Steady Progress,
Further Growth
Annual Report 2015

Sumitomo Realty’s Track Record

Sumitomo Realty constantly pursues challenges
to ensure continuous growth
Since its establishment in 1949, Sumitomo Realty has continued to
expand the scope of its operations to become one of Japan’s leading comprehensive real estate companies and a core company of
the Sumitomo Group, which has a history going back 400 years.
Our operations are expanding beyond our core business of officebuilding leasing to a range of areas including condominium
sales, custom homes and remodeling, and real estate brokerage.

The first Medium-Term Management Plan was launched in
1999, and we are now operating under the Sixth Management
Plan. By placing top priority on the achievement of these plans,
Sumitomo Realty has been able to grow to where we are today.
Going forward, we will continue to expand existing businesses
while pursuing the challenges of new business development, toensure even higher, continuous growth.

Progress under Medium-Term Management Plans (Years ended/ending March 31)
Billions of Yen
1,000

2004 Commenced sales of World City
Towers (Minato Ward, Tokyo).
2003 ‌Commenced sales of J·URBAN
fixed-price urban-style housing series.
2002 ‌Completed constructionof Izumi Garden Tower.

750

1996 ‌Commenced Shinchiku Sokkurisan
remodeling business.

500

1949 ‌Izumi Real Estate Co., Ltd.
established as the successor
to the holding company of theSumitomo zaibatsu following the
breakup of the conglomerate.

1957 ‌Izumi Real Estate Co.,
Ltd. changed its nameto Sumitomo Realty &Development Co., Ltd.

250

0

1949

1957

1997

1998

1999

2000

1st Plan*

Revenue from operations

Operating income (right scale)
Ordinary profit (right scale)

2001

2002

2003

2nd Plan

2004

2005

2006

3rd Plan

1999–2001

2002–2004

2005–2007

1,270
202
87

1,606
265
170

1,939
350
274

2007

2012 Commenced sales of J·RESIDENCE.

2013 ‌The number of managed STEP brokerage
offices exceeded 250.
2008 ‌Established Sumitomo
Fudosan Bellesalle Co., Ltd.,a consolidated subsidiary.

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

	‌Commenced sales of City
Towers Toyosu (Koto Ward,
Tokyo).

Commenced‌sales of Deux Tours (Chuo Ward, Tokyo).
‌Cumulative units contracted topped 90,000 in
Shinchiku Sokkurisan remodeling operations.
‌2015 Completed‌
construction of Tokyo Nihonbashi Tower(Chuo Ward, Tokyo).

2011 ‌Opened Grand
Mansion Gallery.

2016 C ompletion of Roppongi 3-chome Project (scheduled).

‌Completed
Sumitomo
Fudosan Shinjuku
Grand Tower (Shinjuku
Ward, Tokyo).

Billions of Yen
200

ROE (%)

150

5.7
1999

10.5
2015

Ordinary Profit (Billions of Yen)
100

21.7
1999

139.1
2015

Cash Flows from Leasing Business (Billions of Yen)
50

53.4
1999

135.5
2015

0

2008

2009

4th Plan

2010

2011

2012

5th Plan

2013

2014

2015

2016 (Forecast)

6th Plan

2008–20102011–20132014–2016 (Forecast)

2,107
435
339

2,170
437
329

2,500
500
400

Note: ‌The figures represent cumulative totals for the period covered by each plan.
* The‌
1st Plan began in 1998 and spanned four years. Figures shown represent cumulative
totals for the final three years of the plan.

Sumitomo Realty & Development Co., Ltd.

1

To Our Shareholders
We would first like to take this opportunity to express our thanks on behalf of theSumitomo Realty & Development Group for your ongoing support. We have formulated
a medium-term management plan every three years since 1997, and have achieved
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-year period covered by the Plan.
In the March 2015 fiscal year, we recorded revenue and profit growth for the second
consecutive year, and record earnings on a single-year basis. We are forecasting revenue
and profit growth again in the March 2016 fiscal year, the final year under the Sixth
Management Plan, and are aiming for a third consecutive year of record earnings.
If we are able to achieve the single-year targets for the March 2016 fiscal year, we will
also meet the Sixth Management Plan’s aggregate targets. Although the macroeconomic
environment is showing signs of a recovery, the outlook remains uncertain. The Sumitomo
Realty Group will flexibly respond to changes in the operating environment, and step up ourefforts to clear the targets in the Sixth Management Plan and achieve sustained growthunder the following Management Plan and beyond. We ask for your continued support.

Junji Takashima

Chairman of the Board

2

Annual Report 2015

Kojun Nishima
President

Contents
4 At a Glance
6 President Interview
9	‌Special Feature	—‌Initiatives in Redevelopment for
Creating New Value—
10 No. 1 Developer in Redevelopment Industry
12 Redevelopment Business Performance
14 Specific Projects in Sixth Management Plan and After

18 Review of Operations
18 LEASING
22 SALES
24 CONSTRUCTION
26 BROKERAGE

27 Corporate Governance

27 Board of Directors and Statutory Auditors
28 Corporate Governance Initiatives

30 CSR
32 Financial Section

32 Eleven-year Financial Summary
34 Management’s Discussion and Analysis
38 Consolidated Balance Sheets40	‌Consolidated Statements of Income andConsolidated Statements of Comprehensive Income
41	‌Consolidated Statements of Changes in Net Assets
42 Consolidated Statements of Cash Flows
43 Notes to Consolidated Financial Statements
65 Independent Auditor’s Report

66 Corporate Data / Investor Information
67 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 forward-looking statements. Suchfactors include but are not limited to macroeconomic conditions, supply and demand in the real estate market and interest rate trends.

Sumitomo Realty & Development Co., Ltd.

3

At a Glance

LEASING

SALES

management and related activities

housing lot development and sales and related activities

Revenue fromOperations

Revenue fromOperations

Office building, condominium and other property leasing andOperating
Income

35.5%

58.2%

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

Mid- and high-rise condominium, detached house and32.4%

Operating
Income24.4%

History

History

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

Having entered the condominium sales business in the first half ofin the latter half of the 1970s. We demonstrated our strong businessthe 1960s, Sumitomo Realty is a pioneer in the domestic market fordevelopment capabilities by being the first company in the industry

condominium development and sales. We have become a leading

to restart construction work on office buildings following the col-company for condominium sales in Japan by staying ahead of ourlapse of Japan’s economic bubble in the 1990s. Our competitivecompetitors, strategically focusing on city centers and proactively

strengths and focus on large-scale redevelopment projects havedeveloping large, high-rise properties.

enabled us to build our current leading position in the domestic realestate industry.

Unique Features and Competitive Advantages

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

‌We have businesses in cities across Japan, and 70% of ourland purchases and tenant acquisition to property management,

portfolio is in the Tokyo metropolitan area.

means that we can quickly address tenant needs in our ‌In order to maintain asset value for the future, we are bolsteringdevelopments.

distinct characteristics such as modern appliances and stylish‌We have an extensive track record in redevelopment.

designs, including landmark exteriors, a rich array of common

Please refer to pages 10 to 15.

facilities and elegant entrances.

‌Our “close, new and large” leasing portfolio gives us strong market
competitiveness.

‌We are employing a unique sales strategy in order for the customer
to understand the value of our condominiums.
Please refer to pages 16 and 22.

Please refer to page 20.

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

4

Annual Report 2015

CONSTRUCTIONBROKERAGE

related activities

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

Custom home construction and remodeling andRevenue fromOperations

Operating
IncomeMajor Consolidated
Subsidiary

Brokerage and sales on consignment of real estate andRevenue fromOperations

Operating
Income· Sumitomo Fudosan Syscon Co., Ltd.

23.2%

7.2%

History

Remodeling—Shinchiku Sokkurisan

Major Consolidated
Subsidiary· ‌Sumitomo Real Estate Sales Co., Ltd.

7.2%

9.2%

History
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.

package in 1996. It has become the top brand in the market with

After entering the real estate brokerage sector in 1979, Sumitomo

a cumulative total of more than 80,000 units contracted.

Real Estate Sales achieved significant success and was listed on

Custom Homes

the Tokyo Stock Exchange in 1998. We are strengthening our sales

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

network to further increase our market share.

the needs of the times, we followed this with the J∙URBAN line in2003 and J∙RESIDENCE in 2012. We are also enhancing our marketing strength with a nationwide network of over 100 model house units.

Unique Features and Competitive Advantages

Unique Features and Competitive Advantages

Please refer to page 25 for details
on Shinchiku Sokkurisan and Custom Homes.

 ‌The network has steadily expanded to 255 offices as of the end of

Remodeling—Shinchiku Sokkurisan ‌Because all brokerage offices are directly operated, the network‌We can remodel a home in half the time and at 50% to 70% of the costof rebuilding.

 ‌Our network of brokerage offices has close ties to local communities.
March 2015.
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 ourbusinesses that do not require upfront investment and have awell-balanced operations. We have a balanced portfolio in four

short operational cycle of less than one year, but require sub-operational fields—leasing, sales, construction and brokerage­—stantial 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 roughly

growth going forward by strengthening our existing businesses,

3 to 10 years, but human resource levels are relatively low. The

and also establishing new core businesses.

construction and brokerage businesses are order-based
Sumitomo Realty & Development Co., Ltd.

5

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.

Kojun Nishima
President

Q.1

A.1

Please summarize yourresults for the March 2015
fiscal year and progress under
the Sixth Management Plan.

We recorded a second consecutive year of revenue and profit growth, withrecord profit. With a greater-than-expected falloff in the wake of the consumption
tax increase, profit declined in the Construction and Brokerage segments, butrevenue in the main Leasing and Sales segments came in above plan, and revenue and profit
growth in both segments drove overall results. As a result, revenue from operations for the
March 2015 fiscal year totaled ¥806.8 billion, with operating income of ¥165.9 billion, ordinary
profit of ¥139.1 billion, and net income of ¥80.6 billion, for a third consecutive year of revenue
growth and a fifth consecutive year of increases in operating income and ordinary profit.
In terms of progress under the Sixth Management Plan, we are making steady progress,
having achieved roughly two-thirds of the Plan’s cumulative three-year targets.

Sixth Medium-Term Management Plan (April 2013 to March 2016)1. ‌Surpass single-year record and achieve 2. Strengthen financial position

We will strengthen our financial position by bol-

3. Diversify our businesses

stering internal reserves and extending repay-

new businesses (including overseas develop-

For single-year business results, we will work

ment periods. We have not set specific numeri-ment) in our four existing areas of operations

to surpass, at an early date, our record high forcal targets, but aim to maintain continuously(leasing, sales, construction and brokerage).

ordinary profit, which was set in the March 2008

higher credit ratings.

We will also pursue completely new areas ofthree-year cumulative ordinary profitof ¥400 billion

fiscal year (ordinary profit of ¥125.2 billion). In

Billions of Yen

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, tovs. 5th Plan

Revenue from operations

2,500

15.2%

Operating income

500

14.3%

Ordinary profit

400

21.5%

We will look for new directions and develop

operations.

¥400 billion.

Progress under 6th Management Plan
2015 (Result)(2nd year)(Cumulative three-year total)

Achievement ratio

Revenue from operations

780

807

2,500

63.5%

913

Operating income

160

166

500

65.2%

174

Ordinary profit

131

139

400

67.5%

130

6

Annual Report 2015

(1st year)

Targets of 6th Plan

Amount to achieve target

2014 (Result)
Billions of Yen(Remaining one year)Q.2

What is your outlook for
the March 2016 fiscal
year?

A.2

For the March 2016 fiscal year, the final year under the Sixth Management Plan,
we are forecasting revenue and profit growth in all four primary segments andaiming for a third consecutive year of record profit. If we are able to achievethese targets, we also expect to be able to achieve the Sixth Management Plan’s targets for
operating income and ordinary profit, and are forecasting record aggregate profit for the threeyear period as well.
With the Japanese market experiencing higher share prices and improved corporate
earnings, the main Leasing segment is experiencing growth in demand from tenants, and theSales segment continues to see a high level of purchasing interest from customers. In addition,
the Construction and Brokerage segments are emerging from the previous year’s decline.
We will endeavor to achieve our goals for the fiscal year ending March 31, 2016.
Outlook for the March 2016 Fiscal Year
Billions of Yen

Revenue from operations

2015 (Result)Operating income
Ordinary profit

Q.3

What is your basic policy
regarding returns toshareholders?

A.3

2016 (Forecast)

YoY

166

174

+8

139

147

+8

807

850

+43

Our basic policy regarding the distribution of profits is first to maintain a stabledividend, while at the same time striving to maintain sufficient internal reserves
required for stable, long-term business growth.

Reflecting the fact that we have achieved record ordinary profit for a second consecutive
year, we increased the year-end dividend for the March 2015 fiscal year by ¥1 per share, fora full-year dividend of ¥21 per share, including an interim dividend of ¥10 per share, and for
the March 2016 fiscal year we intend to pay a full-year dividend of ¥22 per share, including
an interim dividend of ¥11 per share.
At the same time, we cannot consider our equity ratio to be sufficient relative to othercompanies in our industry, and there are still investments for future growth, including theacquisition of land and construction expenses. While keeping in mind the payment of a stabledividend, we will also work to meet the expectations of shareholders through investments thatwill lead to earnings growth.

Q.4This year the Board of
Directors added two outside
directors for the first time.
Why were these two
individuals selected?

A.4

We have been considering outside directors for some time, and at this time two
appropriate individuals have agreed to join the Board of Directors. Both of these
individuals have a wealth of management experience, and will provide candid

opinions from the perspective of other industries. To date we have recorded stable earnings,
and I believe our governance and management have functioned properly, but throughengaged communication with these outside directors we will further enhance management
quality and strengthen the governance structure.

‌
Pleaserefer to page 27 for more information regarding the two outside directors.

Sumitomo Realty & Development Co., Ltd.

7

President Interview

Q.5

What is your policy
going forward in termsof investment strategy
and financial strategy?
‌
Pleaserefer to page 10
for more information regarding
redevelopment.

A.5

Our investment policy is to be highly selective and proactive in our acquisitionof quality land. In addition to bidding, we look at individual land through theeyes of a manufacturer and emphasize redevelopment of amalgamations ofwhat were originally small, individual lots, to maximize their value. We take pride in the factthat this is the source of our competitiveness in developing office buildings and condominiums.
Regarding financial strategy, considering we have had many opportunities to acquire
quality land for office building and condominium construction has meant that during the
March 2015 fiscal year our interest-bearing debt grew by more than ¥200 billion. At the sametime, the environment for financing is favorable, with long-term interest rates remaining low for
the time being. We are able to borrow long-term funds with repayment periods of 10 years ormore at 1.0% or less, and will continue to strive to maintain a robust financial position.
We recorded more than ¥80 billion of net income in the March 2015 fiscal year, and withthis accumulation of profit and corresponding growth in shareholders’ equity, our net debtequity (ND/E) ratio improved to 3.5 times. We will continue to invest proactively going forward
to generate profit to increase shareholders’ equity and further improve our financial balance.

