thousands of U.S. dollars(Note 1)Millions of yen

AssetsCurrent assets:Cash, time and notice deposits (Notes 3, 5 and 6)
Notes and accounts receivable—trade (Note 6)
Allowance for doubtful accounts (Note 6)
Inventories (Note 4)
Deferred income taxes (Note 12)
Other current assets
Total current assets

2014

2013

2014

¥ 147,267
18,813(76)715,779
11,44331,226924,452¥ 225,774
17,886(112)
679,496
10,796
31,946
965,786$ 1,431,444
182,864(739)
6,957,416
111,227
303,519
8,985,731

55,922
255,269(12,513)
298,678

39,373
222,970(15,506)
246,837

543,565
2,481,231(121,627)
2,903,169

2,149,668
928,694
25,7403,189
73,017
3,180,308

2,042,669
918,316
25,331
3,005
43,581
3,032,902

20,894,907
9,026,963
250,194
30,997
709,730
30,912,791(380,263)
2,800,045(348,702)
2,684,200(3,696,180)
27,216,611

111,91453,961
14,952
16,427
197,254¥4,220,429

125,855
51,538
14,97816,306208,677¥4,105,500

1,087,811
524,504
145,334
159,672
1,917,321$41,022,832

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

Property and equipment:
Land (Notes 4, 5 and 19)
Buildings and structures (Notes 4, 5 and 19)
Machinery and equipment (Notes 5 and 19)
Leased assets
Construction in progress (Notes 4, 5 and 19)

Accumulated depreciation
Net property and equipment

Other assets:
Guarantee and lease deposits paid to lessors (Note 6)
Leasehold rights and other intangible assets
Deferred income taxes (Note 12)
Other
Total other assets
Total assets
See accompanying notes.

36

Annual Report 2014

Thousands of U.S. dollars(Note 1)Millions of yen

Liabilities and Net Assets
Current liabilities:
Short-term debt (Notes 6 and 8)
Long-term debt due within one year (Notes 6 and 8)
Long-term non-recourse debt due within one year (Notes 5, 6 and 8)
Notes and accounts payable—trade (Note 6)
Accrued income taxes
Accrued bonuses
Deposits received (Notes 6 and 13)
Other current liabilities (Note 13)
Total current liabilities

2014

2013

2014

¥ 144,996
280,085
77,68345,502
28,988
3,774
146,690
101,799
829,517¥ 197,477
278,392
84,53838,811
22,156
3,351
206,865
98,795930,385$ 1,409,370
2,722,444
755,084442,282
281,765
36,683
1,425,836
989,492
8,062,956

1,880,319
417,114325,138—
5,092
30,7172,658,380

1,670,903
419,397
404,411
5,518—
26,021
2,526,250

18,276,818
4,054,374
3,160,362—
49,495298,570
25,839,619

122,805
132,750423,600(4,141)
675,014

122,805
132,749
363,384(3,779)615,159

1,193,672
1,290,338
4,117,418(40,250)
6,561,178

37,763(1,641)(3,362)
174
32,934
24,584
732,532¥4,220,429

19,981(1,393)(6,736)—
11,852
21,854
648,865¥4,105,500

367,059(15,951)(32,678)
1,691
320,121238,958
7,120,257$41,022,832

Long-term liabilities:
Long-term debt due after one year (Notes 6 and 8)
Long-term non-recourse debt due after one year (Notes 5, 6 and 8)
Guarantee and deposits received (Notes 6 and 13)
Allowance for employees' severance and retirement benefits (Note 9)
Net defined benefit liability (Note 9)
Other long-term liabilities (Notes 12 and 13)
Total long-term liabilities

Contingent liabilities (Note 20)
Net assets (Note 14):
Shareholders’ equity
Common stock:
Authorized —1,900,000 thousand shares
Issued—476,086 thousand shares

Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity
Accumulated other comprehensive income (loss)
Net unrealized holding gains on securities
Net deferred losses on hedges
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets

Sumitomo Realty & Development Co., Ltd.

37

Consolidated Statements of Income
Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
For the years ended March 31, 2014, 2013 and 2012

Thousands of U.S. dollars(Note 1)Millions of yen

2014¥780,273

2013¥736,652

2012¥688,662

2014$7,584,302

558,987
60,815619,802529,91355,394585,307490,437
50,760541,197

5,433,388
591,126
6,024,514

Operating income
Other income (expenses):
Interest expense, net
Dividend income
Gain on sale of property and equipment
Loss on sale of property and equipment
Loss on impairment of fixed assets (Note 10)
Loss on disposal of property and equipment
Gain on sale of investments in securities
Loss on sale of investments in securities
Loss on devaluation of investments in securities
Dividend to partnership investors
Loss on devaluation of common stocks of affiliates
Other, net

160,471

151,345

147,465

1,559,788(26,911)
4,569
19
(3)
(15,068)(1,919)
1,430
—
(96)
(2,174)—(5,196)(45,349)(31,820)
4,021
21
(10)
(16,967)(1,405)
1,769(187)(2,087)(2,566)—(6,052)(55,283)(35,748)
3,684
429
(399)
(5,618)(555)——(3,740)(2,853)(854)(4,644)(50,298)(261,577)
44,411185(29)(146,462)(18,653)
13,900—(933)(21,131)—(50,506)(440,795)

Income before income taxes and minority interests
Income taxes (Note 12):Current
DeferredTotal

115,12296,062

97,167

1,118,993

45,125(2,521)42,60437,432(3,508)33,924

37,616
4,224
41,840438,618(24,504)
414,114

Income before minority interests

72,51862,13855,327

704,879

Minority interests

2,821

2,313

2,091

27,420¥ 69,697¥ 59,825¥ 53,236$ 677,459

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

Net income

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

U.S. dollars (Note 1)

2014

2013

2012

2014

¥147.02—
20.00¥126.18—
20.00¥112.28
99.83
20.00

$1.43
—
0.19

Consolidated Statements of Comprehensive Income
Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
For the years ended March 31, 2014, 2013 and 2012
Thousands of U.S. dollars(Note 1)Millions of yen

Income before minority interests
Other comprehensive income (loss) (Note 18)
Net unrealized holding gains on securities
Net deferred gains (losses) on hedges
Foreign currency translation adjustments
Total other comprehensive income
Comprehensive income
Comprehensive income attributable to:
Owners of the parent
Minority interests
See accompanying notes.

38

Annual Report 20142014
¥72,518

2013¥62,1382012¥55,327

2014$704,879

17,796(262)
4,220
21,754¥94,272

21,919(387)
1,741
23,273¥85,411

4,780
1,212
(1,067)
4,925¥60,252

172,978(2,546)41,019211,451$916,330¥90,604
3,668¥82,724
2,687¥58,352
1,900$880,677
35,653

Consolidated Statements of Changes in Net Assets
Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
For the years ended March 31, 2014, 2013 and 2012

Thousands

Number ofshares ofcommonstock

Balance at April 1, 2011
476,086
Net income—
Foreign currency translation
adjustments—
Net unrealized holding gains on
securities—
Acquisition of treasury stock—
Disposal of treasury stock—
Change of scope of consolidation—
Cash dividends paid:
Final for prior year(¥10 per share)—
Interim for current year(¥10 per share)—
Minority interests—
Net deferred gains onhedges—Balance at April 1, 2012
476,086
Net income—
Foreign currency translation
adjustments—
Net unrealized holding gains
on securities—
Acquisition of treasury stock—
Disposal of treasury stock—
Cash dividends paid:
Final for prior year(¥10 per share)—
Interim for current year(¥10 per share)—
Minority interests—
Net deferred losses on hedges—
Balance at April 1, 2013
476,086
Net income—
Foreign currency translation
adjustments—
Net unrealized holding gains on
securities—
Acquisition of treasury stock—
Disposal of treasury stock—
Cash dividends paid:
Final for prior year(¥10 per share)—
Interim for current year(¥10 per share)—
Minority interests—
Net deferred losses on hedges—
Remeasurements of defined
benefit plans—
Balance at March 31, 2014
476,086

Millions of yen
Shareholders’ equity

Accumulated other comprehensive income (loss)
RemeaTotal
Net unrealized
Foreignsurements accumulated
holding gains Net deferredcurrencyof definedother(losses) on gains (losses) translation
benefit comprehensive
securities
on hedges adjustments
plansincome (loss)

Commonstock

CapitalsurplusRetainedearnings

Treasurystock

Total shareholders’equity¥122,805—¥132,748—¥290,260
53,236¥(3,645)—¥542,168
53,236¥ (6,701)—¥(1,925)—¥(7,315)
—

¥ —
—

—

—

—

—

—

—

—

(826)

—
—
—

—
—
—

—
—
—

—
(61)
2

—
(61)
2

4,768
—
—

—
—
—

—

—

(20,971)—(20,971)———(4,742)—(4,742)————(4,742)————¥122,805——¥132,748——¥313,041
59,825—¥(3,704)—

Minority
interests

Total net
assets¥(15,941)—¥19,102—¥545,329
53,236

—

(826)

—

(826)

—
—
—

—
—
—

4,768
—
—

—
—
—

4,768
(61)
2

—

—

—

—

—

(20,971)

—

—

—

—

—

—

(4,742)(4,742)
—

—
—

—
—

—
—

—
—

—
—

—
9,721

(4,742)9,721—¥564,890
59,825—¥ (1,933)—

953¥ (972)——¥(8,141)
—

—
¥ —
—

953
¥(11,046)——¥28,823—

953¥582,667
59,825

—

—

—

—

—

—

—

1,405

—

1,405

—

1,405

—
—
—

—
—
1

—
—
—

—
(77)
2

—
(77)
3

21,914
—
—

—
—
—

—
—
—

—
—
—

21,914—————

21,914
(77)
3

—

—

(4,741)—(4,741)

—

—

—

—

—

—

(4,741)———¥122,805————¥132,749—(4,741)——¥363,384
69,697———¥(3,779)—(4,741)——¥615,159
69,697———¥19,981
—