Q.6

What is your thinking interms of basic policies
for the SeventhManagement Plan?

A.6

We are currently formulating the specifics ahead of the announcement of theSeventh Management Plan.
In the Seventh Management Plan, we will aim to increase earnings espe-

cially in the main office building business. Sumitomo Realty manages more than 200 officebuildings, making us the No. 1 manager in Tokyo in terms of number of buildings. Our aim is
to build on this existing source of growth and make full use of the portfolio to address a variety of needs for continuous growth.
We are planning to bring gross floor area of 150,000 tsubo for leasing to market over
the three-year period, or approximately 50,000 tsubo per year, the same as under the Sixth
Management Plan. Land acquisition is the key element of our real estate business, and wehave land being prepared or under construction to meet this target. We have also begun toacquire land for properties to be completed during the period of the Eighth Management Plan,
and are on track with our land acquisition, primarily for redevelopment in central Tokyo.
For condominiums, we have already secured land for more than roughly 30,000 units.
This gives us sufficient stock for the time being, so we do not need to bid on expensive land,
and we will continue to secure land by patiently aggregating individual parcels.

8

Annual Report 2015

Special Feature

Initiatives in

Redevelopment
for Creating New Value

Industry’s

No. 1 Redevelopment Track Record

Sumitomo Realty has grown by acquiring parcels of land to amalgamate and redevelop.
Today, we are the No. 1 redeveloper in Japan in terms of number of buildings.
In this section, we explain our activities and accomplishments in this area.

10 No. 1 Developer in Redevelopment Industry
12	‌Redevelopment Business Performance14	‌Specific Projects in Sixth Management Plan and After

Sumitomo Realty & Development Co., Ltd.

9

No. 1* Developer in Redevelopment Industry* In terms of number of buildings (Sumitomo Realty data)

No. 1 Owner of Office Buildings in Tokyo

Acquisition of Land for Redevelopment Is
Our Building Development “DNA”

We made our full-scale entry into the leasing business in the

The acquisition of land for construction via “redevelopment”

second half of the 1970s, somewhat later than other majordomestic real estate companies. However, as a result of ourhas been the driving force behind our successful officesteady pace of office building development since then, we cur-­building development.
The Company places priority on redevelopment, rather

rently manage more than 200 office buildings, making us theNo.1 developer in Tokyo. With our lineup of various types ofthan simply rebuilding; we focus in particular on puttingbuildings, mostly in the Tokyo CBD*, we are able to meet

together several parcels by reaching agreements with multiple

a broad range of diverse tenant needs.

landowners to redevelop the land on a larger scale.

‌Please refer to page 20 for more details on our portfolio.

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

Reaching agreements with a large number of landowners
requires considerable time. This makes a high level of trust
indispensable. Negotiations can take more than 10 years, but
our employees deal directly with landowners in person. As aresult of these efforts, many landowners agree to redevelopment “because it is Sumitomo Realty.”

Buildings

E
B
B

Land

Equal value exchange

Through the conversion of the rights ofrights holders, sites can be acquiredwith equal value exchanges.

C
A

D

C

D

Before redevelopment

Purchases of individual rights

ABCD : Rights holders(amalgamation of rights)

A

Building

Building

E

D

B

C
A

Land

B

X

X

C D X

X

Land

After redevelopment

After redevelopment

X : Developer*

X : Developer** ‌A‌cquirer of property other than that received by rights holders inequal value exchange (developer)

Characteristics of Legal Redevelopment Projects
MeritsSubstantial benefits in terms of investment returnand profitability

It is necessary to form a consensus among multiple propertyIn comparison with methods where the land is first purchased,rights holders, and there are also consultations with adminis-such as competitive bidding, projects are completed withtrative bodies, resulting in longer development times.

small initial investments( The government is currently promoting shorter development

Developing blocks of land enhances the convenience of theperiods through simplified approval procedures and otherarea, and makes it possible to receive government subsidies

measures.)and approvals for higher utilization (ratio of total floor space
to land area).
10

Demerits

Substantial behind-the-scenes work is required

Annual Report 2015

Special Feature

Our Redevelopment Projects in Central Tokyo
Approximately 60% of the office buildings we develop are redevelopment projects. We have the No. 1* track record in“redevelopment” among developers. Using the expertise we have cultivated to date, we will continue to grow by building
a pipeline focused on redevelopment projects. * In terms of number of buildings (Sumitomo Realty data)

A

E

Shinjuku Central Park City
B

B

A

D

C

E

Ueno Station

Ochanomizu First Building
F

Iidabashi
StationShinjuku Station

Tokyo Station

F

Sumitomo Fudosan
Shinjuku Grand Tower

ShibuyaStationH

Roppongi
StationC

G

Shiodome Sumitomo
Building
Hamamatsucho
StationG

Tamachi Station

Shinagawa
Station

Sumitomo Fudosan
Nishi Shinjuku Building

Sumitomo Fudosan
Shibakoen Tower

D

H

Chiyoda First Building East

Sumitomo Fudosan
Shibakoen First Building

Sumitomo Realty & Development Co., Ltd.

11

Redevelopment Business Performance
Case 1

Izumi Garden Tower

Case 2• Location
Minato Ward, Tokyo• Gross floor area
61,878 tsubo*• Principal uses
Office, residential,commercial, hotel,
multipurpose hall
• Completion
Oct. 2002• No. of floors
43 above ground,
4 below ground

Sumitomo Fudosan Iidabashi First Tower• Location
Bunkyo Ward, Tokyo• Gross floor area
20,686 tsubo*• Principal uses
Office, residential,commercial,
multipurpose hall
• Completion
Apr. 2010• No. of floors
34 above ground,
3 below ground* 1 tsubo = 3.3m2* 1 tsubo = 3.3m2

Number of Redevelopment Projects (Years ended/ending March 31)

Industry’s

No. 1

Case 1

1,270

202

87

1,606

265

170

1,939

350

274

2,107

435

339

2,300

430

320

2,500

450

340

Case 2

Case 3

2011–20152016–(Forecast)*

1976–1980

Over 100 Projects

Redevelopment
Track Record

1981–1985

1986–1990

1991–1995

1996–2000

2001–2005

2006–2010* In terms of number of buildings (Sumitomo Realty data)

12

Annual Report 2015

Special Feature

Case 3

Tokyo Nihonbashi Tower
Main Features

Enhanced transportation node function•C‌ onstruction of an open space of approximately 1,500m2 facing
Nihonbashi intersection• ‌Installation of underground open space connecting the square
to Nihonbashi station concourse• ‌Provision of barrier-free access between Nihonbashi station and street level

Business continuity planning (BCP)• ‌Earthquake-resistant structure with vibration control to minimize shaking• ‌Emergency generator, which provides a 72-hour supply of backup power(power supplied to leased rooms in addition to public areas)• ‌Gas-powered electric power generation in both normal and emergency
circumstances• ‌Reduced risk of flood damage through installation of power receiving andrelated equipment on sixth floor

Latest office specifications• ‌825 tsubo of leasable floor space on each standard floor, designed without
internal pillars for a highly efficient layout• ‌Adoption of air-conditioning system comprising fully independent units foreach floor’s 52 zones• ‌Three-meter ceiling height, with an additional 10 centimeters of free access

Local disaster-response center• ‌Incorporation of a storage facility for emergency provisions, a water supply
for firefighting, and room for emergency toilets• ‌Open space in front of the station can be used as a first-aid center andessential goods supply facility in the event of an emergency• ‌Area can be used as refuge to accommodate those who encounter trouble
returning home

Increased international accessibility and local vitality• ‌Provision of multilingual tourist information center• ‌Installation of the area’s largest multipurpose hall, which can be used for international conferences

Sky Lobby• Location Chuo Ward, Tokyo• Gross floor area 42,000 tsubo*• Principal uses ‌Office, commercial, multipurpose hall•C‌ ompletion Apr. 2015

• No. of floors 35 above ground, 4 below ground* 1 tsubo = 3.3m2

Multipurpose hall “Bellesalle”

Sumitomo Realty & Development Co., Ltd.

13

Specific Projects in Sixth Management Plan and After

LEASING

Under the Sixth Management Plan, we are aiming for cumulative revenue and profit growth for the three-year period, withrecord profit as well as record-setting business results on a single-year basis. Including redevelopment projects in Nihonbashi
and Roppongi 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 170,000 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 Realty’sCore Development Area
Sumitomo Realty continues to build its portfolio going forward with a focus on large-scale redevelopment projects inthe central Tokyo districts of Shinjuku, Roppongi, Osaki,
Tamachi, and Nihonbashi.
For example, Nihonbashi is located near Tokyo Stationin the central business district, and we anticipate strong
demand for office buildings in this area.

Tokyo CBD*Core
Development
Area
1. Shinjuku
2. Roppongi
3. Osaki
4. Tamachi
5. Nihonbashi

Gross Floor Area (Years ended/ending March 31)
Thousands of Tsubo+170,000
tsubo* Tokyo‌
CBD (Central
Business District): 7 wards,
comprising Chiyoda, Minato,Chuo, Shinjuku, Shibuya,
Shinagawa and Bunkyo

5

2
4
3

1,420

1,250

1,160

1,020

870

680

+14%

1

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

2004

2007

2010

2013

2016

(Forecast)

New Building Development Plan—Period Covered by Sixth
Management Plan, Seventh Management Plan, and Beyond
Name

Area
Total gross floor area of projects completed in 2014*1
Total gross floor area of projects completed in 2015*1
Nihonbashi
Tokyo Nihonbashi Tower
Tamachi
Sumitomo Fudosan Mita Building

Roppongi 3-chome Project

Sumitomo Fudosan
Shinjuku Garden Tower
Sumitomo Fudosan
Nibancho First Building
Total: 2016*1
Total: 6th Management Plan
Projects from the 7th Management Plan
Mita 1-chome Project
Onarimon Project
Higashi Shinbashi Project
Osaki Project
Others*1. Fiscal year ended/ending March 31*2. ‌1 tsubo = 3.3 m2

14Annual Report 2015

Gross
floor area Expected(tsubo*2) completion
4,496
6,420
42,000 Apr. 2015
7,400 Nov. 2015

Roppongi

62,000Mar. 2016

Shinjuku

42,000Mar. 2016

6,000

Mar. 2016

ChiyodaRoppongi 3-chome Project
On a large site of about 2.7 hectares adjacent to both
Roppongi-itchome Station and our flagship property Izumi
Garden Tower, this large-scale project will have a grossfloor area of approximately 200,000 square meters, or
62,000 tsubo. It will include three types of facilities­—office,residential and commercial—in north and south sections.

159,400
170,315

TamachiTamachiTamachi
Osaki

14,00010,0002,500
54,000Station Lobby

Special Feature

FOCUS
Toranomon
StationProjects in Roppongi Area
Completed
In progress

Roppongi-itchome
StationRoppongi 7-chome
Project

Sumitomo Fudosan Shinjuku
Garden Tower• Location

Izumi Garden Tower

Shinjuku Ward (Shinjuku Area)• Gross floor area
42,000 tsubo

Roppongi
Station• Expected completion
Mar. 2016

Roppongi
3-chome Project• No. of floors
Kamiyacho
Station37 above ground2 below groundRoppongi 5-chome
Project

Azabujuban
Station• Location

Minato Ward (Roppongi Area)• Gross floor area
62,000 tsubo• Expected completion
Mar. 2016• No. of floors

40 above ground5 below ground

Sumitomo Fudosan Nibancho
First Building• Location

Chiyoda Ward

• Gross floor area

6,000 tsubo• ‌E xpectedcompletion

Mar. 2016• No. of floors

7 above ground
1 below ground

Sumitomo Realty & Development Co., Ltd.

15

Specific Projects in Sixth Management Plan and After

SALES

Under the Sixth Management Plan, we aim to increase deliveries

Deux Tours

volume to achieve growth in cumulative revenue and profit for

Deux Tours is one of our flagship projects, located in thethe three-year period. We are targeting cumulative deliveries ofHarumi district of Tokyo’s Chuo Ward, an area that is

18,000 condominium units under the Sixth Management Plan,

expected to see an increasing pace of development. Ina roughly 30% increase from 14,000 units delivered during theaddition to being a competitive condominium property in aperiod of the Fifth Management Plan. This target is equivalent toprime location, the project is being designed as a condo-

deliveries of approximately 6,000 units annually, which would be

minium package that aims to deliver customer satisfactiona record level for the Company.

through residential functionality and lifestyle enrichment.

During the period covered by the Fifth Management Plan,
we launched the Grand Mansion Gallery and Custom-orderService as new initiatives to strengthen our product planningand sales structure. We aim to achieve our new targets bymaking maximum use of the results of these initiatives.
Revenue from Operations and Units Delivered (Years ended/ending March 31)‌
Revenuefrom Operations (Billions of Yen)
‌Units Delivered (Thousands of Units)

12

14

18

Record
high

2004

2010

2013

• Scheduled delivery
2016

2016

(Forecast)

Principal Projects in and after the 6th Management Plan
Name

Location

No. ofunits Scheduled
for sale delivery*1

Chuo Ward, Tokyo 1,450*2
Deux Tours Canal & Spa
Katsushika Ward, Tokyo 840
City Tower Kanamachi
Mitaka, Tokyo 268
City Terrace Kichijoji Minami
Kawasaki 800
City Tower Musashi Kosugi
Yokohama 373
City Terrace Yokohama Wadamachi
Osaka 745
City Terrace Kanzakigawa Ekimae
The Tennoji Residence Garden & Vista
Osaka 413
City Tower Sendai Ichibancho Residence
Sendai 134
Shinagawa Ward, Tokyo 244
City Tower Meguro
Shinagawa Ward, Tokyo 254
City Terrace Shinagawa East
Ota Ward, Tokyo 279
City Terrace Omori Nishi
Shinjuku Ward, Tokyo 139
Grand Hills Yotsuya
City House Nakameguro Residence Meguro Ward, Tokyo 115
Meguro Ward, Tokyo 112
City House Nakameguro Terrace
Koto Ward, Tokyo 522
City Terrace Toyocho
Edogawa Ward, Tokyo 357
City Terrace Hirai
Osaka 501
City Tower Umeda Higashi
Hiroshima 471
City Tower Hiroshima*1. Fiscal years ending March 31*2. Excluding 216 units for SOHO use

Annual Report 2015

• No. of units for sale
52 above ground
1 below ground

820

670

605

660
2007

* Cumulative totals for the period covered by each plan.