—
—
(421)
¥(1,393)————¥(6,736)
—

—
—
—
¥ —
—

—
—
(421)
¥ 11,852——(6,969)—¥21,854—(4,741)(6,969)(421)¥648,865
69,697

—

—

—

—

—

—

—

3,374

—

3,374

—

3,374

—
—
—

—
—
1

—
—
—

—
(363)
1

—
(363)
2

17,782
—
—

—
—
—

—
—
—

—
—
—

17,782—————

17,782
(363)
2

—

—

(4,741)—(4,741)

—

—

—

—

—

—

(4,741)

—
—
—

—
—
—

(4,740)—————(4,740)
—
—

—
—
—

—
—
(248)

—
—
—

—
—
—

—
—
(248)

—
2,730
—

(4,740)
2,730
(248)

—
¥122,805—¥132,750—¥423,600—¥ (4,141)—¥675,014—¥37,763—¥ (1,641)—¥ (3,362)

174
¥174

174
¥ 32,934—¥24,584174¥732,532

RemeaTotal
Foreignsurements accumulated
Net unrealized Net deferredcurrencyof definedotherholding gains losses ontranslation
benefit comprehensive
on securities
hedgesadjustments
plansincome (loss)

Minority
interests

Total net
assets$194,217—$(13,540)—$(65,474)—$212,422 $6,307,009—
677,459

Thousands of U.S. dollars (Note 1)
Shareholders’ equity

Commonstock

Balance at April 1, 2013
Net income
Foreign currency translation
adjustments
Net unrealized holding gains
on securities
Acquisition of treasury stock
Disposal of treasury stock
Cash dividends paid:
Final for prior year($0.10 per share)
Interim for current year($0.10 per share)
Minority interests
Net deferred losses on hedges
Remeasurements of defined
benefit plans
Balance at March 31, 2014

CapitalsurplusRetainedearnings$1,193,672 $1,290,329 $3,532,115——
677,459

Accumulated other comprehensive income (loss)

Treasurystock

Total shareholders’equity$(36,732) $5,979,384—
677,459$——$115,203
—

—

—

—

—

—

—

—

32,796—32,796—32,796

—
—
—

—
—
9

—
—
—

—
(3,528)10—(3,528)19

172,842
—
—

—
—
—

—
—
—

—
—
—

172,842—————

172,842(3,528)19——(46,083)—(46,083)

—

—

—

—

—

—

(46,083)

—
—
—

—
—
—

(46,073)
—
—

—
—
—

(46,073)
—
—

—
—
—

—
—
(2,411)

—
—
—

—
—
—

—
—
(2,411)—
26,536—(46,073)
26,536(2,411)——$(40,250) $6,561,178—$367,059—$(15,951)—
1,691$(32,678) $1,691

1,691$320,121———$1,193,672 $1,290,338 $4,117,418—
1,691$238,958 $ 7,120,257

See accompanying notes.

Sumitomo Realty & Development Co., Ltd.

39

Consolidated Statements of Cash Flows
Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
For the years ended March 31, 2014, 2013 and 2012

Thousands of U.S. dollars(Note 1)Millions of yen

2014

2013

2012

2014

¥115,122
35,311
15,068(3,006)¥96,062
37,761
16,967
39¥97,167
36,0495,618(839)$1,118,993
343,225
146,462(29,219)

—
(155)
(16)
1,919
(1,430)96—(4,629)26,971(530)(24,292)
6,671
4,261
7,549
178,910

417
—
(11)
1,405
(1,582)
2,087—(4,090)31,889(1,243)(104,737)
4,160
15,963
6,264
101,351

219
—
(30)
555
—
3,740
854
(3,761)35,825(2,867)(14,347)
2,908(2,145)
5,798
164,744—(1,507)(156)
18,653(13,900)
933—(44,994)
262,160(5,152)(236,120)
64,843
41,41773,378
1,739,016

4,629(28,205)(38,340)
116,994

4,090(32,507)(39,339)
33,595

3,761(36,360)(30,742)
101,40344,994(274,154)(372,667)
1,137,189(181,471)
109(26,813)
3,857(1,296)
14,813(13,992)
15,395
2,381(105,667)(2,765)(295,449)(57,623)678(52,334)
6,194(1,343)
9,171(16,747)
12,781
86,327(44,085)
4,449(52,532)(112,294)
1,485(8,316)52(2,291)
10,713(18,305)
19,115
91,115(51,971)(1,403)(72,100)(1,763,909)
1,059(260,624)
37,490(12,597)
143,983(136,003)
149,640
23,143(1,027,090)(26,875)(2,871,783)(52,500)
140,000(70,000)
8,000(8,848)354,500(213,392)
67,900(76,190)(7,829)(360)(10,327)(33,499)
97,45527,78390,000(90,000)
2,000(89,828)
431,400(334,773)
109,000(48,990)
7,102(73)(10,639)
9,776
102,758(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)(510,303)
1,360,809(680,404)
77,760(86,003)3,445,762(2,074,184)
659,992(740,572)(76,098)(3,499)(100,379)(325,612)
947,269

2,491

711

(464)

24,213

Net increase (decrease) in cash and cash equivalents(78,509)84,532(1,227)(763,112)

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)

224,732

140,200

119,749

2,184,409—¥146,223—¥224,732

21,678¥140,200—$1,421,297

Cash flows from operating activities:
Income before income taxes and minority interests
Depreciation and amortization
Loss on impairment of fixed assets (Note 10)
Provision for (Reversal of) allowance for doubtful accounts
Increase in allowance for employees’ severance andretirement benefits
Decrease in net defined benefit liability
Gain on sale of property and equipment, net
Loss on disposal of property and equipment
Gain 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
Increase in notes and accounts receivable—trade
Increase in inventories
Increase in notes and accounts payable—trade
Increase (Decrease) in advances received
Other, net
Total
Proceeds from interest and dividend income
Payments for interest
Payments for income tax and other taxes
Net cash provided by operating activities

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

Cash flows from financing activities:
Increase (Decrease) in short-term debt, net
Proceeds from issuance of bonds
Redemption of bonds
Proceeds from non-recourse bonds
Redemption of non-recourse bonds
Proceeds from long-term loans payable
Repayment of long-term loans payable
Proceeds from long-term non-recourse loans
Repayment of long-term non-recourse loans
Increase (Decrease) in assignment of receivables
Increase in treasury stocks, net
Cash dividends paid
Other, net
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents

See accompanying notes.

40

Annual Report 2014

Notes to Consolidated Financial Statements
Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
As of and for the years ended March 31, 2014, 2013 and 2012

1. Basis of presenting consolidated financial statements(2) Foreign currency translation
Receivables and payables denominated in foreign currencies are translated

The accompanying consolidated financial statements of Sumitomo Realty &Development Co., Ltd. (“the Company”) and its consolidated subsidiaries

into Japanese yen at the year-end rate.
Financial statements of consolidated overseas subsidiaries are translated

have been prepared in accordance with the provisions set forth in the Finan-

into Japanese yen at the year-end rate, except for shareholders’ equity

cial Instruments and Exchange Law and its related accounting regulations,accounts, which are translated at historical rates, and income statement

and in conformity with accounting principles generally accepted in Japan

items resulting from transactions with the Company, which are translated at(“Japanese GAAP”), which are different in certain respects as to application

the rates used by the Company.

and disclosure requirements from International Financial Reporting Standards.
The accounts of the Company’s overseas subsidiaries are based on theirDifferences arising from translation are presented as “Foreign currencytranslation adjustments” in net assets.

accounting records maintained in conformity with generally accepted accounting principles prevailing in the respective countries of domicile. The(3) Cash and cash equivalents

accompanying consolidated financial statements have been restructured andIn preparing the consolidated statements of cash flows, cash on hand, read-translated into English (with certain expanded disclosure) from the consolidated

ily available deposits and short-term, highly liquid investments with maturities

financial statements of the Company prepared in accordance with Japanese

not exceeding three months at the time of purchase are considered to be

GAAP and filed with the appropriate Local Finance Bureau of the Ministry ofcash and cash equivalents.

Finance as required by the Financial Instruments and Exchange Law. Certain
supplementary information included in the statutory Japanese-language(4) Recognition of revenue

consolidated financial statements, but not required for fair presentation, is not

Revenues from sales operations of condominiums, detached houses andpresented in the accompanying consolidated financial statements.

land lots are recognized when the units are delivered and accepted by

The translation of the Japanese yen amounts into U.S. dollars is included
solely for the convenience of readers outside Japan, using the prevailing

customers. Revenues from leasing operations of office buildings, residences
and other properties are recognized as rent accrues over the lease term.

exchange rate at March 31, 2014, which was ¥102.88 to U.S. $1. The
translation should not be construed as representations that the Japanese(5) Inventories

yen amounts have been, could have been or could in the future beInventories are stated at cost, determined by the specific identification

converted into U.S. dollars at this or any other rate of exchange.

method principally. The carrying amount of inventories is written down when
the profitability declines.

2. Accounting policies(6) Securities
Held-to-maturity securities are stated at amortized cost. Investments in(1) Consolidation

subsidiaries and affiliates that are not consolidated or accounted for using

The accompanying consolidated financial statements include the accounts

the equity method are stated at moving-average cost. Available-for-saleof the Company and significant companies over which the Company has

securities with available fair values are stated at fair value. Unrealized gains

power of control through majority voting rights or existence of certain condi-

and losses on these securities are reported, net of applicable income taxes,

tions evidencing control by the Company.

as a separate component of net assets. Realized gains and losses on the

In the elimination of investments in subsidiaries, the assets and liabilities

sale of such securities are computed using moving-average cost.

of the subsidiaries, including the portion attributable to minority sharehold-Preferred equity securities are stated at cost determined by the specificers, are recorded based on the fair value at the time the Company acquired

identification method, and securities with no available fair value are stated atcontrol of the respective subsidiaries.

moving-average cost.