16

Chuo Ward, Tokyo
1,450

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

• Location• No. of floors
567

437

11

13

15

Entrance

2016
2016
2016
2016
2016
2016
2016
2016
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017

Special Feature

Key Features• ‌Large, earthquake-resistant twin towers soaring 180 meters highWith 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 ofglass and materials that blend in beautifully with the waterfront landscapecreates a striking exterior design that sets the development apart from othernearby towers.

• Offering‌both convenient downtown access and thewaterfront’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 access to central Tokyo, while theTokyo Bay location feels like a waterfront resort.
As part of its program to boost Tokyo’s international competitiveness,
the Tokyo Metropolitan Government’s Bureau of Urban Development has
designated Harumi as a priority zone, and the area is expected to become
increasingly developed.

City Tower
Musashi Kosugi• Location
Kawasaki• No. of units for sale800

• No. of floors

53 above ground3 below ground• Scheduled delivery
2016• Diverse‌public facilities include spa and View Lounge & Bar

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

Principal Project from the 7th Management Plan

Grand Hills Yotsuya• Location

Shinjuku Ward, Tokyo• No. of units for sale139

• No. of floors

7 above ground2 below ground• Scheduled delivery
2017

Sumitomo Realty & Development Co., Ltd.

17

Review of Operations

LEASING

Basic Growth Strategy

Continuing new investment to build a platform for
growth, by further increasing the portfolio’s portionof prime properties that are “close, new, and large”

Revenue from Operations

Operating Income¥289.1¥104.4billion% of Revenue from Operations

35.5

FY2015%% of Operating Income

58.2

FY2015%

Overview of the Fiscal Yearbillion. This revenue and profit growth reflected improved

The Tokyo office building market, which represents more thanvacancy rates at existing buildings, as well as full-year contribu-

90% of the segment’s portfolio, experienced steady tenant

tions from buildings completed during the previous year, including

demand against a backdrop of improved economic sentiment

Sumitomo Fudosan Chiyoda First Wing and Sumitomo Fudosan

and a recovery in corporate earnings. This led to a continued

Motoakasaka Building.

trend of declining vacancy rates, as well as a turnaround to

The vacancy rate for existing buildings improved, fromhigher actual rents for existing buildings in addition to the rise in

5.9% at the end of the previous fiscal year, to 4.9% at the end

rents for new buildings that was already under way. With a con-of the year under review. Sumitomo Fudosan Onarimon Ekimaetinued underlying trend of growth in new demand for additional

Building and Sumitomo Fudosan Hirakawacho Building, which

floor space and relocation for expansion, rents for existing

were completed during the year under review, are fully occu-

buildings are gradually being increased.

pied, and tenant solicitations for new buildings including Tokyo

Against this backdrop, revenue from operations for the18billionNihonbashi Tower and the Roppongi 3-chome Project, which

March 2015 fiscal year rose 1.9% from the previous year, toare scheduled for completion during the March 2016 fiscal year,¥289.1 billion, and operating income grew 6.6%, to ¥104.4

were solid as well.

Annual Report 2015

Sumitomo Fudosan
Onarimon Ekimae
Building

Sumitomo Fudosan
Hirakawacho
Building

Minato Ward

Chiyoda Ward

Location

Location

Gross floor area

Gross floor area

3,729 tsubo

2,691 tsubo

Completion

Completion

Jan. 2015

Apr. 2014

No. of floors

No. of floors

10 above ground
1 below ground

11 above ground

OutlookSpecifically, we are projecting a 3.8% increase in revenue

We are aiming for record revenue from operations and operat-

from operations, to ¥300.0 billion, with a 5.3% increase in oper-

ing income in the March 2016 fiscal year, based on improved

ating income, to ¥110.0 billion.

earnings from existing buildings and full-year contributions from
Sumitomo Fudosan Onarimon Ekimae Building and Sumitomo
Fudosan Hirakawacho Building, which were completed during
the year under review.

14

15

16

14

15

16

(Forecast)

Operating Income(Forecast)

Operating Margin (right scale)

914

13

13

3,189

110.0

0

12

12

923

104.4

0

11

11

3,171

0

0

1,010

1,500

3,135

30

1,051

33.8 34.5 36.1 36.7
30.1 33.0

3,109

40

300.0

100

289.1

3,000

283.7

60

278.3

80

271.8

200

292.9

4,500

98.0

Thousands of m2

90

94.2

%

120

89.6

Billions of yen

300

88.2

Billions of yenGross Floor Area

11

12

13

14

15

1,041

Operating Income andOperating Margin

2,935

Revenue from Operations

Outright Ownership

Sub-lease

Sumitomo Realty & Development Co., Ltd.

19

Review of Operations: LEASING

Our Leasing Portfolio(as of March 31, 2015)

Ueno Station

In the Tokyo CBD (Central Business
Iidabashi Station

District)*, where buildings that meet thethree conditions for prime properties—

Shinjuku Station

close, new and large—are in strong

Tokyo Station

demand, our competitive portfolio will
provide a strong foundation for us toutilize our strengths—development ofhigh-value-added office buildings, tenant leasing and property management.
We will utilize that foundation to maximize the earnings potential of ouroffice building operations and build

ShibuyaStationHamamatsu-cho Station

Tokyo CBD*

Tamachi Station

BunkyoShinjuku
ChiyodaShibuya

Chuo

Other buildings

a strong base for the achievement ofsustainable growth in the years ahead.

Major flagship buildings(see the table below)

Shinagawa Station

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

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

Tokyo’s No. 1 office building owner, managing

MORE THAN

Gross Floor Area

200 BUILDINGS

4.10

in central Tokyo’s major office districts
Major Flagship Buildings

20

No. of floors

million m2

Name

Location (Tokyo CBD)

(above ground/
below ground)

Completion

Gross floorarea (m2)

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. Shinjuku NS Building
9. Tokyo Shiodome Building
10. Sumitomo Fudosan Shibakoen First Building
11. Sumitomo Fudosan Iidabashi First Tower
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 Iidabashi First Building
17. Sumitomo Fudosan Shibuya First Tower
18. Sumitomo Fudosan Shiodome Hamarikyu Building
19. Chiyoda First Building East
20. Sumitomo
Fudosan
Nishi
Shinjuku
Note:
Figures for grossfloor area
indicate
the area Building
managed by Sumitomo Realty.

Minato Ward
Shinjuku Ward
Shinjuku Ward
Shinjuku Ward
Shinjuku Ward
Minato Ward
Minato Ward
Shinjuku Ward
Minato Ward
Minato Ward
Bunkyo Ward
Chiyoda Ward
Shibuya Ward
Meguro Ward
Shinjuku Ward
Bunkyo Ward
Shibuya Ward
Chuo Ward
Chiyoda Ward
Shinjuku Ward

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

Oct. ’02
Mar. ’74
Dec. ’11
Feb. ’10
Jan. ’03
July ’04
Sept. ’06
Sept. ’82
Jan. ’05
June ’00
Apr. ’10
Jan. ’04
June ’12
Aug. ’09
Oct. ’02
Mar. ’00
Aug. ’10
Aug. ’09
Oct. ’98
Apr. ’09

204,556
177,467
168,296130,290
117,446
99,91398,33875,046
95,12870,381
68,382
61,20959,41755,77353,04752,982
52,942
47,951
37,59337,317

Annual Report 2015

Our Portfolio’s Strengths(as of March 31, 2015)

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
strengths by focusing on providing high-quality office buildings with these qualities.

Close
Tokyo CBD*

Locations in the Tokyo CBD

Our leasing portfolio emphasizes locations in central Tokyo; 94% of our portfolio is in Tokyo’s 23 wards, and
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

94%

competitive strengths by continuing to acquire land in this area.

23 Wards

New
Completedsince 2000

57%

New quakeresistance*99%* ‌New standards thattook effect in 1981

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

Brand-new and Recently Constructed Buildings

The average age of the buildings in our portfolio is 16 years, the lowest figure among major Japanese realestate companies, and 57% of the buildings in our portfolio have been completed since 2000. New buildings
are able to generate strong demand by meeting tenant needs in areas like facilities and design,
making the relative age of the buildings in a portfolio a key factor affecting leasing businesses.
As shown in the table below, our buildings are equipped with the latest facilities and features, and are popular among tenants for their functionality, comfort, and safety in the event of a major disaster. 99% of our portfolio meets or exceeds earthquake-resistance standards that took effect in 1981, which are a key yardstick forearthquake safety. In recent years, emergency generators that provide electricity in the event of 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

LargeOver 10,000m2(gross floor area)

84%

Large-scale Buildings

Large-scale buildings with gross floor area of at least 10,000 square meters make up 84% of our portfolio.
When a tenant moves, being able to consolidate multiple business offices on one floor facilitates internal communication and reduces space redundancies, helping to make operations more efficient. These types of needs arebehind the increased demand in recent years for large-scale buildings with large amounts of floor space per floor.

Sumitomo Realty & Development Co., Ltd.

21

Review of Operations

SALES

Basic Growth Strategy

Enhancing our brand strength by providing highquality properties via a unique sales strategy, tobuild a strong position that is less susceptiblechanges in market conditions

Revenue from Operations

Operating Income¥264.2¥43.8

billion% of Revenue from Operations

32.4

FY2015%

Overview of the Fiscal Yearbillion
FY2015% of Operating Income

24.4

%

As a result, revenue from operations grew 12.9%, to

The condominium market, which represents more than 90%¥264.2 billion, with an 11.7% increase in operating income,of the segment’s portfolio, continued to enjoy a favorable sales

to ¥43.8 billion, both of which were record highs.

environment underpinned by low interest rates. With­consumers showing a robust purchasing appetite from

Principal Condominium Development Projects (2015–2016)

improved ­economic sentiment and a wealth effect driven byrising share prices, sales prices moved higher, especially forproperties in prime locations.

Name

Sky Forest Residence

Shinjuku Ward, Tokyo

361

2015

The Grand Millennia

Toshima Ward, Tokyo

411

2015
2015

Reflecting this environment, the number of condominium

Tokyo Bay City Tower

Minato Ward, Tokyo

171

units, detached houses, and land lots delivered, including The

The Imperial Garden

Bunkyo Ward, Tokyo

167

2015

Grand Millennia, Sky Forest Residence, and Tokyo Bay City Tower,

Sky Tiara

Itabashi Ward, Tokyo

621

2015

increased 393 from the previous year, to a record 5,351 units.
The number of condominium units put on the market
topped 6,000 for the first time, at 6,305 units, and the numberof condominium units sold was above 5,000 for the third­consecutive year, at 5,204.

City Terrace Kunitachi

Kunitachi, Tokyo

277

2015

Osaka

294

2015

Deux Tours

Chuo Ward, Tokyo 1,450*2

2016

City Tower Kanamachi

Katsushika Ward,
Tokyo

840

2016

City Terrace Imafuku Tsurumi

City Terrace Kichijojiminami

Mitaka, Tokyo

268

2016

City Tower Musashi Kosugi

Kawasaki

800

2016

Osaka

413

2016

The Tennoji Residence*1. Fiscal years ended/ending March 31*2. Excluding 216 units for SOHO use

22

No. of units Scheduled
for saledelivery*1

Location

Annual Report 2015

Sky Forest
Residence

Sky Tiara

Shinjuku Ward

Itabashi Ward

Location

Location

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

* Fiscal years ended March 31

OutlookOf the 5,400 condominium units and detached houses that

We are aiming for a second consecutive year of record units

we expect to deliver during the March 2016 fiscal year, con-delivered, revenue from operations, and operating income in the

tracts had already been concluded for approximately 45% as ofMarch 2016 fiscal year, based on a projected 149-unit increase

April 1, 2015, the same level as in the previous year.
We are therefore forecasting a 9.8% increase in revenue

in the number of condominium units, detached houses, andfrom operations, to ¥290.0 billion, with a 0.5% rise in operating

land lots delivered, to 5,500 units.

income, to ¥44.0 billion.

Operating Income andOperating Margin
Billions of yen

19.1
13.9
100

0

11

12

13

14

15

Operating Income

4,000

15

2,000

0

0

44.0

43.8

16

(Forecast)

39.2

15

38.9

264.2

14

37.9

234.1

13

33.4

232.1

12

290.0

198.2

11

30

16.8 16.7 16.6 15.2

15

239.7
0

6,000

16

(Forecast)

Operating Margin (right scale)

11

12

13

14

15

5,500

30

Units

5,351

200

%
45

4,958

45

4,688

300

4,119

Billions of yen

Units Delivered*

4,841

Revenue from Operations

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

Sumitomo Realty & Development Co., Ltd.

23

Review of Operations

CONSTRUCTION

Basic Growth Strategy

Further raising our competitiveness by refining ourplanning, technical, and sales capabilities without
being bound by conventional thinking

Revenue from Operations

Operating Income¥189.0¥13.0

billion% of Revenue from Operations

23.2

FY2015%billion% of Operating Income

7.2

FY2015%

Overview of the Fiscal Year

income, to ¥13.0 billion, from upfront costs for the opening of

The number of units contracted during the first half declined

16 new sales offices to strengthen the custom homes market-

year on year in both the Shinchiku Sokkurisan remodeling busi-

ing structure, in addition to the decrease in the number ofness and custom homes operations because of a temporary

units delivered.

drop in demand following the consumption tax increase, butboth businesses have turned around to a recovery track with
year-on-year increases in the second half, of 41.6% for

We are aiming for a return to revenue and profit growth for both

Shinchiku Sokkurisan and 30.9% for custom homes operations.

the Shinchiku Sokkurisan remodeling business and custom

For the Shinchiku Sokkurisan remodeling business, thehomes operations in the March 2016 fiscal year, through con-number of units delivered declined 3.3%, to 7,775 units, andtinuous enhancement of our product lineup and strengthening

revenue from operations decreased 1.2%, to ¥104.1 billion.

of our marketing structure.

Custom homes operations recorded a 6.3% decrease in

Our March 2016 fiscal year projections are for a 0.5%

the number of units delivered, to 2,226 units, and a 1.8%

increase in revenue from operations, to ¥190.0 billion, withdecline in revenue from operations, to ¥68.1 billion.

a 4.2% increase in operating income, to ¥13.5 billion.

As a result, the construction segment including Sumitomo
Fudosan Syscon Co., Ltd., recorded declines of 6.1% in revenue from operations, to ¥189.0 billion, and 30.7% in operating

24

Outlook

Annual Report 2015

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 have engineering qualifications.
‌Carpenters: We employ carpenters who
work exclusively for Sumitomo Realty.
‌Fixed price: We provide the customer witha fixed price per 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 tolive in them, which is a major advantage.
‌Earthquake resistance: We incorporate
earthquake-resistance 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
Advancedperformance: We have developed
proprietary earthquake-resistant technologies,
namely the New Power Column, New Power
Cube and Super Power Wall construction
methods, and are actively incorporating thesetechnologies 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 arebacked by a 30-year guarantee, and we havea dedicated contact line for customers.