All significant intercompany balances, transactions and profits have been
eliminated in consolidation.
Effective from the year ended March 31, 2012, the Company early
adopted the new accounting standard, “Accounting Standard for Consoli-

Investments in limited partnerships, which are regarded as securities under
the Financial Instruments and Exchange Law, are accounted for in a manner
similar to the equity method based on the recent financial statements.
If the market value of held-to-maturity securities, investments in subsidiar-

dated Financial Statements” (ASBJ Statement No. 22 on March 25, 2011),

ies and affiliates and available-for-sale securities declines significantly, such

“Guidance on Disclosures about Certain Special Purpose Entities” (ASBJ

securities are stated at fair value and the difference between fair value andGuidance No. 15 on March 25, 2011), “Guidance on Determining a Subsid-

the carrying amount is recognized as a loss in the period of the decline. If theiary and an Affiliate” (ASBJ Guidance No. 22 on March 25, 2011) andfair value of investments in unconsolidated subsidiaries and affiliated compa-“Practical Solution on Applications of the Control Criteria and Influence Crite-

nies not accounted for using the equity method is not readily available, such

ria to Investment Associations” (ASBJ PITF No. 20 on March 25, 2011).

securities should be written down to the net asset value with a corresponding

Accordingly, 23 Special Purpose Entities, including Shiodome Hamarikyu

charge in the income statement in the event net asset value declines signifi-

Special Purpose Company, Ltd., and 1 limited partnership (“Tokumei kumiai”)

cantly. In these cases, such fair value or the net asset value will be thehave been newly included within the scope of consolidation at April 1, 2011.

carrying amount of the securities at the beginning of the next fiscal year.

This early adoption of the new accounting standard is according to the rules
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 at April 1, 2011.
Sumitomo Realty & Development Co., Ltd.

41

(7) Property and equipment

For the calculation of retirement benefit obligations, the estimated amountThe Company and its consolidated domestic subsidiaries depreciate build-of retirement benefits is allocated to the respective fiscal years by theings using the straight-line method, and other property and equipment using

straight-line method.

the declining-balance method over their estimated useful lives. The consoli-

Some of the Company’s consolidated subsidiaries calculate net defined

dated overseas subsidiaries depreciate property and equipment using

benefit liability and retirement benefit expenses by using a simplified method

primarily the straight-line method in accordance with the accounting princi-

in which retirement benefit obligations are equal to the amount that would beples in the respective countries.

paid if all employees resigned voluntarily at the end of the fiscal year.

Leased assets related to finance lease transactions without title transfer

Prior service costs are recognized as expenses in the period in which they

are depreciated using the straight-line method over the lease periods as

are incurred, and actuarial gains and losses are recognized as expenses intheir useful lives with no residual value.

the following period.

Estimated useful lives used in the computation of depreciation are gener-

Effective from the year ended March 31, 2014, the Company and its
consolidated subsidiaries adopted the new accounting standard, “Account-ally as follows:
Buildings and structures

6 to 60 years

ing Standard for Retirement Benefits” (ASBJ Statement No. 26 on May 17,

Machinery and equipment

2 to 20 years2012) and “Guidance on Accounting Standard for Retirement Benefits”

Leased assets

Lease periods(ASBJ Guidance No. 25 on May 17, 2012) (excluding provisions set forth in

Effective from the year ended March 31, 2013, in accordance with thethe main clauses of Article 35 of the Accounting Standard of Retirement

revision of the Corporation Tax Act (Law) of Japan, the Company and its

Benefits and of Article 67 of the Guidance on Accounting Standard forconsolidated domestic subsidiaries have computed depreciation by the

Retirement Benefits). Consequently, the amount of retirement benefit obliga-

method based on the revised Corporation Tax Act (Law) for the property andtions after deducting pension plan assets is recorded as net defined benefit

equipment acquired on or after April 1, 2012.

liability, and unrecognized actuarial gains and losses are included in net

This accounting change has an immaterial impact on operating income
and income before income taxes and minority interests.

defined benefit liability.
In accordance with the transitional treatment set forth in article 37 of the
Accounting Standard for Retirement Benefits, the effect of the changes on(8) Software costs

the accounting policies is reflected on remeasurements of defined benefit

Software costs are amortized using the straight-line method over the esti-

plans in accumulated other comprehensive income.

mated useful lives (five years).

As a result of adopting the new accounting standard, net defined benefit
liability of ¥5,092 million ($49,495 thousand) is recorded and accumulated(9) Allowance for doubtful accounts

other comprehensive income increased by ¥174 million ($1,691 thousand)

The Company and its consolidated subsidiaries provide for doubtful

on the consolidated balance sheet as of March 31, 2014.

accounts at an estimated uncollectable amount based on the evaluation of

The Company and certain of its consolidated subsidiaries provided an allow-

certain identified doubtful and bankrupt receivables plus an amount calcu-

ance for employees’ severance and retirement benefits at March 31, 2013 andlated using the percentage of actual collection losses in certain reference

2012 based on the estimated retirement benefit obligations at those dates.

periods with respect to remaining receivables.

(13) Construction contracts(10) Lease transactions

The construction projects for which the outcome of the portion completedLeased assets related to finance lease transactions without title transfer are

by the end of the fiscal year under review can be reliably estimated are

depreciated using the straight-line method over the lease periods as theiraccounted for by the percentage-of-completion method (the degree of

useful lives with no residual value.

completion of each construction project is estimated using the cost-

The Company and its consolidated subsidiaries use the accounting
procedures that conform to methods related to normal lease transactions

comparison method), while other construction projects are accounted for by
the completed-contract method.

with respect to finance lease transactions without title transfer with a leasetransaction start date prior to March 31, 2009.

(14) Derivative transactions and hedge accounting
The Company and its consolidated subsidiaries state derivative financial(11) Income taxes

instruments at fair value and recognize changes in the fair value as gains orIncome taxes are provided for on the basis of income for financial statement

losses unless derivative financial instruments are used for hedging purposes

purposes. The tax effects of temporary differences between the carrying

and qualify for hedge accounting.

amounts of assets and liabilities for financial statements and income tax
purposes are recognized as deferred income taxes.

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 the derivative(12) Employees’ severance and retirement benefits

financial instruments until the related gains or losses on the hedged items

The Company and certain of its consolidated subsidiaries provide two types

are recognized.

of post-employment benefit plans, lump-sum payment plans and defined42

However, in cases where foreign exchange forward contracts are used as

benefit corporate pension plans, under which all eligible employees are enti-

hedges and meet certain hedging criteria (regarding foreign exchange

tled to benefits based on their current rate of pay, length of service and thecontracts), the foreign exchange forward contracts and hedged items areconditions under which termination occurs.

accounted for in the following manner:

Annual Report 2014

1. If a foreign exchange forward contract is executed to hedge an existing(1) Outline

foreign currency receivable or payable,

The accounting standards were revised mainly with a focus on (i) the(a) the difference, if any, between the Japanese yen amount of the hedged

treatment of a change of the parent company’s ownership interest in its

foreign currency receivable or payable translated using the spot rate at

subsidiary in case of the parent company continuing to control upon

the inception date of the contract and the carrying amount of theadditional acquisition of shares of the subsidiary, (ii) the treatment ofreceivable or payable is recognized in the income statement in theacquisition costs, (iii) the presentation of net income and the change

period which includes the inception date; andfrom minority interests to non-controlling interests and (iv) the treatment(b) the discount or premium on the contract (that is, the difference between
the Japanese yen amount of the contract translated using the contracted

of provisional accounting.
(2) Effective dateforward rate and that translated using the spot rate at the inception date

They are scheduled to be effective from the beginning of the yearof the contract) is recognized over the term of the contract.

ending March 31, 2016.

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 or losses on
the foreign exchange forward contract are recognized.
Also, if interest rate swap contracts are used as a hedge and meet certain
hedging criteria (regarding interest rate swap contracts), the net amount tobe paid or received under the interest rate swap contracts is added to or

The treatment of provisional accounting is scheduled to be effective tobusiness combinations after the beginning of the year ending March
31, 2016.
(3) Impact of the adoption
The impact of the accounting change is under evaluation at the time ofthe preparation of the consolidated financial statements.
2. Accounting Standard for Retirement Benefits

deducted from the interest on the assets or liabilities relative to which the“Accounting Standard for Retirement Benefits” (ASBJ Statement No. 26

swap contract was executed as a hedge.

on May 17, 2012)“Guidance on Accounting Standard for Retirement Benefits” (ASBJ Guid-(15) Amounts per share of common stock

ance No. 25 on May 17, 2012)

The computation of net income per share is based on the weighted-average(1) Outline

number of shares of common stock outstanding during each year.

In consideration of improvement of financial reporting and international

Diluted net income per share is computed based on the amount of net

trends, “Accounting Standard for Retirement Benefits” and “Guidance

income available to the shareholders and the weighted-average number ofon Accounting Standard for Retirement Benefits” were revised mainly

shares of common stock outstanding during each year after giving effect towith a focus on the accounting method of unrecognized actuarial differ-the dilutive potential of shares of common stock to be issued upon the exer-

ences and unrecognized prior service costs, the calculation method ofcise of stock options.

retirement benefit obligations and service costs, and the expansion of

Diluted net income per share for the year ended March 31, 2014 is notdisclosure.

listed since dilutive shares of the Company had been extinguished by repay-(2) Effective datement of perpetual subordinated loans.
Cash dividends per share represent actual amounts applicable to therespective year.

The revisions of calculation method of retirement benefit obligations
and service costs are scheduled to be effective from the beginning of
the year ending March 31, 2015.
(3) Impact of the adoption of the accounting standard and the guidance(16) New accounting pronouncements(Accounting standards issued not yet effective)

The impact of the adoption of the accounting standard and the guid-

1. Accounting Standard for Business Combinations

consolidated financial statements.

ance is under evaluation at the time of the preparation of the“Accounting Standard for Business Combinations” (ASBJ Statement
No. 21 on September 13, 2013)(17) Reclassifications and restatement“Accounting Standard for Consolidated Financial Statements” (ASBJ

Certain prior year amounts have been reclassified to conform to the 2014

Statement No. 22 on September 13, 2013)presentation.

“Accounting Standard for Business Divestitures” (ASBJ Statement No. 7
on September 13, 2013)

These reclassifications had no impact on previously reported results ofoperations or retained earnings.

“Accounting Standard for Earnings Per Share” (ASBJ Statement No. 2 on
September 13, 2013)(18) Accounting changes and error corrections“Guidance on Accounting Standard for Business Combinations andEffective from the year ended March 31, 2012, the Company and its consoli-

Accounting Standard for Business Divestitures” (ASBJ Guidance No. 10

dated subsidiaries adopted the new accounting standard, “Accounting

on December 26, 2008)

Standard for Accounting Changes and Error Corrections” (ASBJ Statement“Guidance on Accounting Standard for Earnings Per Share” (ASBJ Guid-

No. 24 on December 4, 2009) and “Guidance on Accounting Standard forance No. 4 on September 13, 2013)

Accounting Changes and Error Corrections” (ASBJ Guidance No. 24 on
December 4, 2009).