Operating Income andOperating Margin
Billions of yen

10.2

9.9

9.2

9.3
6.9

16

(Forecast)

0

11

12

13

14

15

Operating Income

10

6,000

2,000

5

3,000

1,000

0

0

13.5

13.0

15

18.7

14

15.8

189.0

13

16.5

201.2

12

16.7

171.1

11

190.0

166.0

0

3,000

7.1

7

162.9

70

9,000

16

(Forecast)

Operating Margin (right scale)

11

12

13

14

15

Shinchiku Sokkurisan

7,800
2,600

14

UnitsUnits

7,310
2,455

140

%
15

7,623
2,430

21

7,651
2,389

210

7,228
1,968

Billions of yen

Shinchiku Sokkurisan andCustom Home Units Contracted

7,463
1,840

Revenue from Operations

16

0(Forecast)

Custom Home (right scale)

Sumitomo Realty & Development Co., Ltd.

25

Review of Operations

BROKERAGE

Basic Growth Strategy

Strengthening our business platform by further
expanding our network and pursuing closer ties
between existing offices and their local communities

Revenue from Operations

Operating Income

¥58.5

¥16.5

billion
FY2015% of Revenue from Operations

7.2

billion
FY2015% of Operating Income

9.2

%

%

Overview of the Fiscal Year

operations, to ¥58.5 billion, but operating income declined

The existing home market experienced temporary stagnation

8.3%, to ¥16.5 billion, mainly from an increase in the cost offollowing the consumption tax rate increase, leading to a

corporate transactions.

decline from the previous fiscal year in the number of contracts

With the addition of four directly operated offices during theconcluded in the Tokyo metropolitan area, but average transac-

year, including the new STEP ADVANCE brand, the networktion prices rose, primarily in prime downtown locations.

boasted a total of 255 offices nationwide as of March 31, 2015.

Given this environment, the segment, which is handled by

Outlook

Sumitomo Real Estate Sales Co., Ltd., recorded a 4.2%
decline, to 33,968 units, in the number of transactions in ourOur brokerage operations will continue to open new offices andmainstay brokerage operations, primarily for retail transactions for

upgrade existing offices, while at the same time striving to raise

existing homes. Nevertheless, with higher transaction prices andmarketing efficiency, with the aim of achieving revenue and profit

an increase in the number of large corporate transactions, trans-

growth on a record number of brokerage transactions.
We are therefore forecasting a 7.7% increase in revenue

action value increased 7.9% from the previous year, to ¥1,065.7

from operations, to ¥63.0 billion, with a 21.5% increase in oper-

billion, surpassing ¥1 trillion for the first time in seven years.

ating income, to ¥20.0 billion, for the March 2016 fiscal year.

As a result, revenue growth was maintained for the sixth
consecutive year, with a 2.2% increase in revenue from
Revenue from Operations

Operating Income andOperating Margin

Billions of yenBillions of yen

75

%

21

60

Number of Transactions andTransaction Value
Billions of yenTransactions
48,0001,200

33,96833,18035,45531,44336,479

0

13

14

15

Operating Income

26

Annual Report 2015

20

400

16

0

0

(Forecast)

Operating Margin (right scale)

11

12

13

14

15

Transaction Value

32,0001,142.6

12

800

20.0

11

40

1,065.7

16(Forecast)

16.5

15

18.0

14

14.5

58.5

13

14.5

57.2

12

12.2

51.0

11

63.0

49.4

0

7

46.4

25

31.7
29.4 28.4 31.4 28.1

987.8

26.3

858.9

14

892.8

50

834.6

31,29316

16,0000(Forecast)

Number of Transactions (right scale)Corporate Governance
Board of Directors and Statutory Auditors As of June 26, 2015

Outside Director

Hiromasa Yonekura

Chairman of the Board

Deputy Chairman of the Board

Junji Takashima*

Kenichi Onodera

President

Deputy President

Kojun Nishima*

Nobuaki Takemura*(Date of birth: March 31, 1937)
April 1960 Entered Sumitomo Chemical Co., Ltd.
June 2000 President, Sumitomo Chemical Co., Ltd.
April 2009 Chairman, Sumitomo Chemical Co., Ltd.
May 2010 Chairman, KEIDANREN (Japan Business Federation)
June 2014	‌Honorary Chairman, KEIDANREN (present)Counselor, Sumitomo Chemical Co., Ltd. (present)
June 2015	‌Outside Director, Sumitomo Realty & Development Co., Ltd.
(present)

Outside Director

Shoichi Abbe

Deputy President

Director

Masato Kobayashi*

Yoshiyuki Odai*(Date of birth: September 20, 1940)
April 1963 Entered The Sumitomo Warehouse Co., Ltd.
June 1994 Director, The Sumitomo Warehouse Co., Ltd.
June 1997	‌Executive Managing Director – Managing Director,
The Sumitomo Warehouse Co., Ltd.
June 2000	‌Executive Managing Director – President, The Sumitomo
Warehouse Co., Ltd.
June 2010 President – Executive Officer, The Sumitomo Warehouse Co., Ltd.
June 2013	‌Statutory Auditor, Sumitomo Realty & Development Co., Ltd.
June 2015	‌Executive Managing Director – Chairman of the Board,
The Sumitomo Warehouse Co., Ltd. (present)
June 2015	‌Outside Director, Sumitomo Realty & Development Co., Ltd.
(present)(Notes)	‌Mr. Yonekura and Mr. Abbe both meet the requirements for independent directors
stipulated by the Tokyo Stock Exchange, and the Company has notified the Tokyo
Stock Exchange that both individuals are designated as independent directors.

Director

Director

Hiroshi Kato

Koji Ito	‌Mr. Yonekura is a member of the special committee established in accordance with
the Company’s takeover defense measures.

Statutory Auditors
Yozo Izuhara

Hiroshi Tomoyasu
Tadashi Kitamura
Director

Director

Yoshinobu Sakamoto

Toshikazu Tanaka* Executive Managing Director

Yoshifumi Nakamura

Sumitomo Realty & Development Co., Ltd.

27

Corporate GovernanceCorporate Governance Initiatives
Fundamental Approach to Corporate Governanceby executives responsible for operational execution. They also work
together to improve auditing by, for example, exchanging opinions as

To achieve sound management, Sumitomo Realty believes that it isneeded with other statutory auditors, the Internal Audit Division and theimportant to share information on a Companywide basis, ensure thatindependent auditors. At the same time, they provide timely advice andeveryone is aware of problems, enhance internal management supervi-

guidance to internal departments associated with internal control.

sion and achieve highly transparent management through appropriate

Sumitomo Realty does not have standards or a policy regarding

information disclosure. We have implemented a number of corporate

independence from the Company for selecting outside statutory auditors

governance initiatives to realize these practices efficiently.

and outside directors. However, the Company does refer to the Tokyo
Stock Exchange’s evaluation standards regarding the independence of
directors and corporate auditors when appointing such individuals.

Corporate Governance Bodies

The Internal Audit Division, which has seven staff members, monitors

The Board of Directors is made up of 12 directors. The Board

the operational execution of divisions throughout the Group and the

makes decisions on important Company matters, and oversees theoperation of internal control systems. The division also works to prevent

directors’ execution of duties. Furthermore, internal information, aware-

misconduct and mistakes, and proposes operational improvements.

ness of issues and other matters are shared through the Board of

Moreover, the division reports the results of its audits to the statutory

Directors, internal meetings and other forums, promoting quick andauditors and the independent auditors and exchanges opinions withrational decision-making.

them in an appropriate manner. These activities help to improve the

The Board of Statutory Auditors has four members, including two

quality and efficiency of the audit work of the Internal Audit Division,

outside statutory auditors. To strengthen management oversight, we

the statutory auditors and the independent auditors. At the same time,

continue working to enhance outside auditing. The statutory auditors

the Internal Audit Division, the statutory auditors and the independent

attend meetings of the Board of Directors and other important meet-

auditors provide timely advice and guidance to internal departments

ings, and track internal issues that are important for robust auditing.

that are associated with internal control.

Two outside directors were elected at the ordinary General Meetingof Shareholders held in June 2015. Both of these directors possessa wealth of company management experience and were nominated​Independent Auditors

as directors in light of their appropriate personal character, knowledge

In accordance with the Corporate Law and the Financial Instruments

and judgment. The Company has appointed outside directors to further

and Exchange Law, the Company has concluded an auditing contract

enhance management efficiency and strengthen the corporate gover-with KPMG AZSA & Co. for the auditing of the Company’s accounts.

nance structure by contributing points of view that are not bound by
preconceived ideas of the real estate industry and advice from a global

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

perspective. The professional histories of the two outside directors areon page 27.
Each of the two outside statutory auditors has abundant manage-Reason for Adopting the Current Structure

ment experience at other companies, and they were nominated because

The current Board of Directors is comprised of directors and statutory

their character and knowledge were considered to be appropriate for

auditors who are familiar with the nature of the Company’s business.

the Company’s statutory auditors. The outside statutory auditors fulfill

The Company therefore believes that the current Board of Directors istheir roles by expressing objective opinions on governance from anmost suitable for promoting management. The Company ensures cor-

independent standpoint from the Company without being influenced

porate governance is maintained by enhancing management oversightGeneral Meeting of Shareholders

Board of Directors
President

Board of Statutory Auditors
Independent Auditors
Executive Officers Committee
Internal Audit Division

Departments, Divisions, etc.

28

Annual Report 2015

through the Board of Statutory Auditors and through proper information

over the medium and long term, we have determined that it promotes

disclosure. In addition, two outside directors have joined the Board of

the common interests of shareholders to take certain measures to avoid

Directors to further enhance management efficiency and strengthen the

disturbance by abnormal speculations to our business approach, which

corporate governance structure.

has brought significant achievements. The Company therefore introduced a policy for responding to large-scale purchases of its shares,

Internal Control and Risk Management Systems

and at the ordinary General Meeting of Shareholders held on June 28,
2007 the policy was approved by more than 70% of shareholders,

To efficiently institute sound management practices, the Company

which is the level of support required for the approval of special resolu-

has established a range of internal control systems and is working totions. With the approval of shareholders at the 77th General Meetingenhance those systems.

of Shareholders held in 2010, and again at the 80th General Meeting

To further enhance our compliance with laws and regulations andof Shareholders held in 2013, the policy has been extended to theto ensure ethical business practices, we established the Risk Management

conclusion of the 83rd General Meeting of Shareholders, scheduled

Committee. In addition, through the Compliance Department, we haveto be held in June 2016.

established internal auditing and internal reporting systems. In theseways, we are working to prevent inappropriate and illegal actions.

Compensation of Directors and Statutory Auditors

Overview of Takeover Defense Measures
and Board of Directors’ Judgment
The Company believes that if a large-scale purchase of the Company’s

At the ordinary General Meeting of Shareholders held in June 2004, weshares is initiated, the shareholders, in principle, should decide to

introduced a new performance-based compensation system for direc-

accept or reject the large-scale purchase. To enable the shareholders to

tors. Under this system, the annual compensation for directors is based

correctly understand the large-scale purchase’s effect on the corporateon the Company’s performance. The new system combines the threevalue and the common interests of shareholders, however, it is neces-elements that made up the previous system—monthly compensation,sary that both the party making the large-scale purchase and the Board

annual bonuses and retirement allowances.

of Directors of the Company provide to the shareholders necessary andUnder the new system, total annual (July to June) compensation

sufficient information, opinions, alternative proposals, etc. and that thefor directors is set at 1% of consolidated ordinary profit. In the year undershareholders are given sufficient time to consider the provided informa-

review, compensation for directors was ¥1,266 million, compensation

tion, opinions, alternative proposals, etc.

for statutory auditors (excluding outside statutory auditors) was ¥30 million and compensation for outside statutory auditors was ¥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,certified public accountants, etc.

construction 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

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

the 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 complies

participants who are capable of making huge investments, we arewith the large-scale purchase rules, if it is clear that the large-scalecautious about the risk of abnormal investment activity in the stock ofpurchase will cause unrecoverable damage to the Company or if thethe Company 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

common interests of shareholders.
Sumitomo Realty & Development Co., Ltd.

29

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

1

DisasterResistant2

PeopleFriendly23People Friendly

Enhancing regional convenience andpromoting barrier-free accessOur redevelopment business creates
people-friendly cities. A case in point is the
Roppongi 3-chome Project (East District),where an underground walkway is being
built so that pedestrians of all abilities canmove more easily from city areas totrain stations.

AEDs

In order to be better prepared for a
medical emergency at an office building,hotel or other key facility we operate
and manage, we have installed automated external defibrillators (AEDs).
Moreover, all personnel undertakefirst-aid training.

30

Annual Report 2015

3

Disaster ResistantProtecting office workers andbusinesses

to disasters and friendly to people and the environment.

Create even bettersocial assets
for the next generation

1

3

Environment
Friendly

Sumitomo Realty’s latest office buildings
actively employ earthquake-resistant features to 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

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

Environment Friendly

Improving the environmental performance of buildings

When we build condominiums, we give consideration to the environment,
including by planting trees, adding greenery to rooftops 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 low CO2 emissions. The blocks are environmentally friendly because they are made ofnatural materials, which will eventually return to the ground at the end of their life. The blocks areused 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.

CSR through Business
Urban Redevelopment That Improves Cities—Sumitomo Fudosan Shinjuku Grand Tower
In December 2011, we completed redeveloping an approximate two-hectare area in the western part of Shinjuku Ward, Tokyo,
under the basic concept of creating a multipurpose urban area combining offices, residences, an event hall and shops with a grossfloor area of 168,296 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
LEAF vehicle will be able to supply power to the multipurpose hall for

Introduction of Solar Power Generationand Energy-saving Facilities

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. Also, 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

striving 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.