Sumitomo Realty & Development Co., Ltd.

43

3. Cash and cash equivalents
Cash and cash equivalents at March 31, 2014 and 2013 consisted of the following:Thousands of
U.S. dollars

Millions of yen

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

2014

2013

2014

¥147,267(1,044)¥146,223¥225,774(1,042)¥224,732$1,431,444(10,147)$1,421,297

4. Inventories
Inventories at March 31, 2014 and 2013 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

2014

2013

2014

¥161,438
545,534
7,048
1,759¥715,779¥203,452
469,550
5,142
1,352¥679,496$1,569,187
5,302,624
68,507
17,098$6,957,416

The Company transferred amounts between inventories and property and equipment. Such transfers at March 31, 2014 and 2013 are as follows:
Thousands of
U.S. dollars

Millions of yen

Inventories:
Transferred to property and equipment
Transferred from property and equipment
Net increase (decrease)

2014

2013

—
10,163¥10,163¥(34,504)
22,328¥(12,176)

¥

2014
$

—
98,785$ 98,785

5. Pledged assets
Assets pledged as collateral at March 31, 2014 and 2013 are as follows:

Thousands of
U.S. dollars

Millions of yen

2014
Cash, time and notice deposits
Buildings and structures
Land
Construction in progress
Machinery and equipment
Total¥ 1,991
157,519446,11315851¥606,489

2013

2014

2,031
167,145446,11317
1,128¥616,434$ 19,353
1,531,094
4,336,246
146
8,272$5,895,111¥

Secured liabilities at March 31, 2014 and 2013 are as follows:

Thousands of
U.S. dollars

Millions of yen

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

2014

2013

2014

¥ 77,683
417,114¥494,797¥ 84,538
419,397¥503,935$ 755,084
4,054,374$4,809,458

Specified assets for non-recourse debts at March 31, 2014 and 2013 are as follows:

Thousands of
U.S. dollars

Millions of yen

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

2014

2013

2014

¥ 16,274
157,519446,11315851¥620,772¥ 17,450
167,145446,11317
1,128¥631,853$ 158,184
1,531,094
4,336,246
146
8,272$6,033,942(Note) “Specified assets for non-recourse debts” includes a portion of the amount of “Assets pledged as collateral” for the years ended March 31, 2014 and 2013.

44

Annual Report 2014

Interest rate swap contracts are used to hedge risks arising from fluctua-

6. Financial instruments

tions in interest rates on certain loans, corporate bonds, commercial paper

1. Policy for financial instruments

and deposits.

The Company and its consolidated subsidiaries (“the Group”) have the policy

In regard to derivative transactions, the Group utilizes interest rate swaps

to limit its fund management to short-term deposits with funds through loans

for bank loans and deposits, and utilizes foreign exchange forward contracts

from banks and the issuance of corporate bonds and commercial paper.

and cross currency swap contracts for foreign currency-denominated trans-

The Group utilizes derivative financial instruments only for the purpose ofactions. Interest rate swap contracts are exposed to the risks of interest rate

hedging the foreign exchange risk associated with foreign currency-denomi-changes, and foreign exchange forward contracts and cross currency swap

nated transactions or hedging the interest rate risk associated with thecontracts are exposed to the risks of foreign exchange rate changes. The

Group’s loans payable, and does not utilize derivative financial instruments

derivative financial instruments are executed with creditworthy financial insti-

for any speculative purposes.

tutions, and the Group’s management believes there is insignificant risk ofdefault by counterparties. Derivative transactions are executed by the

2. Details of financial instruments, risks, and policies and systems of risk
management

Group’s Finance Department in accordance with the decisions of a commit-

Operating receivables such as notes and accounts receivable—trade are

Department prepares reports on derivative transactions that are provided to

exposed to customers’ credit risk, but this risk is generally avoided throughthe director of the Finance Department periodically.

tee whose chairman is the director of the Finance Department. The Financethe receipt of deposits.
Investments in securities are business-related equities and are exposed to

3. Supplemental information on fair values of financial instruments

market price fluctuation risk. The Group regularly checks the market value of

The fair values of financial instruments are based on their market prices, andthe securities and the financial condition of the issuers, and continuously

if the market price is not available, other rational valuation techniques arereviews whether it continues to hold securities with consideration for its rela-used instead. The rational valuation techniques incorporate variable factors,

tionships with the issuers.

and as a result the values may change due to using different assumptions.
The amounts of derivative transactions shown in Note 16 “Derivative transac-

Guarantee and lease deposits are mostly deposits related to leasing prop-

tions,” are not representing the market risks related to derivative transactions.

erties, and are exposed to the counterparty credit risk.

The carrying amounts of financial instruments on the consolidated balance

In addition, the Group accommodates counterparties with loans and consequently is exposed to the borrowers’ credit risk. However, the Group constantly

sheets, their fair values and the differences between them as of March 31, 2014

checks the financial condition of principal borrowers and their performanceand 2013 are as follows. (Financial instruments whose fair value is extremely diffi-

using the funds lent to those borrowers even after accommodation.

cult to estimate are not included; please see (Note 2).)The majority of due dates of operating debt, such as notes and accounts
payable, are within one year.

For 2014
Millions of yen
Carrying amount

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

Fair value

Difference

Fair value

Difference$¥ 147,267¥ 147,267—$ 1,431,444$ 1,431,444

18,813

18,813—

182,864

182,864—

210,902210,902—2,049,981

2,049,981

—

1,299

1,300

1

12,626

12,636

10

953

953

—

9,263

9,263

¥ 379,234¥ 379,235¥

1$ 3,686,178$ 3,686,188

$

10

¥

¥

¥

—

$

$

$

—

45,50245,502¥Carrying amount442,282

442,282——

144,996

144,996—

1,409,370

1,409,370—

2,160,404

2,168,585

8,181

20,999,262

21,078,781

79,519494,797499,404

4,607

4,809,458

4,854,238

44,78010,00010,000—97,201

97,201—

66,00066,000—641,524

641,524—¥2,921,699¥2,934,487¥12,788$28,399,097$28,523,396$124,299

¥

¥

¥

$

$

$

—
(2,530)¥(2,530)—(2,530)¥(2,530)

—
—

¥

—

—
(24,592)$(24,592)—(24,592)$(24,592)

—
—

$

—

Sumitomo Realty & Development Co., Ltd.

45

For 2013
Millions of yen
Carrying amount

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)(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¥ 225,774

Fair value

Difference¥ 225,774¥—

17,886(1)
17,885

17,885—

176,131

176,131

—

1,294

1,297

3

820

820

—

¥ 421,904¥ 421,907

¥

3

¥

¥

¥

—

38,811

38,811

197,477

197,477—

1,949,295

1,963,97814,683503,935

511,766

7,831

39,00039,000—66,00066,000—¥2,794,518¥2,817,032¥22,514¥¥¥—(2,127)¥(2,127)—(2,127)¥(2,127)——¥—*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.

46(Note 1) The calculation methods of fair value for financial instruments

Liabilities:

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 thefair value approximates the carrying amount because the market interest rate
is reflected in such notes within a short time period. The fair value of the fixedcoupon debt is determined based on the present value discounted at theinterest rate which reflects the period remaining to maturity and the credit risk.
For notes on securities classified by purpose of holding, please see
Note 7 “Securities.”(4) Guarantee and lease deposits
The fair value of guarantee and lease deposits are based on the value
offered by correspondent financial institutions.
For notes and securities classified by purpose of holding, please see Note
7 “Securities.”(1) Notes and accounts payable—trade and (2) Short-term debt

Annual Report 2014

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 short time period
and because the credit standing of the Company is the same after borrowing. The fixed-coupon debt is calculated by discounting the combined totalof principal and interest at an interest rate assumed for similar 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 16 “Derivative transactions”). The fair value ofthese items is calculated by discounting the combined total of interest andprincipal, with which the interest rate swap and cross currency interest rate
swap have been accounted for, at an interest rate rationally estimated forsimilar borrowings.
The fair value of corporate bonds issued by the Company (included in (3)Long-term debt (including due within one year)) is based on the market price.
(4) Long-term non-recourse debt (including due within one year)
For floating rate notes, the carrying amount is used as the fair value because
the market interest rate is reflected in such notes within a short time period
and the value of its non-exempt properties hasn’t been changed.
The fixed-coupon debt is calculated by discounting the combined total ofprincipal and interest at an interest rate assumed for similar new borrowings
or bonds.

The specific matching criteria of interest rate swaps are applicable to(5) Deposits received and (6) Guarantee and deposits received

some long-term non-recourse debts with floating interest rates (please

The fair value of these items approximates their carrying amounts because

see Note 16 “Derivative transactions”). The fair value of these items is calcu-

the market interest rate is reflected in deposits with floating interest rates

lated by discounting the combined total of interest and principal, with which

within a short time period and the credit standing of the Company is thethe interest rate swap has been accounted for, at an interest rate rationallysame after borrowing.

estimated for similar borrowings or bonds.

Derivative transactions:
Please see Note 16 “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 *2
Preferred equity securities, etc.*1
Investments in limited partnerships, etc.*1
Guarantee and lease deposits (excluding held-to-maturity securities and available-for-sale securities)*3
Guarantee and deposits received*4

2014

2013

2014

¥ 34,284¥ 17,735$ 333,243

18,88518,981

183,563

22,38822,288217,613

297

496

2,887

109,662

123,743

1,065,921

161,487

160,470

1,569,664*1 The fair value of these items are not disclosed since their market price is unavailable and the assessment of their fair value is deemed extremely difficult.
*2 The Company recognized ¥96 million ($933 thousand) of impairment loss on investments in securities for the year ended March 31, 2014.
*3 Guarantee and lease deposits (excluding held-to-maturity securities and available-for-sale securities) are not included in “Assets (4) Guarantee and lease deposits” because their remaining terms cannot
be determined and the assessment of their fair value is deemed extremely difficult.
*4 The fair value of guarantee and deposits received (mainly consisting of lease deposits) are not disclosed because their remaining terms cannot be determined and the assessment of their fair value isdeemed extremely difficult.

(Note 3) Redemption schedule of pecuniary claims and securities with maturities

For 2014
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¥147,267¥

5 to 10 years

Over 10 years

—

¥ —

¥—

18,724

89

—

—

—

—

—

—

257

1,048

—

—

—

—

908

—

¥166,248¥1,137¥908¥—

For 2013
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¥225,774¥

5 to 10 years—¥

Over 10 years—¥—

17,718

168

—

—

—

—

700

—

324

976

—

—

—

—

770

—

¥243,816¥1,144¥1,470¥—Sumitomo Realty & Development Co., Ltd.

47

For 2014
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$1,431,444$

5 to 10 years—$

Over 10 years—$—

181,999

865

—

—

—

—

—

—

2,498

10,187

—

—

—

—

8,826

—

$1,615,941$11,052$8,826$—(Note 4) Repayment schedule of corporate bonds, long-term debt, long-term non-recourse debt and other interest-bearing debt

For 2014
Millions of yen
Year ending March 31

2015

2016

2017

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¥144,996¥

280,085

380,863316,737

289,622275,752

617,345

77,683

68,689120,490

19,26045,535

163,140

10,000

—

—

—

—

—

—

—

40,000——26,000¥512,764¥449,552¥477,227¥308,882¥321,287¥806,485

Year ending March 31

2014

2015

2016

2017

2018

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¥197,477

¥

—

¥

2018

—

¥

2019

—

¥

2020 and thereafter

—

¥

—

For 2013
Millions of yen

—

¥

—

¥

—

¥

2019 and thereafter

—

¥

—

278,392

285,085

380,863316,612289,372

398,971

84,53876,04367,049118,850

17,620139,835

39,000

—

—

—

—

—

—

—

—

66,000——¥599,407¥361,128¥447,912¥501,462¥306,992¥538,806

2015

2016

2017

For 2014
Thousands of U.S. dollars
Year ending March 31

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

48

Annual Report 2014

—

$

2018

—

$

2019

—

$

2020 and thereafter$1,409,370$—

2,722,444

3,702,012

3,078,703

2,815,144

2,680,327$

6,000,632—

755,084

667,661

1,171,171

187,208

442,603

1,585,731

97,201

—

—

—

—

—

—

—

388,802——

252,722$4,984,099$4,369,673$4,638,676$3,002,352$3,122,930$7,839,085

7. Securities
For 2014
A. The following tables summarize the acquisition costs, carrying amounts and fair values of securities with available fair values as of March 31, 2014:(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

Thousands of U.S. dollars

Fair value¥ 776

Difference¥ 778

Carrying amount¥2

Fair value$ 7,543

Difference$ 7,562

$19

523

522

(1)

5,083

5,074

(9)

¥1,299¥1,300¥1$12,626$12,636$10(b) Available-for-sale securities:
Millions of yen
Carrying amount

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

Thousands of U.S. dollars

Acquisition cost

Difference

Carrying amount

Acquisition cost

Difference¥178,465¥112,558¥65,907$1,734,691$1,094,071$640,620

953

908

45

9,263

8,826

437

686

652

34

6,668

6,337

331

180,104

114,118

65,986

1,750,622

1,109,234

641,388

30,92138,068(7,147)

300,554370,023(69,469)

—

—

—

—

—

—

830

954

(124)

8,068

9,273

(1,205)31,751

39,022(7,271)

308,622379,296(70,674)¥211,855¥153,140¥58,715$2,059,244$1,488,530$570,714* Debt securities in securities whose carrying amount exceeds acquisition cost are included in “Guarantee and lease deposits paid to lessors” on the consolidated balance sheets.

B. Total sales of available-for-sale securities sold in the year ended March 31, 2014 amounted to ¥3,656 million ($35,537 thousand) and the related gains
amounted to ¥1,430 million ($13,900 thousand).
C. The Company lent the equity securities temporarily to financial institutions under securities lending agreements. Lent securities, included in investments insecurities and other, were ¥96,140 million ($934,487 thousand) as of March 31, 2014.

Sumitomo Realty & Development Co., Ltd.

49

For 2013
A. The following tables summarize the acquisition costs, carrying amounts and fair values of securities with available fair values as of March 31, 2013:(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

¥ 771

Fair value

Difference

¥ 775

¥4

523

522

(1)

¥1,294¥1,297¥3(b) Available-for-sale securities:
Millions of yen
Carrying amount

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

Acquisition cost

Difference¥124,162¥ 81,426¥42,736

819

770

49

435

433

2

125,416

82,62942,78749,716

61,271(11,555)

700

700

—

1,118

1,294

(176)

51,53463,265(11,731)¥176,950¥145,894¥31,056* Debt securities in securities whose carrying amount exceeds acquisition cost are included in “Guarantee and lease deposits paid to lessors” on the consolidated balance sheets.
(Note) The Company recognized ¥2,087 million of impairment loss on investments in securities (¥1,861 million on equity securities in available-for-sale securities).

B. Total sales of available-for-sale securities sold in the year ended March 31, 2013 amounted to ¥6,121 million and the related gains and losses amounted to¥1,769 million and ¥187 million, respectively.
C. The Company lent the equity securities temporarily to financial institutions under securities lending agreements. Lent securities, included in investments insecurities and other, were ¥129,719 million as of March 31, 2013.

8. Short-term debt and long-term debt
Short-term debt at March 31, 2014 and 2013 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2014
Loans, principally from banks
Commercial paper
Total

Average interest
rate (%)¥113,000

0.45

31,9960.09¥144,996

2013

Average interest
rate (%)¥137,500

0.52

59,977

0.11¥197,477

2014$1,098,367
311,003$1,409,370

The interest rates represent weighted average rates in effect at March 31, 2014 and 2013, regardless of borrowing currencies, though the range of the interest rate varies by borrowing currency.

50

Annual Report 2014

Long-term debt at March 31, 2014 and 2013 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2014
1.89% domestic straight bonds, due 2013
1.70% domestic straight bonds, due 2013
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 20170.55% domestic straight bonds, due 2017
0.50% domestic straight bonds, due 2017
0.50% domestic straight bonds, due 2017
0.486% domestic straight bonds, due 20170.444% domestic straight bonds, due 2017
0.388% domestic straight bonds, due 2018
0.329% domestic straight bonds, due 2018
0.563% domestic straight bonds, due 2020
0.877% domestic straight bonds, due 2020
0.462% domestic straight bonds, due 2018
1.098% domestic straight bonds, due 2023
0.426% domestic straight bonds, due 2018
0.355% domestic straight bonds, due 2018
0.950% domestic straight bonds, due 2023
0.344% domestic straight bonds, due 2018
0.968% domestic straight bonds, due 2023
0.987% domestic straight bonds, due 2024
0.914% domestic straight bonds, due 2024
Loans, principally from banks and insurance companies, with interest at weighted average rates of 0.62% in2014, and 0.73% in 2013, respectively:
SecuredUnsecured*
Subtotal
Amount due within one year
Total

¥

—

2014

2013
¥

10,000$——20,000——20,000——20,000—10,00010,00097,201

20,00020,000

194,400

10,00010,00097,201

10,00010,00097,201

10,00010,00097,201

30,00030,000291,602

30,00030,000291,602

10,00010,00097,201

20,00020,000

194,400

10,00010,00097,201

10,00010,00097,201

10,00010,00097,201

10,00010,00097,201

10,00010,00097,201

10,00010,00097,201

10,00010,00097,201

10,00010,00097,201

20,00020,000

194,400

10,00010,00097,201

10,00010,00097,201

20,000—

194,400

10,000—97,201

10,000—97,201

20,000—

194,400

10,000—97,201

10,000—97,201

10,000—97,201

10,000—97,201

20,000—

194,400

20,000—

194,400———

1,750,404

1,609,295

17,014,037

2,160,404

1,949,295

20,999,262(280,085)(278,392)(2,722,444)¥1,880,319¥1,670,903$18,276,818* Unsecured long-term debt as of March 31, 2014 and 2013 includes a subordinated loan of ¥60,000 million ($583,204 thousand) and ¥60,000 million, respectively.

Sumitomo Realty & Development Co., Ltd.

51

Non-recourse debt at March 31, 2014 and 2013 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2014
Non-recourse bonds, with interest at weighted average rate of 0.93% in 2014, and 1.09% in 2013,
respectively:
Due within one year
Due after one year
Subtotal
Non-recourse loans, with interest at weighted average rate of 0.82 % in 2014, and 0.95% in 2013,
respectively:
Due within one year
Due after one year
Subtotal
Total
SecuredUnsecured
Total

¥

8,348

2014

2013

¥

8,848

$

81,14341,324

41,672

401,672

49,67250,520482,815

69,33575,690673,941

375,790377,725

3,652,702

445,125

453,415

4,326,643¥494,797¥503,935$4,809,458¥494,797¥503,935$4,809,458

—

—

—

¥494,797¥503,935$4,809,458

The aggregate annual maturities of long-term debt at March 31, 2014 are as follows:Year ending March 31

2015
2016
2017
2018
2019
2020 and thereafter
Total

Millions of yen

Thousands of
U.S. dollars¥ 280,085$ 2,722,444

380,863

3,702,012

316,737

3,078,703

289,6222,815,144

275,752

2,680,327

617,345

6,000,632¥2,160,404$20,999,262

The aggregate annual maturities of non-recourse debt at March 31, 2014 are as follows:Year ending March 31

2015
2016
2017
2018
2019
2020 and thereafter
Total

Millions of yen¥ 77,683

Thousands of
U.S. dollars$ 755,084

68,689667,661

120,490

1,171,171

19,260187,208

45,535442,603

163,140

1,585,731¥494,797$4,809,458

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 and its consolidated subsidiaries have never received such a request.

52

Annual Report 2014

9. 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 except for the cases using the simplified method.