31

Financial Section
Eleven-year Financial Summary

Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
Years ended March 31
Millions of yen

2015

2014

2013

2012

2011

¥  806,835
289,117264,207
188,995
58,486¥  780,273
283,730
234,093
201,190
57,211¥  736,652
278,317232,149
171,082
50,957¥  688,662
271,812
198,154
165,995
49,397¥  744,756
292,875
239,709
162,924
46,430

Cost of revenue from operations

579,964

558,987

529,913490,437

551,364

SG&A expenses

60,976
7.6%

60,815
7.8%

55,394
7.5%

50,760
7.4%

54,9297.4%

165,895
20.6%

160,471
20.6%

151,345
20.5%

147,465
21.4%

138,463
18.6%% of revenue from operations

139,055
17.2%

130,537
16.7%

114,916
15.6%

107,91215.7%

106,296
14.3%

Net income

80,567

69,697

59,82553,23650,908Depreciation and amortization

33,51935,311

37,761

36,04923,705¥1,025,703
801,950
4,523,804
832,462
2,875,660¥  924,452
715,779
4,220,429
707,948
2,652,929¥  965,786
679,496
4,105,500
627,0122,424,932¥  801,142
586,1703,859,698
553,8442,407,639¥  805,958
558,091
3,234,203
526,227
1,901,850¥   169.97
1,756.25
21.00¥   147.02
1,493.48
20.00¥   126.18
1,322.52
20.00¥   112.28
1,168.11
20.00¥   107.35
1,109.78
20.00

18.4
3.5
10.5
3.9
97
87
6.5

16.8
3.7
10.4
4.0
95
82
6.1

15.3
3.9
10.1
3.9
93
80
4.9

14.3
4.3
9.9
4.3
93
80
4.2

16.3
3.6
10.0
4.4
89
79
4.7

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

Key Ratios

Equity ratio (%)
ND/E ratio*4 (Times)
ROE (%)ROA (%)
Long-term debt ratio (%)
Fixed-interest rate debt ratio (%)
Interest coverage ratio*5 (Times)*1. U.S. dollar amounts in this report are translated, for convenience only, at the rate of ¥120.15 = U.S.$1, the prevailing exchange rate at March 31, 2015.
*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

32

Annual Report 2015

Financial Section

Thousands of U.S. dollars*1

2010

2009

2008

2007

2006

2005

2015

¥  719,636
293,533
219,662
158,21444,621¥  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$ 6,715,231
2,406,300
2,198,976
1,572,992
486,775

534,270

496,547

488,202490,491

487,805

470,636

4,827,000

51,3877.1%

52,327
7.5%

49,118
7.1%

49,167
7.3%

46,6977.2%

45,1887.3%

507,499—

133,979
18.6%

146,366
21.1%

154,608
22.3%

137,176
20.3%

112,02317.3%

100,291
16.3%

1,380,732—

100,464
14.0%

113,582
16.3%

125,17618.1%

112,406
16.6%

87,03813.5%

74,39312.1%

1,157,345—

52,662

46,205

63,13350,30032,506

15,548670,553

18,065

17,886

17,15015,677

16,33014,019278,976¥  802,693
521,871
3,168,098
488,896
1,785,854¥  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$ 8,536,854
6,674,573
37,651,303
6,928,522
23,933,916¥   111.04
1,030.93
20.00¥    97.39
920.7420.00¥   133.00
900.5718.00¥   105.92
861.9314.00¥    68.33
790.7410.00¥    32.64
673.409.00$      1.41
14.62
0.17

15.4
3.7
11.4
4.4
83
81
4.6

14.5
3.9
10.7
5.1
76
77
4.9

14.8
3.6
15.1
5.6
83
85
6.2

14.9
3.3
12.8
5.4
79
83
6.8

15.3
3.1
9.3
5.0
80
77
6.5

15.0
2.9
5.0
4.8
83
87
5.2

—
—
—
—
—
—
—

Sumitomo Realty & Development Co., Ltd.

33

Management’s Discussion and Analysis‌
Reviewof the March 2015 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

Revenue from operations grew ¥26.6 billion, or 3.4%, to ¥806.8 billion, andApril 2013. The Plan sets a cumulative three-year target of ¥400 billion ofoperating income rose ¥5.4 billion, or 3.4%, to ¥165.9 billion.

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

Please refer to “Review of Operations” on pages 18 to 26 for detailed

In the March 2015 fiscal year, the second year of the Sixth Management

segment information.

Plan, Sumitomo Realty marked the third consecutive year of revenue growth
and the fifth consecutive increase in both operating income and ordinary

Other Income and Expenses

profit, and the second consecutive year of record revenue from operations,

Net other expenses decreased ¥10.1 billion, to ¥35.2 billion, mainly from a

operating income, ordinary profit, and net income.

¥0.9 billion decline in interest expense, net.

Although operating income from housing construction and real estate
brokerage declined from the effect of a drop in consumption following the

Net Income

consumption tax rate increase, the leasing business and real estate sales

Income before income taxes and minority interests grew to ¥130.7 billion.

business recorded revenue and profit growth on a continued improvement in

After the payment of income taxes in the amount of ¥47.4 billion, net income

the office building market and solid condominium sales. With this boost,rose 15.6%, to ¥80.6 billion, and the net income margin improved, fromrevenue from operations rose 3.4% from the previous year, to ¥806.8 billion,

8.9% to 10.0%.

and operating income grew 3.4%, to ¥165.9 billion.
Market conditions are posing challenges for the achievement of the Plan’sCash Flows

target for revenue from operations, but operating income and ordinary profit
are on track with the aggregate achievement of roughly two-thirds of thethree-year targets.

Cash and cash equivalents at the end of year totaled ¥150.3 billion, aGoing forward, we will flexibly respond to changes in the operating envi-

decrease of ¥4.0 billion from the end of the previous fiscal year. Cash flows

ronment, while redoubling our efforts to achieve the targets set in the Sixth

were as follows.

Management Plan and chart a course for sustained growth.

Cash Flows from Operating Activities

Please refer to “President Interview” on pages 6 to 8 for detailed information regarding the Sixth Management Plan.

Net cash provided by operating activities was ¥35.1 billion, despite therecording of ordinary profit of ¥139.1 billion, outlays, including investments
for condominium sales and the payment of income taxes.

120

18.6

20.6

20.6

16

(Forecast)

0

20.5

11

12

13

14

15

Operating Income

150

20

100

10

50

0

0

174.0

165.9

15

160.5

14

151.3

806.8

13

147.5

780.3

12

138.5

736.7

11

850.0

688.7

0

20.5

60

744.8

300

21.4

Billions of Yen

16(Forecast)

Operating Margin (right scale)

11

12

13

14

15

Ordinary Profit*

Net Income* Please see note *2 on page 32.

34

Annual Report 2015

Financial Section

147.0
88.0

600

%
30

139.1
80.6

180

130.5
69.7

Billions of Yen

900

114.9
59.8

Billions of Yen

Ordinary Profit * andNet Income

107.9
53.2

Operating Income andOperating Margin

106.3
50.9

Revenue from Operations

16(Forecast)Cash Flows from Investing Activities

Millions of yen

Net cash used in investing activities was ¥220.9 billion. In addition to ¥149.5
billion of payments for purchases of property and equipment to strengthen

Short-term debt:

the leasing business, the net amount of outlays for restitution of deposits
from partnership investors was ¥72.9 billion.

Principally from banks ¥Cash Flows from Financing Activities

Subtotal

2015

2014

Amountchange%change87,000¥ 113,000¥ –26,000–23.0%

Commercial paper—

31,996–31,996–100.0%87,000144,996–57,996–40.0%

Bonds

440,000

410,000

30,0007.3%¥280.0 billion in redemption of bonds and repayment of long-term loans

Non-recourse bonds

44,324

49,672–5,348–10.8%

payable, and the net decrease in short-term debt, including commercial
paper, was ¥57.9 billion. In addition, as a result of the amount repaid

Loans principallyfrom banks

1,996,218

1,690,403

305,815

18.1%

exceeding the amount raised, the year-end balance of long-term non-Non-recourse loans

399,485

445,125–45,640–10.3%Net cash provided by financing activities was ¥187.8 billion. To enhanceLong-term debt:

long-term fund-raising stability, proceeds from the issuance of bonds andfrom long-term loans payable totaled ¥615.8 billion, exceeding the total

recourse loans and non-recourse bonds by SPEs* was a net decrease ofSubordinated loan

¥51.0 billion.

SubtotalInterest-bearing debt

60,00060,0000

0.0%

2,940,027

2,655,200

284,827

10.7%¥3,027,027¥2,800,196¥226,831

8.1%

Capital Resources and Liquidity
Shareholders’ Equity*

AssetsShareholders’ equity as of March 31, 2015, was ¥832.5 billion, a ¥124.5

Total assets as of March 31, 2015, were ¥4,523.8 billion, an increase ofbillion increase from the previous fiscal year-end. This included net income of¥303.3 billion from the previous fiscal year-end. Current assets increased¥80.6 billion, as well as net unrealized holding gains on securities of ¥88.8¥101.3 billion, to ¥1,025.7 billion. This included an increase in real estate forbillion (a ¥51.0 billion increase from the previous fiscal year-end). As a result,sale (including construction in progress) and an increase in investments inthe equity ratio improved to 18.4%, from the previous year’s 16.8%. ROE

securities, primarily from higher valuations of listed equity holdings. Property

also improved, from 10.4% to 10.5%. ROA was 3.9%, compared with 4.0%

and equipment, net increased ¥123.3 billion, to ¥2,923.4 billion.

for the March 2014 fiscal year.
We remain at the top level of our industry in terms of ROE, with an average

Liabilitiesof 10.2% over the past five years. Going forward, we will continue to work

Total liabilities as of March 31, 2015, were ¥3,664.3 billion, an increase of

toward achieving the earnings targets set out in our Management Plans.

¥176.4 billion from the previous fiscal year-end. Consolidated interest-* Shareholders’ equity = Net assets – Minority interests

bearing debt increased ¥226.8 billion, to ¥3,027.0 billion, while deposits
received decreased.

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

Total Assets

Shareholders’ Equity and 
Equity Ratio

Billions of Yen

Billions of Yen

4,800

%
30

900

3,200

600

16.3
1,600

14.3

15.3

16.8

18.4

15

0

832.5

14

707.9

4,523.813627.0

4,220.4

12553.8

4,105.5

11526.2

3,859.7300

3,234.2
0

ROE and ROA

11

12

13

14

15

%
12

20

8

10

4

0

0

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

10.0

9.9

10.1

10.4

10.5

4.4

4.3

3.9

4.0

3.9

11

12

13

14

15

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

Sumitomo Realty & Development Co., Ltd.

35

Management’s Discussion and Analysis

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

Financial Strategy
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 170,000 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 14 and 15 for more information
regarding specific projects in the Sixth Management Plan). We are aiming forSpecifically, we have aggressively introduced development securitization
methods using SPEs. With SPEs where off-balance sheet funds are raised

and maintaining this level under the Seventh Management Plan, bringing

through non-recourse loans, we have worked to conduct development on agross floor area of 50,000 tsubo to market annually (150,000 tsubo perlarge scale with a small amount of equity money without placing a burden on

three-year plan) going forward, focusing on redevelopment.

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

For these future development projects, we plan to invest approximately

since the March 2012 fiscal year). In addition, to diversify our fund-raising¥400.0 billion during the three years covered by the Sixth Management Plan,

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

and we intend to cover this investment with operating cash flow. In addition(Sumitomo Realty & Development Fund) investment partnerships backed byto this investment, we will consider bond issues or other debt financing if

leased buildings, making effective use of our assets in our fund-raising activi-

additional investment opportunities arise, recognizing that current low inter-ties. At the end of March 2015, the balance of investment received in SURF

est rates present a favorable environment for financing.
As one of the goals of our Sixth Management Plan, we are working toinvestment partnerships was ¥104 billion, which was recorded on thestrengthen our financial position, and have been able to increase sharehold-balance sheet as deposits received.

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

By actively utilizing these types of fund-raising methods that do not rely
on interest-bearing debt, in the first half of the 2000s, we raised large

our net debt-equity (ND/E) ratio improved to 3.5 times as of the fiscal year-

amounts of funds without having to sell assets at low prices, and haveend, compared with 4.6 times five years earlier. We believe we will beaggressively acquired sites when site acquisition costs are low and there areable to continue to invest for growth while improving our financial balance

investment opportunities. Consequently, our site acquisition has proceeded

going forward.

according to plan, and we were able to achieve substantial growth in revenue and profit over a decade.

%Billions of Yen

80

79

80

80

82

12

87

8

120

0

11

12

13

14

15

0

11

12

13

14

15

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.

36

0

35.8

15

4

155.4

14

20

30.0

2,875.7

13

60

151.2

2,652.9

12

4

142.0

2,424.9

11

4.2

40

97

2,407.6

02,444.2

1,000Annual Report 2015

Financial Section

8

4.9

4.7
3.5

95

3.7

93

3.9

93

4.3

89

4.6

6.5

6.1

60

26.2

2,000

Times

180

100

27.0

12

171.2

Times

3,000

Interest Coverage Ratio

31.9

Billions of Yen

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

165.1

ND and ND/E Ratio0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 the riskof 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 ¥110.0 billion of corporate bonds, and were able to issuebase level of dividends and, while retaining a sufficient level of earnings for¥90.0 billion of that amount as 10-year bonds with an average interest rate

stable, long-term operational growth, to increase dividends in line withof less than 1%. We will continue to closely observe market conditions andgrowth in profit.

extend the tenor of our debt portfolio going forward. As of March 31, 2015,

We have implemented five plans since April 1997. We steadily strength-

long-term debt accounted for 97% of consolidated interest-bearing debt,

ened our profit foundation under two management plans—the First Plan andand fixed-rate debt for 87%.

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¥135.5 billion in the year under review, surpassing ¥100.0 billion for theto comparatively large special losses, net income fluctuated, but we main-eighth 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 crisis. As of September 2015, JCR and R&I issued ratings of A+

However, profit subsequently declined due to the Lehman crisis. Never-and A–, respectively, following the elevation of JCR by one grade in January

theless, we focused on the continuation of stable dividends and maintained2015.

the dividend per share at ¥20.00. Reflecting the fact that the March 2015

Site acquisition is essential to the achievement of sustained growth.

fiscal year was our second consecutive year of record earnings, we

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

increased the full-year dividend by ¥1.0, to ¥21.00 per share. In addition, at

position through the generation of profit and work to achieve increased

this time we intend to pay a full-year dividend of ¥22.00 per share for thefund-raising stability as we continue to invest in growth, centered on the

March 2016 fiscal year. Moving forward, we will make efforts to continue

core leasing business.

profit growth and advance the expansion of equity, while further enhancing
shareholder returns.

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

Leasing Assets andReturn on Leasing Assets

Billions of Yen
150

Times

Billions of Yen

30

3,600

%
12

Cash Dividends per Share,
Ordinary Profit andIncome before Income Taxes
Billions of Yen

30

20.0

130.9

135.5

14

15

0

0

4.8

4.7

4.7

11

12

13

14

15

100

20

4

50

10

0

0

139.1
130.7

129.7
13

5.3

3,124.0

123.6
12

1,200

3,010.8

110.3
11

10

22.0

8

130.5
115.1

2,400

5.6

50

0

20

21.0

20.0

114.9
96.1

21.2

20.0

107.9
97.2

20.3

2,884.2

18.7

2,840.5

19.5

20.0

106.3
87.8

22.2

2,170.9

100

Yen

150

11

12

13

14

15

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)

147.0
137.0

Leasing Cash Flows

160(Forecast)

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

Sumitomo Realty & Development Co., Ltd.