For 2014
1. Defined benefit plan
(1) Adjustment table of retirement benefit obligations between the beginning and the end of the fiscal year

Thousands of
U.S. dollars

Millions of yen

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

2014

2014

¥8,861$86,129

651

6,328

129

1,254

(9)

(87)

(535)

(5,200)¥9,097$88,424(2) Adjustment table of plan assets between the beginning and the end of the fiscal year

Thousands of
U.S. dollars

Millions of yen

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

2014

2014

¥3,471$33,738

69

671

262

2,547

407

3,956

(204)

(1,983)¥4,005$38,929(3) Adjustment table of retirement benefit obligations and plan assets at the end of the fiscal year and net defined benefit liability on the consolidated balance sheet
Thousands of
U.S. dollars

Millions of yen

Obligations under retirement benefit plans (funded)
Fair value of plan assets
Obligations under retirement benefit plans (unfunded)
Net amount of liabilities on the consolidated balance sheet
Net defined benefit liability
Net amount of liabilities on the consolidated balance sheet

2014

2014

¥ 5,089$ 49,466(4,005)(38,929)

1,084

10,537

4,008

38,958¥ 5,092$ 49,495¥ 5,092$ 49,495¥ 5,092$ 49,495(4) The components of retirement benefit expenses

Thousands of
U.S. dollars

Millions of yen

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

2014

2014

¥ 651

$ 6,328

129

1,254

(69)

(671)

(129)

(1,254)

1

10

¥ 583

$ 5,667(5) The components of remeasurements of defined benefit plans (before deducting tax effect)
Millions of yen

Unrecognized actuarial differences
Total

Thousands of
U.S. dollars

2014

2014

¥(271)$(2,634)¥(271)$(2,634)

Sumitomo Realty & Development Co., Ltd.

53

(6) Major breakdown of plan assets

2014
Debt securities
Equity securities
General life insurance accounts
Other
Total

17.8%
39.0
41.1
2.1
100.0%(7) Actuarial assumptions

2014
Discount rate
Rate of expected return on plan assets

1.5%
2.0

2. Defined contribution plan
The required contribution amount for a defined contribution plan that one of the Company’s consolidated subsidiaries adopted is ¥337 million ($3,276 thousand).

For 2013 and 2012
The allowance for severance and retirement benefits included in the liabilities section of the consolidated balance sheets as of March 31, 2013 consisted of
the following:
Millions of yen

2013
Retirement benefit obligations
Fair value of plan assets
Unrecognized actuarial differences
Allowance for employees’ severance and retirement benefits¥ 8,861(3,471)
128¥ 5,518

Included in the consolidated statements of income for the years ended March 31, 2013 and 2012 are severance and retirement benefit expenses
comprised of the following:
Millions of yen

Service costs – benefits earned during year
Interest cost on retirement benefit obligations
Expected return on plan assets
Amortization of actuarial differences
Other
Severance and retirement benefit expenses

2013

2012

¥ 557

¥ 492

130

152

(60)

(58)

392

228

318

311

¥1,337¥1,125

Other of ¥318 million for the year ended March 31, 2013 and ¥311 million for the year ended March 31, 2012 is the amount paid for a defined contribution
plan that one of the Company’s consolidated subsidiaries adopted.
The discount rate and the rate of expected return on plan assets for the years ended March 31, 2013 and 2012 are as follows:

Discount rate
Rate of expected return on plan assets

54

Annual Report 2014

2013

2012

1.0, 2.0%

1.0, 2.0%

2.0

2.0

10. Loss on impairment of fixed assets
The Company and its consolidated domestic subsidiaries recognized impairment losses on the following assets for the years ended March 31, 2014, 2013
and 2012, respectively.

For 2014
Use

Location

Land for development
Assets leased to others

Tokyo, etc.
Tokyo

Number of properties42

For 2013
Use

Location

Number of properties

Land for development

Tokyo

1

Use

Location

Number of properties

Land for development

Setagaya-ku, Tokyo, etc.

For 2012

3

The Company and its consolidated domestic subsidiaries recognized losses

As a result of transferring inventories from property and equipment, theon the impairment of certain properties, which are generally assessed individu-

carrying values of the land holdings summarized above have been reduced

ally for impairment. The Company’s houses are treated as common assets.

to their recoverable amounts by ¥15,068 million ($146,462 thousand),¥16,967 million and ¥5,618 million for the years ended March 31, 2014,2013 and 2012, 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

2014

2013

2012

2014

¥15,068¥16,967¥5,618$146,462

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.

11. Asset retirement obligations
In addition, under the partial lease contracts, the Group has obligations
Even though removing asbestos is required for some buildings the Company

for restoring office spaces when they move out. For the asset retirement

and its consolidated subsidiaries (“the Group”) operate at the time of demol-

obligations associated with such a case, the duration of use of the assets isishing, it is difficult to estimate the fair value of obligations associated withnot clear enough and these assets do not have any relocation plans. There-

such assets reasonably since the timing and/or method of settlement for thefore, the Group is unable to estimate the asset retirement obligations since it

retirement obligations are not clear enough. Therefore, for the years ended

is difficult to estimate the timing of fulfillment of the obligations. Conse-

March 31, 2014 and 2013, asset retirement obligations related to such aquently, for the years ended March 31, 2014 and 2013, asset retirementcase are not recorded (except for the asset retirement obligations recorded

obligations related to such a case are not recorded (except for the asseton the financial statements).

retirement obligations recorded on the financial statements).

Sumitomo Realty & Development Co., Ltd.

55

12. Income taxes
The normal effective statutory income tax rate in Japan arising out of the aggregation of corporate, enterprise and inhabitants’ taxes was approximately
38.01% for the years ended March 31, 2014 and 2013, and 40.69% for the year ended March 31, 2012.
Details of deferred tax assets and liabilities at March 31, 2014 and 2013 are as follows:

Thousands of
U.S. dollars

Millions of yen

Deferred tax assets:
Depreciation and amortization of consolidated adjustment
Loss on impairment of fixed assets
Loss on devaluation of real estate for sale
Net operating loss carryforwards
Accrued enterprise tax and business office tax
Net defined benefit liability
Allowance for employees' severance and retirement benefits
Allowance for doubtful accounts
Loss on devaluation of investments in SPEs’ holding properties for saleAccrued bonuses
Elimination of unrealized profit
Loss on devaluation of investments in securities
Net deferred losses on hedges
Other
Subtotal of deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Net unrealized holding gains on securities
Retained earnings appropriated for tax allowable reserves
Other
Total deferred tax liabilities
Net deferred tax assets

2014

2013

2014

¥ 11,963¥ 12,129$ 116,281

8,830

6,156

85,828

2,913

2,394

28,315

2,485

3,383

24,154

2,196

2,197

21,345

1,977—

19,217

—

1,972

—

1,762

1,503

17,127

1,645

1,645

15,990

1,496

1,414

14,541

1,017

1,054

9,885

951

1,031

9,244

925

809

8,991

5,931

6,651

57,64944,09142,338428,567(4,497)(5,526)(43,711)¥ 39,594¥ 36,812$ 384,856(20,936)(11,079)(203,499)(4,343)(4,343)(42,214)

(850)

(655)

(8,262)(26,129)(16,077)(253,975)¥ 13,465¥ 20,735$ 130,881“Act for Partial Revision of the Income Tax Act etc. for the purpose of

Following the promulgation of “Act for Partial Revision of the Income Tax

Creating Taxation System Responding to Changes in Economic and Social

Act, etc.” on March 31, 2014, the effective statutory tax rate used to measure

Structures” and “Act on Special Measures for Securing Financial Resources

deferred tax assets and liabilities was changed from 38.01% to 35.64% for

Necessary to Implement Measures for Reconstruction Following the Great

temporary differences expected to be eliminated in the fiscal year beginning

Japan Earthquake” were enacted into law on December 2, 2011 andon April 1, 2014. As a result, net deferred tax assets decreased by ¥543

became effective from April 1, 2012. The Company and its consolidated

million ($5,278 thousand) and deferred income taxes increased by ¥543

subsidiaries were subject to the new corporate tax rate based on thesemillion ($5,278 thousand) for the year ended March 31, 2014.

laws. As a result, net deferred tax assets decreased by ¥3,354 million anddeferred income taxes increased by ¥3,161 million for the year ended March
31, 2012.
The differences between the statutory tax rate and the effective tax rate for the year ended March 31, 2014 were insignificant and not presented.
The differences between the statutory tax rate and the effective tax rate for the years ended March 31, 2013 and 2012 are as follows:

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

56

Annual Report 2014

2013

2012

38.01%

40.69%(3.35)(1.33)

0.30

0.28

0.95

0.84

—

3.25

(0.60)(0.67)

35.31%

43.06%

13. Deposits received and accounts payable with interest rate
Guarantee and deposits received at March 31, 2014 and 2013 are as follows:

Thousands of
U.S. dollars

Millions of yen

2014
Short-term deposits and long-term deposits due within one year:
Non-interest-bearing
Interest-bearing

Average interest
rate (%)

2013

Total

2014

¥136,690—¥167,865—

10,0000.26

39,0000.27

146,690

Guarantee and lease deposits from tenants:
Non-interest-bearing
Interest-bearing
Long-term deposits:
Non-interest-bearing
Interest-bearing

Average interest
rate (%)

206,865

97,201
1,425,836

161,487—

160,470—

1,569,664

—

—

—

—

—

97,651—

177,941—

949,174

66,0000.31

66,0000.34

641,524

325,138

404,4113,160,362¥471,828¥611,276$4,586,198

Accounts payable with interest rate at March 31, 2014 and 2013 are as follows:

Thousands of
U.S. dollars

Millions of yen

2014
Due within one year
Due after one year
Total

$1,328,635

Average interest
rate (%)

2013

Average interest
rate (%)

2014¥ 3,277

1.28¥ 3,277

1.53

13,9741.30

17,251

1.53¥17,251¥20,528$ 31,853
135,828$167,681(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, 2014 are as follows:Year ending March 31

2015
2016
2017
2018
2019
2020 and thereafter
Total

Thousands of
U.S. dollars

Millions of yen¥10,000$ 97,201——

40,000388,802

—

—

—

—

26,000252,722¥76,000$738,725

The aggregate annual maturities of accounts payable at March 31, 2014 are as follows:Year ending March 31

2015
2016
2017
2018
2019
2020 and thereafter
Total

Millions of yen

Thousands of
U.S. dollars¥ 3,277$ 31,853

3,277

31,853

3,277

31,853

3,277

31,853

3,277

31,853866

8,416¥17,251$167,681

Sumitomo Realty & Development Co., Ltd.

57

14. Net assets
Under the Law, legal earnings reserve and additional paid-in capital could
Under the Japanese Corporate Law (“the Law”) and its regulations, thebe used to eliminate or reduce a deficit and capitalized by a resolution of theentire amount paid for new shares is required to be designated as commonshareholders’ meeting.

stock. However, a company may, by a resolution of the Board of Directors,

Additional paid-in capital and legal earnings reserve may not be distrib-

designate an amount not exceeding one-half of the price of the new shares

uted as dividends. Under the Law, all additional paid-in capital and all legal

as additional paid-in capital, which is included in capital surplus.

earnings reserve may be transferred to other capital surplus and retained

Under the Law, in cases where a dividend distribution of surplus is made, thesmaller of an amount equal to 10% of the dividend or the excess, if any, of 25%

earnings, respectively, which are potentially available for dividends.
The maximum amount that the Company can distribute as dividends isof common stock over the total of additional paid-in capital and legal earn-calculated based on the non-consolidated financial statements of theings reserve must be set aside as additional paid-in capital or legal earnings

Company in accordance with the Law and its regulations.

reserve. Legal earnings reserve is included in retained earnings on theaccompanying consolidated balance sheets.

15. Information for certain lease transactions
Future lease payments and receipts under such non-cancelable operating leases at March 31, 2014, 2013 and 2012 are as follows:
Thousands of
U.S. dollars

Millions of yen

2014
Operating leases
Future lease payments:
Due within one year
Due after one year
Total

¥

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

942

2013

¥

2014

2012

2,036

¥

2,056

$

9,156

17,736

14,12915,448172,395¥ 18,678¥ 16,165¥ 17,504$ 181,551¥ 52,024¥ 59,375¥ 57,989$ 505,677

91,61476,303

94,602890,493¥143,638¥135,678¥152,591$1,396,170

16. Derivative transactions
Hedge accounting was applied for all derivative transactions for the years ended March 31, 2014 and 2013.
The summary of these transactions is as follows:

For 2014(1) Foreign currency-related derivatives
Millions of yen

Hedging accounting

Deferred hedge
accounting

Types of derivative transactions

Hedged items

Foreign exchange forward contracts
Foreign currency-denominated transactions
Receipts in U.S. dollars / Payments in yen

Contract amounts due
after one year

Contract amounts¥11,757

Fair value

¥—

¥67

Thousands of U.S. dollars

Hedging accounting

Deferred hedge
accounting

Types of derivative transactions

Foreign exchange forward contracts
Foreign currency-denominated transactions
Receipts in U.S. dollars / Payments in yen(Note) Fair value is determined based on the quoted price obtained from relevant financial institutions.

58

Annual Report 2014

Hedged items

Contract amounts$114,279

Contract amounts due
after one year$—

Fair value$651

(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
Exceptional accounting Interest rate swap contracts
Bank loans and bonds
for interest rate swaps
Fixed rate payments / Floating rate receipts
Exceptional accounting Interest rate swap contracts
for interest rate andFixed rate payments / Floating rate receipts Foreign currency-denominated loans
currency swaps
Receipts in U.S. dollars / Payments in yen
Deferred hedge
accounting

Contract amounts due
after one year

Contract amounts

Fair value¥472,000¥472,000¥(2,597)

987,222844,131

—

4,000

4,000

—

Thousands of U.S. dollars

Hedging accounting

Types of derivative transactions

Hedged items

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

Contract amounts

Contract amounts due
after one year

Fair value$4,587,869$4,587,869$(25,243)

9,595,859

8,205,006—

38,88038,880—(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 thedifferential paid or received under the swap agreements is recognized and included in interest expenses or income of the long-term debt or the long-term non-recourse debt as hedged items. Thus,
the fair value of such interest rate swap contracts is included in the fair value of the long-term debt.

For 2013(1) Foreign currency-related derivatives
Millions of yen

Hedging accounting

Deferred hedge
accounting

Types of derivative transactions

Hedged items

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

Total

Contract amounts¥ 286

Contract amounts due
after one year¥—

Fair value

¥

5

9,184

—

134

¥9,470¥—¥139(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
Fixed rate payments / Floating rate receipts
Exceptional accounting Interest rate swap contracts
Bank loans and bonds
for interest rate swaps
Fixed rate payments / Floating rate receipts
Exceptional accounting Interest rate swap contracts
for interest rate andFixed rate payments / Floating rate receipts Foreign currency-denominated loans
currency swaps
Receipts in U.S. dollars / Payments in yen
Deferred hedge
accounting

Contract amounts

Contract amounts due
after one year

Fair value¥432,000¥422,000¥(2,266)

847,706

676,822

—(*)

4,000

4,000

—(*)

(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 thedifferential paid or received under the swap agreements is recognized and included in interest expenses or income of the long-term debt or the long-term non-recourse debt as hedged items. Thus,
the fair value of such interest rate swap contracts is included in the fair value of the long-term debt.

Sumitomo Realty & Development Co., Ltd.

59

17. Segment information
The Company and its consolidated subsidiaries mainly operate their business in five segments: (1) Leasing business consists of leasing of office buildings, residences and other properties, and management of these properties; (2) Sales business consists of sale of condominiums, detached houses and land lots; (3)Construction business consists of construction of housing, condominiums and buildings; (4) Brokerage business; and (5) Other business including fitness business and restaurant business.
Information by business segment for the years ended March 31, 2014, 2013 and 2012 is summarized as follows:
Millions of yen
Reportable segments

For 2014
Revenue from operations:Customers
Intersegment
Total
Segment profit
Segment assets
Other:
Depreciation and amortization
Loss on impairment of fixed assets
Increase in property andequipment, and intangible assets

Leasingbusiness

Salesbusiness

Construction
business

Brokeragebusiness

Other business

Total

Consolidated financial
statements amounts

Adjustments¥ 280,105¥233,869¥198,324¥56,591¥11,384¥ 780,273

3,625

224

2,866

620

4,706

12,041(12,041)—

283,730

234,093

201,190

57,211

16,090792,314(12,041)

780,273¥¥—¥ 780,273

97,952¥ 39,209¥ 18,709¥17,962¥ 1,910¥ 175,742¥ (15,271)¥ 160,471¥3,010,807¥749,259¥ 17,924¥13,813¥17,567¥3,809,370¥411,059¥4,220,429

¥

¥

¥

¥

¥

¥

¥

¥

32,975

230

744

185

143

34,2771,034

35,31126

15,042———

15,068—15,068

173,648

2,474

1,891

286

294

178,593327

178,920

Millions of yen
Reportable segments

For 2013
Revenue from operations:Customers
Intersegment
Total
Segment profit
Segment assets
Other:
Depreciation and amortization
Loss on impairment of fixed assets
Increase in property andequipment, and intangible assets

Leasingbusiness

Salesbusiness

Construction
business

Brokeragebusiness

Other business

Total

Consolidated financial
statements amounts

Adjustments¥ 275,379¥231,928¥168,608¥50,397¥10,340¥ 736,652

2,938

221

2,474

560

5,451

11,644(11,644)—278,317232,149

171,082

50,957

15,791

748,296(11,644)736,652¥¥—¥ 736,652

94,187¥ 38,924¥ 15,758¥14,494¥ 1,667¥ 165,030¥ (13,685)¥ 151,345¥2,884,179¥732,713¥ 15,358¥12,490¥24,874¥3,669,614¥435,886¥4,105,500

¥

¥

¥

¥

¥

¥

¥

¥

35,558

275

552

195

123

36,703

1,058

37,761—

16,967———

16,967—

16,96755,346

3,394

1,367

134

251

60,492

159

60,651Millions of yen
Reportable segments

For 2012
Revenue from operations:Customers
Intersegment
Total
Segment profit
Segment assets
Other:
Depreciation and amortization
Loss on impairment of fixed assets
Increase in property andequipment, and intangible assets

60

Annual Report 2014

Leasingbusiness

Salesbusiness

Construction
business

Brokeragebusiness

Other business

Total

Consolidated financial
statements amounts

Adjustments¥ 269,225¥198,070¥163,246¥48,882¥ 9,239¥ 688,662

2,587

84

2,749

515

4,932

10,867(10,867)—

271,812

198,154

165,995

49,397

14,171

699,529(10,867)

688,662¥¥—¥ 688,662

89,636¥ 37,892¥ 16,476¥14,540¥ 1,757¥ 160,301¥ (12,836)¥ 147,465¥2,840,515¥678,886¥ 13,824¥12,809¥39,236¥3,585,270¥274,428¥3,859,698

¥

¥

¥

¥

¥

¥

¥

¥

33,990

227

448

215

104

34,984

1,065

36,049

—

5,618

—

—

—

5,618

—

5,618

113,185

1,499

641

125

215

115,665299

115,964

Thousands of U.S. dollars
Reportable segments
Leasingbusiness

Salesbusiness

Construction
business$ 2,722,638$2,273,221$1,927,722$550,068$110,653$ 7,584,302

35,235

2,178

27,857

6,026

45,743

117,039(117,039)—

2,757,873

2,275,399

1,955,579

556,094

156,396

7,701,341(117,039)

7,584,302

For 2014
Revenue from operations:Customers
Intersegment
Total
Segment profit
Segment assets
Other:
Depreciation and amortization
Loss on impairment of fixed assets
Increase in property andequipment, and intangible assets$

Brokeragebusiness

Other business

Total

Consolidated financial
statements amounts

Adjustments$—$ 7,584,302

952,100$ 381,114$ 181,853$174,592$ 18,564$ 1,708,223$ (148,435)$ 1,559,788$29,265,231$7,282,844$ 174,222$134,263$170,753$37,027,313$3,995,519$41,022,832

$

$

$

$

$

$

$

$

320,519

2,236

7,232

1,798

1,390

333,175

10,050343,225253

146,209———

146,462—

146,462

1,687,869

24,047

18,381

2,780

2,858

1,735,935

3,179

1,739,114

Intercompany eliminations between the Company and its consolidated

Intercompany eliminations between the Company and its consolidated

subsidiaries and undistributed corporate expenses to each segment are

subsidiaries and undistributed corporate assets to each segment areincluded in adjustments of segment profit, and the Company classified

included in adjustments of segment assets, and the Company classified

expenses of the general administrative division in the Company and certain

cash, time and notice deposits, investments in securities and assets of theof its consolidated subsidiaries to corporate expenses for the years ended

general administrative division in the Company and certain of its consoli-

March 31, 2014, 2013 and 2012.

dated subsidiaries to corporate assets for the years ended March 31, 2014,2013 and 2012.