37

Consolidated Balance Sheets
Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
As of March 31, 2015 and 2014

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
Inventories (Note 4)
Deferred income taxes (Note 12)
Other current assets

		 Total current assets

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.

38

Annual Report 2015

Financial Section

2015

2014

2015

¥  151,367
27,597(78)
801,950
10,82534,042
1,025,703¥  147,267
18,813(76)715,779
11,44331,226924,452$ 1,259,817
229,688(649)
6,674,573
90,096283,329
8,536,854

56,233
337,427(11,914)
381,746

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

468,023
2,808,381(99,159)
3,177,245

2,259,845
933,641
26,224
3,396
106,738
3,329,844

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

18,808,531
7,770,628
218,261
28,265888,372
27,714,057(406,489)
2,923,355(380,263)
2,800,045(3,383,179)
24,330,878

107,252
54,015
13,534
18,199193,000¥4,523,804

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

892,651449,563
112,643
151,469
1,606,326$37,651,303

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

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)
Net defined benefit liability (Note 9)
Other long-term liabilities (Notes 12 and 13)

		 Total long-term liabilities

2015

2014

2015

¥   87,000
380,863
69,191
66,963
26,5193,726
61,172102,109797,543¥  144,996
280,085
77,68345,502
28,988
3,774
146,690
101,799
829,517$   724,095
3,169,896
575,872
557,328
220,716
31,011
509,130
849,847
6,637,895

2,115,356
374,618
328,393
5,434
42,9212,866,722

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

17,605,959
3,117,919
2,733,192
45,227357,229
23,859,526

122,805
132,750494,276(4,247)745,584

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

1,022,097
1,104,869
4,113,824(35,347)
6,205,443

88,799(1,615)(550)
244
86,87827,077859,539¥4,523,804

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

739,068(13,442)(4,578)2,031
723,079
225,360
7,153,882$37,651,303

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.

39

Consolidated Statements of Income
Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
For the years ended March 31, 2015, 2014 and 2013

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

2015¥806,835

2014¥780,273

2013¥736,652

2015$6,715,231

579,964
60,976
640,940

558,987
60,815619,802529,91355,394585,3074,827,000
507,499
5,334,499

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
Other, net

165,895

160,471

151,345

1,380,732(26,049)
5,063
4
(3)
(3,811)(3,105)——­(30)(1,776)(5,521)(35,228)(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)(216,804)
42,13933(25)(31,719)(25,843)——(250)(14,782)(45,949)(293,200)

Income before income taxes and minority interests
Income taxes (Note 12):Current
Deferred		Total130,667

115,12296,062

1,087,532

44,7852,661
47,44645,125(2,521)42,60437,432(3,508)33,924

372,742
22,147394,889

Income before minority interests

83,221

72,51862,138692,643

Minority interests

2,654

2,821

2,313

22,090¥ 80,567¥ 69,697¥ 59,825$  670,553

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)

2015

2014

2013

2015

¥169.97—21.00¥147.02—
20.00¥126.18
—
20.00

$1.41
—
0.17

Consolidated Statements of Comprehensive Income
Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
For the years ended March 31, 2015, 2014 and 2013
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
Remeasurements of defined benefit plans
			 Total other comprehensive income
Comprehensive income
Comprehensive income attributable to:
Owners of the parent
Minority interests
See accompanying notes.

40

Annual Report 2015

Financial Section

2015¥ 83,2212014¥72,518

2013¥62,1382015$  692,643

51,057
10
3,498
65
54,630¥137,851

17,796
(262)
4,220
—
21,754¥94,272

21,919
(387)
1,741
—
23,273¥85,411424,94483
29,114541
454,682$1,147,325¥134,511
3,340¥90,604
3,668¥82,724
2,687$1,119,526
27,799

Consolidated Statements of Changes in Net Assets
Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
For the years ended March 31, 2015, 2014 and 2013

Thousands

Millions of yen
Shareholders’ equity

Balance at April 1, 2012
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
	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 April 1, 2014
	Cumulative effects of changes
in accounting policies
Restated balance	Net income	Foreign currency translation
adjustments
	Net unrealized holding gains
on securities
	Acquisition of treasury stock	Cash dividends paid:		Final for prior year(¥10 per share)		Interim for current year(¥10 per share)	Minority interests
	Net deferred gains on hedges	Remeasurements of defined
benefit plans
Balance at March 31, 2015

Accumulated other comprehensive income (loss)

Number ofshares ofcommon stock

Commonstock

CapitalsurplusRetainedearnings

Treasurystock

476,086—¥122,805—¥132,748—¥313,041
59,825¥(3,704)—

Net
RemeaTotal
unrealized
Foreignsurements accumulated
Total
holding gains Net deferredcurrencyof defined
othershareholders’ (losses) on gains (losses) translation
benefit comprehensive
equitysecurities
on hedges adjustments
plansincome (loss)¥564,890
59,825¥ (1,933)—¥  (972)—¥(8,141)—¥  ——¥(11,046)—

Minority
interests

Total net
assets¥28,823—¥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)———
476,086————¥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)

—
476,086—¥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—
476,086——¥122,805——¥132,750—(410)¥423,190
80,567—¥(4,141)—(410)¥674,604
80,567—¥37,763——¥(1,641)——¥(3,362)
—

—
¥174
—

—
¥ 32,934——¥24,584—(410)¥732,122
80,567

—

—

—

—

—

—

—

—

2,812

—

2,812

—

2,812

—
—

—
—

—
—

—
—

—
(106)

—
(106)

51,036
—

—
—

—
—

—
—

51,036———51,036
(106)

—

—

—

(4,741)—(4,741)

—

—

—

—

—

—

(4,741)

—
—
—

—
—
—

—
—
—

(4,740)—————(4,740)
—
—

—
—
—

—
—
26

—
—
—

—
—
—

—
—
26

—
2,493
—

(4,740)2,493
26—476,086—¥122,805—¥132,750—¥494,276—¥(4,247)—¥745,584—¥88,799—¥(1,615)—¥  (550)

70
¥244

70
¥ 86,878—¥27,07770¥859,539

Minority
interests

Total net
assetsThousands of U.S. dollars (Note 1)
Shareholders’ equity

Commonstock

Balance at April 1, 2014
	Cumulative effects of changes
in accounting policies
Restated balance
Net income	Foreign currency translation
adjustments
	Net unrealized holding gains
on securities
Acquisition of treasury stock
Cash dividends paid:		Final for prior year($0.08 per share)		Interim for current year($0.08 per share)
Minority interests
Net deferred gains on hedges	Remeasurements of defined
benefit plans
Balance at March 31, 2015

CapitalsurplusRetainedearnings

Accumulated other comprehensive income (loss)

TreasurystockRemeaTotal
Net
Foreignsurements accumulated
Total
unrealized Net deferredcurrencyof defined
othershareholders’ holding gains gains (losses) translation
benefit comprehensive
equityon securities on hedges adjustments
plansincome$1,022,097 $1,104,869 $3,525,593$(34,465) $5,618,094$314,299$(13,658)$(27,982) $1,448$274,107$204,611 $6,096,812——(3,412)$1,022,097 $1,104,869 $3,522,181——
670,553—(3,412)—$(34,465) $5,614,682 $314,299—
670,553——$(13,658)———$(27,982) $1,448———$274,107——(3,412)$204,611 $6,093,400—
670,553

—

—

—

—

—

—

—

23,404—

23,404—

23,404

—
—

—
—

—
—

—
(882)

—
(882)

424,769
—

—
—

—
—

—
—

424,769———

424,769
(882)

—

—

(39,459)—(39,459)

—

—

—

—

—

—

(39,459)

—
—
—

—
—
—

(39,451)
—
—

—
—
—

(39,451)
—
—

—
—
—

—
—
216

—
—
—

—
—
—

—
—
216

—
20,749—(39,451)
20,749216——$(35,347) $6,205,443—$739,068—$(13,442)—
583$(4,578) $2,031

583$723,079———$1,022,097 $1,104,869 $4,113,824—
583$225,360 $7,153,882

See accompanying notes.

Sumitomo Realty & Development Co., Ltd.

41

Consolidated Statements of Cash Flows
Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
For the years ended March 31, 2015, 2014 and 2013

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

2015

2014

2013

2015

¥ 130,667
33,5193,811(583)¥ 115,122
35,311
15,068(3,006)¥  96,062
37,761
16,96739$ 1,087,532
278,976
31,719(4,852)

—
(212)
(1)
3,105
—
30
(5,261)
26,247(8,741)(88,915)
21,446(3,507)(7,725)
103,880

—
(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—(1,764)(8)
25,843—250(43,787)
218,452(72,751)(740,033)
178,494(29,189)(64,296)864,586

5,261(26,747)(47,327)
35,067

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

4,090(32,507)(39,339)
33,59543,787(222,613)(393,900)
291,860(149,517)
141(22,335)
14,324(1,088)
5,691(11,635)
18,415
1,994(74,876)(2,032)(220,918)(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)(1,244,419)
1,174(185,893)
119,218(9,055)47,366(96,837)
153,267
16,596(623,188)(16,914)(1,838,685)(57,900)
110,000(80,000)
3,000(8,348)505,800(200,085)
23,800(69,440)(2,777)(106)(10,323)(25,806)
187,815(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(481,898)
915,522(665,834)
24,969(69,480)
4,209,738(1,665,293)
198,086(577,944)(23,113)(882)(85,918)(214,782)
1,563,171

Effect of exchange rate changes on cash and cash equivalents

2,078

2,491

711

17,295

Net increase (decrease) in cash and cash equivalents

4,042(78,509)84,532

33,641

146,223¥ 150,265

224,732¥ 146,223

140,200¥ 224,732

1,217,004$ 1,250,645

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
Increase 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
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
		TotalProceeds 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 and redemption of investments in securities
Payments for guarantee and lease deposits paid to lessors
Proceeds from guarantee and lease deposits paid to lessors
Payments for guarantee and lease deposits received
Proceeds from guarantee and lease deposits received
Receipts of deposits from partnership investors
Restitution of deposits from partnership investors
Other, net
Net cash used in investing activities

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 financing activities

Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year (Note 3)
See accompanying notes.

42

Annual Report 2015

Financial Section

Notes to Consolidated Financial Statements
Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
As of and for the years ended March 31, 2015, 2014 and 2013

1. Basis of presenting consolidated financial statements(3) Cash and cash equivalents

The accompanying consolidated financial statements of Sumitomo Realty &available deposits and short-term, highly liquid investments with maturities

Development Co., Ltd. (“the Company”) and its consolidated subsidiaries

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

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

cash and cash equivalents.

cial Instruments and Exchange Law and its related accounting regulations,

In preparing the consolidated statements of cash flows, cash on hand, readily

and in conformity with accounting principles generally accepted in Japan(4) Recognition of revenue(“Japanese GAAP”), which are different in certain respects as to application

Revenues from sales operations of condominiums, detached houses andand disclosure requirements from International Financial Reporting Standards.

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

The accounts of the Company’s overseas subsidiaries are based on
their accounting records maintained in conformity with generally accepted
accounting principles prevailing in the respective countries of domicile.

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

The accompanying consolidated financial statements have been restruc-(5) Inventories

tured and translated into English (with certain expanded disclosure) from theInventories are stated at cost, determined by the specific identification

consolidated financial statements of the Company prepared in accordance

method principally. The carrying amount of inventories is written down whenwith Japanese GAAP and filed with the appropriate Local Finance Bureau

the profitability declines.

of the Ministry of Finance as required by the Financial Instruments andExchange Law. Certain supplementary information included in the statutory(6) Securities

Japanese-language consolidated financial statements, but not required for

Held-to-maturity securities are stated at amortized cost. Investments infair presentation, is not presented in the accompanying consolidated finan-

subsidiaries and affiliates that are not consolidated or accounted for using

cial statements.

the equity method are stated at moving-average cost. Available-for-sale

The translation of the Japanese yen amounts into U.S. dollars is included

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

solely for the convenience of readers outside Japan, using the prevailingand losses on these securities are reported, net of applicable income taxes,

exchange rate at March 31, 2015, which was ¥120.15 to U.S.$1. The trans-

as a separate component of net assets. Realized gains and losses on thelation should not be construed as representations that the Japanese yen

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

amounts have been, could have been or could in the future be converted
into U.S. dollars at this or any other rate of exchange.

Preferred equity securities are stated at cost determined by the specificidentification method, and securities with no available fair value are stated atmoving-average cost.
Investments in limited partnerships, which are regarded as securities under

2. Accounting policies(1) Consolidation

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-

The accompanying consolidated financial statements include the accounts

ies and affiliates and available-for-sale securities declines significantly, suchof the Company and significant companies over which the Company has

securities are stated at fair value and the difference between fair value andpower of control through majority voting rights or existence of certain condi-

the carrying amount is recognized as a loss in the period of the decline. If thetions evidencing control by the Company.

fair value of investments in unconsolidated subsidiaries and affiliated compa-

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

nies not accounted for using the equity method is not readily available, suchof the subsidiaries, including the portion attributable to minority sharehold-securities should be written down to the net asset value with a corresponding

ers, are recorded based on the fair value at the time the Company acquired

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

control of the respective subsidiaries.

cantly. In these cases, such fair value or the net asset value will be the

All significant intercompany balances, transactions and profits have been

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

eliminated in consolidation.

(2) Foreign currency translation
Receivables and payables denominated in foreign currencies are translated
into Japanese yen at the year-end rate.
Financial statements of consolidated overseas subsidiaries are translated
into Japanese yen at the year-end rate, except for shareholders’ equity
accounts, which are translated at historical rates, and income statement
items resulting from transactions with the Company, which are translated at
the rates used by the Company.
Differences arising from translation are presented as “Foreign currencytranslation adjustments” in net assets.

Sumitomo Realty & Development Co., Ltd.

43

Notes to Consolidated Financial Statements(7) Property and equipment(12) Employees’ severance and retirement benefits

The Company and its consolidated domestic subsidiaries depreciate

The Company and certain of its consolidated subsidiaries provide two types

buildings using the straight-line method, and other property and equipmentof post-employment benefit plans, lump-sum payment plans and definedusing the declining-balance method over their estimated useful lives. The

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

consolidated overseas subsidiaries depreciate property and equipment

tled to benefits based on their current rate of pay, length of service and theusing primarily the straight-line method in accordance with the accounting

conditions under which termination occurs.

principles in the respective countries.
Leased assets related to finance lease transactions without title transfer
are depreciated using the straight-line method over the lease periods as
their useful lives with no residual value.
Estimated useful lives used in the computation of depreciation are
generally as follows:

straight-line method.
Some of the Company’s consolidated subsidiaries calculate net defined
benefit liability and retirement benefit expenses by using a simplified method
in which retirement benefit obligations are equal to the amount that would be

Buildings and structures

6 to 60 years

Machinery and equipment

2 to 20 years

Leased assets		

Lease periods

Effective from the year ended March 31, 2013, in accordance with thepaid if all employees resigned voluntarily at the end of the fiscal year.
Prior service costs are recognized as expenses in the period in which they
are incurred, and actuarial gains and losses are recognized as expenses in
the following period.

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

Effective from the year ended March 31, 2015, the Company and its

consolidated domestic subsidiaries have computed depreciation by the

consolidated subsidiaries (“the Group”) adopted the main clause of Article

method based on the revised Corporation Tax Act (Law) for the property

35 of “Accounting Standard for Retirement Benefits” (ASBJ Statement No.

and equipment acquired on or after April 1, 2012.

26 on May 17, 2012) and the main clause of Article 67 of “Guidance on

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

Accounting Standard for Retirement Benefits” (ASBJ Guidance No. 25 on
March 26, 2015). Accordingly, the Group reviewed the calculation methodsof retirement benefit obligations and service costs, and revised the method(8) Software costsof determining the discount rate from the method using the discount rate

Software costs are amortized using the straight-line method over thebased on approximate number of the average remaining service years of

estimated useful lives (five years).

employees to the method using the single weighted-average discount rate(9) Allowance for doubtful accounts

reflecting the estimated period and amount of benefit payment.
In accordance with the transitional treatment set forth in Article 37 of the

The Company and its consolidated subsidiaries provide for doubtful

Accounting Standard for Retirement Benefits, the effect of the changes inaccounts at an estimated uncollectable amount based on the evaluation of

the calculation methods of retirement benefit obligations and service costs iscertain identified doubtful and bankrupt receivables plus an amount calcu-

recognized as an adjustment to retained earnings at the beginning of thelated using the percentage of actual collection losses in certain reference

year ended March 31, 2015.

periods with respect to remaining receivables.

As a result, net defined benefit liability increased by ¥637 million ($5,302
thousand) and retained earnings decreased by ¥410 million ($3,412 thou-(10) Lease transactionssand) as of April 1, 2014. In addition, operating income and income before

Leased assets related to finance lease transactions without title transfer are

income taxes and minority interests on the consolidated statement ofdepreciated using the straight-line method over the lease periods as theirincome for the year ended March 31, 2015 decreased by ¥11 million ($92useful lives with no residual value.

thousand), respectively.

The Company and its consolidated subsidiaries use the accounting
procedures that conform to methods related to normal lease transactions(13) Construction contracts

with respect to finance lease transactions without title transfer with a lease

The construction projects for which the outcome of the portion completed

transaction start date prior to March 31, 2009.

by the end of the fiscal year under review can be reliably estimated areaccounted for by the percentage-of-completion method (the degree of(11) Income taxes

completion of each construction project is estimated using the cost-

Income taxes are provided for on the basis of income for financial statementcomparison method), while other construction projects are accounted for

purposes. The tax effects of temporary differences between the carrying

by the completed-contract method.

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

44

For the calculation of retirement benefit obligations, the estimated amountof retirement benefits is allocated to the respective fiscal years by the

Annual Report 2015

Financial Section

(14) Derivative transactions and hedge accounting
The Company and its consolidated subsidiaries state derivative financial
instruments at fair value and recognize changes in the fair value as gains orlosses unless derivative financial instruments are used for hedging purposes
and qualify for hedge accounting.
If derivative financial instruments are used as hedges and meet certain
hedging criteria, the Company and its consolidated subsidiaries defer recog-

the dilutive potential of shares of common stock to be issued upon the exercise of stock options.
Diluted net income per share is not presented as there are no potential
shares.
Cash dividends per share represent actual amounts applicable to therespective year.

financial instruments until the related gains or losses on the hedged items(16) N ew accounting pronouncements(Accounting standards issued not yet effective)

are recognized.

1. Accounting Standard for Business Combinations

nition of gains or losses resulting from changes in fair value of the derivative

However, in cases where foreign exchange forward contracts are used ashedges and meet certain hedging criteria (regarding foreign exchange
contracts), the foreign exchange forward contracts and hedged items areaccounted for in the following manner:
1. 	If a foreign exchange forward contract is executed to hedge an existing
foreign currency receivable or payable,(a) the difference, if any, between the Japanese yen amount of the hedged
foreign currency receivable or payable translated using the spot rate at
the inception date of the contract and the carrying amount of thereceivable or payable is recognized in the income statement in the
period which includes the inception date; and(b) the discount or premium on the contract (that is, the difference between
the Japanese yen amount of the contract translated using the contracted	“Accounting Standard for Business Combinations” (ASBJ Statement
No. 21 on September 13, 2013)	“Accounting Standard for Consolidated Financial Statements” (ASBJ
Statement No. 22 on September 13, 2013)	“Accounting Standard for Business Divestitures” (ASBJ Statement No. 7
on September 13, 2013)	“Accounting Standard for Earnings Per Share” (ASBJ Statement No. 2 on
September 13, 2013)
	“Guidance on Accounting Standard for Business Combinations andAccounting Standard for Business Divestitures” (ASBJ Guidance No. 10
on September 13, 2013)
	“Guidance on Accounting Standard for Earnings Per Share” (ASBJ Guidance No. 4 on September 13, 2013)

forward rate and that translated using the spot rate at the inception dateof the contract) is recognized over the term of the contract.
2.	If a foreign exchange forward contract is executed to hedge a future(1) Outline
		The accounting standards were revised mainly with a focus on (i) thetransaction denominated in a foreign currency, the future transaction willtreatment of a change of the parent company’s ownership interest in its

be recorded using the contracted forward rate, and no gains or losses on

subsidiary in case of the parent company continuing to control upon

the foreign exchange forward contract are recognized.

additional acquisition of shares of the subsidiary, (ii) the treatment of

Also, if interest rate swap contracts are used as a hedge and meet certain

acquisition costs, (iii) the presentation of net income and the change

hedging criteria (regarding interest rate swap contracts), the net amount tobe paid or received under the interest rate swap contracts is added to or
deducted from the interest on the assets or liabilities relative to which thefrom minority interests to non-controlling interests and (iv) the treatmentof provisional accounting.
(2) Effective dateswap contract was executed as a hedge.

		They are scheduled to be effective from the beginning of the year(15) Amounts per share of common stock			 The treatment of provisional accounting is scheduled to be effective

ending March 31, 2016.
The computation of net income per share is based on the weighted-average
number of shares of common stock outstanding during each year.
Diluted net income per share is computed based on the amount of net
income available to the shareholders and the weighted-average number ofshares of common stock outstanding during each year after giving effect toto business 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.

Sumitomo Realty & Development Co., Ltd.

45

Notes to Consolidated Financial Statements

3. Cash and cash equivalents
Cash and cash equivalents at March 31, 2015 and 2014 consisted of the following:Thousands of
U.S. dollars

Millions of yen

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

2015¥151,367(1,102)¥150,2652014¥147,267(1,044)¥146,2232015$1,259,817(9,172)$1,250,645

4. Inventories
Inventories at March 31, 2015 and 2014 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

2015

¥189,771
604,455
5,708
2,016¥801,950

2014¥161,438
545,534
7,048
1,759¥715,779

2015$1,579,451
5,030,836
47,507
16,779$6,674,573

The Company transferred amounts between inventories and property and equipment. Such transfers at March 31, 2015 and 2014 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)

2015

2014

2015

¥(19,737)
8,873¥(10,864)¥     —
10,163¥10,163$(164,270)
73,850$ (90,420)

5. Pledged assets
Assets pledged as collateral at March 31, 2015 and 2014 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

2015

¥  1,833
149,004
446,11317654¥597,621

2014¥  1,991
157,519446,11315851¥606,489

Secured liabilities at March 31, 2015 and 2014 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

2015

¥ 69,191
374,618¥443,809

2014¥ 77,683
417,114¥494,797

Specified assets for non-recourse debts at March 31, 2015 and 2014 are as follows:2015¥ 16,761
149,004
446,11317
654¥612,549(Note) “Specified assets for non-recourse debts” includes a portion of the amount of “Assets pledged as collateral” for the years ended March 31, 2015 and 2014.

46

Annual Report 2015

Financial Section

2015$  575,872
3,117,919$3,693,791

Thousands of
U.S. dollars

Millions of yen

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

2015

$   15,256
1,240,150
3,712,967
141
5,444$4,973,958

2014¥ 16,274
157,519446,11315851¥620,7722015$  139,501
1,240,150
3,712,967
141
5,443$5,098,202

6. Financial instruments

Interest rate swap contracts are used to hedge risks arising from fluctuations 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

actions. Interest rate swap contracts are exposed to the risks of interest rateof hedging the foreign exchange risk associated with foreign currency-changes, and foreign exchange forward contracts and cross currency swap

denominated transactions or hedging the interest rate risk associated with

contracts are exposed to the risks of foreign exchange rate changes. The

the Group’s loans payable, and does not utilize derivative financial instru-

derivative financial instruments are executed with creditworthy financial insti-

ments 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 systemsof risk management

Group’s Finance Department in accordance with the decisions of a committee whose chairman is the director of the Finance Department. The FinanceOperating 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.

the 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.

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

The amounts of derivative transactions shown in Note 16 “Derivative transactions,” are not representing the market risks related to derivative transactions.

erties, and are exposed to the counterparty credit risk.
In addition, the Group accommodates counterparties with loans and conse-

The carrying amounts of financial instruments on the consolidated

quently is exposed to the borrowers’ credit risk. However, the Group constantly

balance sheets, their fair values and the differences between them as ofchecks the financial condition of principal borrowers and their performance

March 31, 2015 and 2014 are as follows. (Financial instruments whose fairusing the funds lent to those borrowers even after accommodation.

value is extremely difficult 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 2015
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(6) Guarantee and deposits received*1
Total liabilities
Derivative transactions*2:
Hedge accounting
Total derivative transactions

Millions of yen
Carrying amount

Fair value¥  151,367¥  151,367

27,597

27,597308,122

308,122

1,305
1,065

Thousands of U.S. dollars
Difference

Carrying amount

Fair value

Difference¥      —

$ 1,259,817$ 1,259,817$      ——

229,688229,688

——2,564,478

2,564,478

—

1,308

3

10,861

10,886

25

1,065

—

8,864

8,864

—

¥  489,456¥  489,459¥     3

$ 4,073,708$ 4,073,733$       25¥   66,963¥   66,963¥      —$   557,328$   557,328$      —

87,00087,000—724,095

724,095—

2,496,219

2,505,944

9,725

20,775,855

20,856,796

80,941

443,809449,740

5,931

3,693,791

3,743,154

49,363

—

—

—

—

—

—

66,00066,000—549,313549,313—¥3,159,991¥3,175,647¥15,656$26,300,382$26,430,686$130,304¥   (2,391)¥   (2,391)¥      —$   (19,900)$   (19,900)$      —¥   (2,391)¥   (2,391)¥      —$   (19,900)$   (19,900)$      —

Sumitomo Realty & Development Co., Ltd.

47

Notes to Consolidated Financial Statements

For 2014

Millions of yen

Assets:(1) Cash, time and notice deposits(2) Notes and accounts receivable—trade(3) Investments in securities
Available-for-sale securities(4) Guarantee and lease deposits
Held-to-maturity securities
Available-for-sale securities
Total assets
Liabilities:(1) Notes and accounts payable—trade(2) Short-term debt
(3) Long-term debt (including due within one year)(4) Long-term non-recourse debt (including due within one year)(5) Deposits received*1(6) Guarantee and deposits received*1
Total liabilities
Derivative transactions*2:
Hedge accounting
Total derivative transactions

Carrying amount

Fair value

Difference¥  147,267¥  147,267¥      —

18,813

18,813—210,902210,902

—

1,299

1,300

1

953

953

—

¥  379,234¥  379,235¥     1¥   45,502¥   45,502¥      —

144,996

144,996—

2,160,404

2,168,585

8,181

494,797499,404

4,607

10,00010,000—66,00066,000—¥2,921,699¥2,934,487¥12,788(2,530)(2,530)—¥   (2,530)¥   (2,530)¥      —

*1. The amounts only included in financial liabilities are disclosed.
*2. Derivative transactions are stated at net of assets and liabilities. Figures in parentheses indicate net liabilities.

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

Assets:(1) Notes and accounts payable—trade and (2) Short-term debt

(1) Cash, time and notice deposits

The fair value of these items approximates their carrying amounts because

The fair value of cash, time and notice deposits approximates their carryingof their short-term maturities.

amounts because of their short-term maturities.

(3) Long-term debt (including due within one year)(2) Notes and accounts receivable—trade

For floating rate notes, the carrying amount is used as the fair value because

The fair value of notes and accounts receivable—trade approximates their

the market interest rate is reflected in such notes within a short time period

carrying amounts unless the credit standing of debtors has changed signifi-

and because the credit standing of the Company is the same after borrow-cantly since the loan origination.

ing. The fixed-coupon debt is calculated by discounting the combined total

The allowance for doubtful receivables is estimated based on expected
recoverable amounts, considering the possibility of individual collections.

of principal and interest at an interest rate assumed for similar new borrowings.
The specific matching criteria of interest rate swaps and cross currency

Therefore the fair value of doubtful receivables approximates the carrying

interest rate swaps are applicable to some long-term debts with floating

amount deducted by the estimated allowance for doubtful accounts on theinterest rates (please see Note 16 “Derivative transactions”). The fair value ofconsolidated balance sheets as of the end of the fiscal year.

these items is calculated by discounting the combined total of interest and(3) Investments in securities

principal, with which the interest rate swap and cross currency interest rate

The fair value of listed shares is based on the exchange prices at market. For

swap have been accounted for, at an interest rate rationally estimated for

floating rate notes, the carrying amount is presented as the fair value, as thesimilar borrowings.

fair value approximates the carrying amount because the market interest rate

The fair value of corporate bonds issued by the Company (included in (3)is reflected in such notes within a short time period. The fair value of the fixed-

Long-term debt (including due within one year)) is based on the market price.

coupon debt is determined based on the present value discounted at the(4) Long-term non-recourse debt (including due within one year)

interest rate which reflects the period remaining to maturity and the credit risk.

For floating rate notes, the carrying amount is used as the fair value because

For notes on securities classified by purpose of holding, please see
Note 7 “Securities.”

the market interest rate is reflected in such notes within a short time period
and the value of its non-exempt properties has not been changed.