18. 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) for the years ended March 31, 2014, 2013 and 2012 are as follows:
Thousands of
U.S. dollars

Millions of yen

Unrealized holding gains on securities:
Increase during the fiscal year
Reclassification adjustments
Amounts before tax effectTax effects
Net unrealized holding gains on securities
Deferred gains (losses) on hedges:
Decrease during the fiscal year
Reclassification adjustments
Amounts before tax effectTax effects
Net deferred gains (losses) on hedges
Foreign currency transaction adjustments:
Increase (decrease) during the fiscal year
Total other comprehensive income

2014

2013

2012

2014

¥28,994¥ 33,694¥ 4,479$281,823(1,335)

329

3,814

(12,976)

27,65934,0238,293

268,847(9,863)(12,104)(3,513)(95,869)

17,796

21,9194,780

172,978(1,283)(2,501)(293)(12,471)

880

1,943

2,379

8,554

(403)

(558)

2,086

(3,917)

141

171

(874)

1,371

(262)

(387)

1,212

(2,546)

4,220

1,741

(1,067)41,019¥21,754¥ 23,273¥ 4,925$211,451

Sumitomo Realty & Development Co., Ltd.

61

19. 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 orcertain 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 fiscal year and their fair values at March 31, 2014
and 2013 are as follows:

Thousands of
U.S. dollars

Millions of yen

Investment and rental properties

A portion used as investment and rental properties

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

2014

2013

2014

¥2,383,506
121,237
2,504,743
3,494,748¥ 292,981(3,385)289,596432,235¥2,444,016(60,510)
2,383,506
3,293,202¥ 221,738
71,243292,981384,834$23,167,827
1,178,431
24,346,258
33,969,168$ 2,847,794(32,903)2,814,891
4,201,351(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, 2014 and 2013 are calculated by the Company primarily based on their fair values according to the “Real Estate Appraisal Standards.”

Significant changes during the years ended March 31, 2014 and 2013 are as follows:

Thousands of
U.S. dollars

Millions of yen

Increase:
Acquired real estateTransferred from real estate for sale in process
Decrease:
Depreciation and amortization
Transferred to real estate for sale in process
Loss on impairment of fixed assets

2014

2013

2014

¥186,432—¥ 56,302
32,762$1,812,131—¥ (31,420)(9,522)(14,570)¥(33,996)(22,328)(16,967)$ (305,404)(92,554)(141,621)

Income and expenses for investment and rental properties for the years ended March 31, 2014 and 2013 are as follows:

Thousands of
U.S. dollars

Millions of yen

Investment and rental properties

A portion used as investment and rental properties

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

2014

2013

2014

¥167,364
87,454
79,910(15,884)¥ 24,136
15,1049,032(13)¥165,264
85,742
79,522(17,753)¥ 24,227
15,4108,817(72)$1,626,788
850,058
776,730(154,393)$ 234,603
146,81287,791(126)(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 well as management and administration, income for these are not recorded above. The expenses primarily consist of rent, depreciation, taxes and dues, and others.
* Other income (expenses) for investment and rental properties is mostly the loss on impairment of fixed assets and the one for a portion used as investment and rental properties is mostly the loss on
disposal of property and equipment.

20. Contingent liabilities
The Company and its consolidated subsidiaries were contingently liable as guarantors of borrowings by customers and others in an amount aggregating to ¥2,734
million ($26,575 thousand) at March 31, 2014 and as guarantors of borrowings by customers in an amount aggregating to ¥351 million at March 31, 2013.

21. Subsequent events
On June 27, 2014, the shareholders of the Company approved payments of a year-end cash dividend of ¥10 ($0.10) per share or a total of ¥4,740 million ($46,073
thousand) to shareholders of record at March 31, 2014. Such appropriations are recognized in the period in which they are approved by the shareholders.

62

Annual Report 2014

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, 2014 and 2013, 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 three-year period ended March 31, 2014, and a summary ofsignificant 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 preparation of 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 and perform the audit to obtainreasonable 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 tofraud 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 the circumstances, while the objective of the financial statement audit is not for the
purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting 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, 2014 and 2013, and their financial performance and cash flows for each of the years in the three-year period
ended March 31, 2014, in accordance with accounting principles generally accepted in Japan.

Convenience Translation
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31, 2014 are presented solely forconvenience. Our audit also included the translation of yen amounts into U.S. dollar amounts and, in our opinion, such translation has been made on the basis
described in Note 1 to the consolidated financial statements.

August 8, 2014
Tokyo, Japan

Sumitomo Realty & Development Co., Ltd.

63

Corporate Data / Investor Information
As of March 31, 2014

Corporate Data

Investor Information

Head OfficePaid-in Capital

Shinjuku NS Building,
4-1, Nishi-Shinjuku 2-chome
Shinjuku-ku, Tokyo 163-0820, Japan
Phone: +81-3-3346-2342
Facsimile: +81-3-3346-1918¥122,805 million

Corporate Website

Number of Shareholders

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

11,656

Breakdown of Shareholders

Number of Common Stock
Authorized: 1,900,000,000 shares
Issued: 476,085,978 shares

Date of Establishment

Stock Exchange Listings

December 1, 1949

Tokyo Stock Exchange

Number of Employees

Major Shareholders

11,473 (Consolidated)

Trust Accounts
Financial Institutions
Other Companies
Foreign Companies
Individuals and Others

Name

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

22.12%
9.94%
27.33%
36.90%
3.71%

Number of shares held(Thousands)

Percentage ofshares held

25,223
22,91911,990
9,973
9,911
7,527
7,500
6,740
6,130
5,836

5.30%
4.81%
2.52%
2.09%
2.08%
1.58%
1.58%
1.42%
1.29%
1.23%

The Master Trust Bank of Japan, Ltd. (Trust account)
Japan Trustee Services Bank, Ltd. (Trust account)
Sumitomo Mitsui Banking Corporation
Japan Trustee Services Bank, Ltd. (Trust account 4)
The Bank of New York, Non-Treaty Jasdec AccountObayashi Corporation
Shimizu Corporation
Mitsui Sumitomo Insurance Co., Ltd.
The Sumitomo Warehouse Co., Ltd.
Daikin Industries, Ltd.

Stock Price and Trading Volume on Tokyo Stock Exchange

Yen

1,800

6,000

Stock Price (right scale)

1,500

5,000

TOPIX Average (left scale)

1,200

4,000

900

3,000

600

2,000

300

1,000

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

2009

2010

2011

2012

2013

2014

Millions of Shares
150

Trading Volume

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

2009

64

Annual Report 2014

2010

2011

2012

2013

2014

0

History

Global Events

‒

1949
1980

1949 – Izumi Real Estate Co., Ltd. established as the successor to the holding company of the Sumitomo zaibatsu

1964– Tokyo Olympic Games

following the breakup of the conglomerate.

1973

1957 – Izumi Real Estate Co., Ltd. changed its name to Sumitomo Realty & Development Co., Ltd.

– First oil crisis

1963 – Merged with the holding company of the former Sumitomo zaibatsu during its liquidation.

1978

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

– Second oil crisis

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

‒

1981
2000

1982 – Completed construction of 30-story Shinjuku NS Building in Shinjuku, Tokyo; moved Company headquarters there from1985
– The Plaza Accord

Shinjuku Sumitomo Building.

1987

1995 – Commenced American Comfort custom home construction business.

– Black Monday

1996 – Commenced Shinchiku Sokkurisan remodeling business.
1997 – Entered high-quality business hotel market. Opened Villa Fontaine Nihonbashi and hotels at two other locations.
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 in Japan.

1989– Collapse of Berlin Wall
– Nikkei Stock Average
all-time high1999
– Introduction of euro2000 – Commenced luxury condominium leasing business. Completed construction of La Tour Shibakoen.

‒

2001
2014

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

2001

2002 – Completed construction of Izumi Garden Tower (Roppongi 1-Chome Redevelopment Project).

– September 11th terrorist attacks

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

2008

2004 – Commenced sales of World City Towers (Minato Ward, Tokyo).

– Lehman crisis

2006 – Established Sumitomo Fudosan Reform Co., Ltd., a consolidated subsidiary.

2011– The Great East Japan
Earthquake– European sovereign
debt crisis– Record high yen against
the U.S. dollar

2008 – Established Sumitomo Fudosan Bellesalle Co., Ltd., a consolidated subsidiary.
– Commenced sales of City Towers Toyosu (Koto Ward, Tokyo).

2010 – Completed construction of Shinjuku Central Park City (Shinjuku Ward, Tokyo).
2011 – Opened Grand Mansion Gallery.
– Completed Sumitomo Fudosan Shinjuku Grand Tower (Shinjuku Ward, Tokyo).

2012 – Completed construction of Sumitomo Fudosan Shibuya Garden Tower (Shibuya Ward, Tokyo).
– Launched a Custom-order Condominium service.
– Commenced sales of J∙RESIDENCE.

2013 – Commenced construction of Nihonbashi 2-Chome Project (Chuo Ward, Tokyo).
– Cumulative units contracted topped 80,000 in Shinchiku Sokkurisan remodeling operations.
– Commenced construction of Roppongi 3-Chome Project (Minato Ward, Tokyo).

Shinjuku NS building(Head ofﬁce)

World City Towers

City Towers Toyosu the Twin

Shinjuku Central Park City

Sumitomo Fudosan
Shinjuku Grand Tower

Sumitomo Realty & Development Co., Ltd.

SRD14̲0828.indd 65

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14/08/29 18:41

Shinjuku NS Building, 4-1, Nishi-Shinjuku 2-chome
Shinjuku-ku, Tokyo 163-0820, Japan
Phone: +81-3-3346-2342 Facsimile: +81-3-3346-1918
http://www.sumitomo-rd.co.jp/english/