(4) Guarantee and lease deposits

The fixed-coupon debt is calculated by discounting the combined total of

The fair value of guarantee and lease deposits are based on the value

principal and interest at an interest rate assumed for similar new borrowings

offered by correspondent financial institutions.

or bonds.

For notes on securities classified by purpose of holding, please see
Note 7 “Securities.”

48

Liabilities:

Annual Report 2015

Financial Section

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

2015

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¥ 34,284¥ 34,5962015$  287,940

1,429

18,885

11,89322,38822,388186,334

745

297

6,201

104,882

109,662

872,926

168,273

161,487

1,400,524*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 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 2015

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

5 to 10 years

Over 10 years¥151,367

¥   —

¥ —

¥—

27,596

1

—

—

195

1,115

—

—

—

408

605

—

¥179,158¥1,524¥605¥—

For 2014

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

1 to 5 years

1 to 5 years

5 to 10 years

Over 10 years¥147,267¥     —

¥ —¥—18,724

89

—

—

257

1,048

—

—

—

—

908

—

¥166,248¥1,137¥908¥—

Sumitomo Realty & Development Co., Ltd.

49

Notes to Consolidated Financial Statements

For 2015

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

1 to 5 years

5 to 10 years

Over 10 years$1,259,817$    —$   —$—

229,680

8

—

—

1,623

9,280

—

—

—

3,396

5,035

—

$1,491,120$12,684$5,035$—(Note 4) Repayment schedule of corporate bonds, long-term debt, long-term non-recourse debt and other interest-bearing debt

For 2015

Millions of yen

Year ending March 31

2016

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

2017

2018

2019

2020

¥ 87,000¥     —

¥     —

¥     —

¥     —

¥      —

380,863316,737

289,622275,752

169,619

1,063,626

69,191

120,992

19,762

46,03798,082

89,745—40,000———26,000¥537,054¥477,729¥309,384¥321,789¥267,701¥1,179,371

For 2014

Millions of yen

Year ending March 31

2015

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

2016

2017

2018

2019

¥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

For 2015
Short-term debt
Long-term debt (including due within one year)
Long-term non-recourse debt (including due within one year)
Guarantee and deposits received
Total

Annual Report 20152020 and thereafterThousands of U.S. dollars

Year ending March 31

50

2021 and thereafter

Financial Section

2016

2017

2018

2019

2020

2021 and thereafter$  724,095$       —

$       —

$       —

$       —

$       —3,169,896

2,636,180

2,410,504

2,295,065

1,411,727

8,852,483

575,872

1,007,008

164,478

383,163

816,330

746,940—

332,917———

216,396$4,469,863$3,976,105$2,574,982$2,678,228$2,228,057$9,815,819

7. Securities
For 2015
A. The following tables summarize the acquisition costs, carrying amounts and fair values of securities with available fair values as of March 31, 2015:(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

¥1,305

Fair value

Thousands of U.S. dollars
Difference¥1,308Carrying amount¥  3$10,861Fair value

Difference$10,886

$25

—

—

—

—

—

—

¥1,305¥1,308¥  3$10,861$10,886$25

Carrying amount

Acquisition cost

¥287,487¥154,178

1,065

1,013

124

(b) Available-for-sale securities:
Millions of yen

Securities whose carrying amount exceeds acquisition cost:
Equity securities
Debt securities*
Other
Subtotal
Securities whose carrying amount does notexceed acquisition cost:
Equity securities
Debt securities
Other
Subtotal
Total

Thousands of U.S. dollars
Difference

Carrying amount

Acquisition cost

Difference¥133,309$2,392,734$1,283,213$1,109,521

52

8,864

8,431

433

76

48

1,032

632

400

288,676

155,267

133,4092,402,630

1,292,276

1,110,354

19,36021,297(1,937)

161,132

177,254(16,122)

—

—

—

—

—

—

1,151

1,305

(154)

9,580

10,861(1,281)

20,511

22,602(2,091)

170,712

188,115(17,403)¥309,187¥177,869¥131,318$2,573,342$1,480,391$1,092,951* 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 ¥30 million ($250 thousand) of impairment loss on investments in securities (¥30 million ($250 thousand) on equity securities in available-for-sale securities).

B. The Company lent the equity securities temporarily to financial institutions under securities lending agreements. Lent securities, included in investments insecurities and other, were ¥81,108 million ($675,056 thousand) as of March 31, 2015.

Sumitomo Realty & Development Co., Ltd.

51

Notes to Consolidated Financial Statements

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¥  776

Fair value

Thousands of U.S. dollars
Difference¥  778Carrying amount¥2$ 7,543

Fair value

Difference$ 7,562

$19

523

522

(1)

5,083

5,074

(9)

¥1,299¥1,300¥1$12,626$12,636$10

Carrying amount

Acquisition cost¥178,465¥112,558

953

908

686

(b) Available-for-sale securities:
Millions of yen

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

Thousands of U.S. dollars
Difference

Carrying amount

Acquisition cost

Difference¥65,907$1,734,691$1,094,071$640,620

45

9,263

8,826

437

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 and the related gains amounted to ¥1,430 million.
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 as of March 31, 2014.

52

Annual Report 2015

Financial Section

8. Short-term debt and long-term debt
Short-term debt at March 31, 2015 and 2014 consisted of the following:Thousands of
U.S. dollars

Millions of yen

Loans, principally from banks
Commercial paper
Total

2015

Average interest
rate (%)

2014

Average interest
rate (%)

2015¥87,000

0.39¥113,000

0.45$724,095——

31,9960.09¥87,000¥144,996—$724,095

The interest rates represent weighted average rates in effect at March 31, 2015 and 2014, regardless of borrowing currencies, though the range ofthe interest rate varies by borrowing currency.
Long-term debt at March 31, 2015 and 2014 consisted of the following:Thousands of
U.S. dollars

Millions of yen

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
0.904% domestic straight bonds, due 2024
0.884% domestic straight bonds, due 2024
0.836% domestic straight bonds, due 2024
0.809% domestic straight bonds, due 2024
0.429% domestic straight bonds, due 2021
0.392% domestic straight bonds, due 2022
0.670% domestic straight bonds, due 2025
Loans, principally from banks and insurance companies, with interest at weighted average rates of 0.49%
in 2015, and 0.62% in 2014, respectively:
SecuredUnsecured*
Subtotal
Amount due within one year
Total

2015

2014

2015

¥   10,000¥   10,000$    83,229—

20,000——10,000——10,000——10,000——30,000—30,00030,000249,690

10,00010,00083,22920,00020,000166,459

10,00010,00083,22910,00010,00083,22910,00010,00083,22910,00010,00083,22910,00010,00083,22910,00010,00083,22910,00010,00083,22910,00010,00083,22920,00020,000166,459

10,00010,00083,22910,00010,00083,22920,00020,000166,459

10,00010,00083,22910,00010,00083,22920,00020,000166,459

10,00010,00083,22910,00010,00083,22910,00010,00083,22910,00010,00083,22920,00020,000166,459

20,00020,000166,459

20,000—166,459

20,000—166,459

20,000—166,459

20,000—166,459

10,000—83,22910,000—83,22910,000—83,229———2,056,219

1,750,404

17,113,766

2,496,219

2,160,404

20,775,855(380,863)(280,085)(3,169,896)¥2,115,356¥1,880,319$17,605,959* Unsecured long-term debt as of March 31, 2015 and 2014 includes a subordinated loan of ¥60,000 million ($499,376 thousand) and ¥60,000 million, respectively.

Sumitomo Realty & Development Co., Ltd.

53

Notes to Consolidated Financial Statements

Non-recourse debt at March 31, 2015 and 2014 consisted of the following:Thousands of
U.S. dollars

Millions of yen

Non-recourse bonds, with interest at weighted average rates of 0.82% in 2015, and 0.93% in 2014,
respectively:
Due within one year
Due after one year
SubtotalNon-recourse loans, with interest at weighted average rates of 0.72% in 2015, and 0.82% in 2014,
respectively:
Due within one year
Due after one year
Subtotal
Total
SecuredUnsecured
Total

2015

2014

2015

¥  8,264¥  8,348$   68,781

36,06041,324300,125

44,324

49,672368,906

60,927

69,335507,091

338,558

375,7902,817,794

399,485

445,125

3,324,885¥443,809¥494,797$3,693,791¥443,809¥494,797$3,693,791

—

—

—

¥443,809¥494,797$3,693,791

The aggregate annual maturities of long-term debt at March 31, 2015 are as follows:Year ending March 31

Millions of yen

Thousands of
U.S. dollars

2016
2017
2018
2019
2020
2021 and thereafter
Total¥  380,863$ 3,169,896

316,737

2,636,180

289,6222,410,504

275,752

2,295,065

169,619

1,411,727

1,063,626

8,852,483¥2,496,219$20,775,855

Millions of yen

Thousands of
U.S. dollars

The aggregate annual maturities of non-recourse debt at March 31, 2015 are as follows:Year ending March 31

2016
2017
2018
2019
2020
2021 and thereafter
Total¥ 69,191$  575,872

120,992

1,007,008

19,762

164,478

46,037383,163

98,082

816,330

89,745746,940¥443,809$3,693,791

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.

54

Annual Report 2015

Financial Section

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 2015 and 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
Cumulative effects of changes in accounting policies
Restated balance
Service costs
Interest costs
Actuarial differences
Retirement benefits paid
Retirement benefit obligations at end of year2015

¥ 9,0972014$75,714

637

—

5,301

¥ 9,734¥    —$81,015

671

651

5,585

84

129

699

14

(9)

117

(409)

(535)

(3,404)¥10,094¥9,097$84,012(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 year2015

¥8,861

2015¥4,0052014

2015¥3,471$33,333

80

69

666

369

262

3,072

403

407

3,354

(197)

(204)

(1,640)¥4,660¥4,005$38,785(3) Adjustment table of retirement benefit obligations and plan assets at the end of the fiscal year and net defined benefit liability on the consolidatedbalance sheets
Thousands of
U.S. dollars

Millions of yen

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 sheets
Net defined benefit liability
Net amount of liabilities on the consolidated balance sheets

2015

2014

¥ 5,089$ 48,606(4,660)(4,005)(38,785)

1,180

1,084

9,821

4,254

4,008

35,406¥ 5,434¥ 5,092$ 45,227¥ 5,434¥ 5,092$ 45,227¥ 5,434¥ 5,092$ 45,227(4) Components of retirement benefit expenses

Thousands of
U.S. dollars

Millions of yen

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

2015¥ 5,840

2015

2014

¥ 671

¥ 651

2015

$ 5,585

84

129

699

(80)

(69)

(666)

(271)

(129)

(2,256)

—

1

—

¥ 404

¥ 583

$ 3,362

Sumitomo Realty & Development Co., Ltd.

55

Notes to Consolidated Financial Statements(5) Remeasurements of defined benefit plans (before deducting tax effect)

Thousands of
U.S. dollars

Millions of yen

Actuarial differences
Total

2015

2014

¥—

$(699)¥(84)¥—$(699)¥(84)(6) Components of remeasurements of defined benefit plans (before deducting tax effect)

Thousands of
U.S. dollars

Millions of yen

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

2015

2015

2014

2015

¥(355)¥(271)$(2,955)¥(355)¥(271)$(2,955)

2015

2014

18.6%

17.8%

41.5

39.0

37.8

41.1

2.1

2.1

100.0%

100.0%

2015

2014

2.0

2.0

1.5%

0.9%

2. Defined contribution plan
The required contribution amount for a defined contribution plan that one of the Company’s consolidated subsidiaries adopted is ¥352 million ($2,930 thousand)and ¥337 million for the years ended March 31, 2015 and 2014, respectively.

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

2013

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¥  557
130
(60)
392
318
¥1,337

Other of ¥318 million for the year ended March 31, 2013 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 year ended March 31, 2013 are as follows:

Discount rate
Rate of expected return on plan assets

56

Annual Report 2015

Financial Section

2013

1.0, 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, 2015, 2014
and 2013, respectively.

For 2015
Use

Location

Land for development
Assets leased to others

IbarakiTokyo

Number of properties

1
1

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

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 ¥3,811 million ($31,719 thousand), ¥15,068
million and ¥16,967 million for the years ended March 31, 2015, 2014 and2013, 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

2015

¥3,811

2014¥15,0682013¥16,9672015$31,719

The recoverable amounts of these assets were determined as the net disposal value. The net disposal value for land for leased buildings and land 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
for restoring office spaces when they move out. For the asset retirement

Even though removing asbestos is required for some buildings the Company

obligations associated with such a case, the duration of use of the assets is

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

not clear enough and these assets do not have any relocation plans. There-

ishing, it is difficult to estimate the fair value of obligations associated withfore, the Group is unable to estimate the asset retirement obligations since itsuch assets reasonably since the timing and/or method of settlement for theis difficult to estimate the timing of fulfillment of the obligations. Conse-

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

quently, for the years ended March 31, 2015 and 2014, asset retirement

March 31, 2015 and 2014, asset retirement obligations related to such aobligations related to such a case are not recorded (except for the asset

case are not recorded (except for the asset retirement obligations recorded

retirement obligations recorded on the financial statements).

on the financial statements).

Sumitomo Realty & Development Co., Ltd.

57

Notes to Consolidated Financial Statements

12. Income taxes
The normal effective statutory income tax rate in Japan arising out of the aggregation of corporate, enterprise and inhabitants’ taxes was approximately
35.64% for the year ended March 31, 2015, and 38.01% for the years ended March 31, 2014 and 2013.
Details of deferred tax assets and liabilities at March 31, 2015 and 2014 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 saleAccrued enterprise tax and business office tax
Net operating loss carryforwards
Allowance for doubtful accounts
Net defined benefit liability
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

2015

2014

2015

¥ 10,359¥ 11,963$  86,217

6,225

8,830

51,810

5,087

2,913

42,339

2,375

2,196

19,767

2,264

2,485

18,843

2,222

1,762

18,494

2,095

1,977

17,437

1,492

1,645

12,418

1,373

1,496

11,427

1,013

1,017

8,431

862

951

7,174

773

925

6,434

4,666

5,931

38,83440,80644,091

339,625(4,262)(4,497)(35,472)¥ 36,544¥ 39,594$ 304,153(42,481)(20,936)(353,566)(3,941)(4,343)(32,801)

(773)

(850)

(6,434)(47,195)(26,129)(392,801)¥(10,651)¥ 13,465$ (88,648)

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

expected to be eliminated in the fiscal year beginning on April 1, 2015 andAct” (Act No. 9 of 2015) and “Act for Partial Revision of the Local Tax Act”

to 32.34% for temporary differences expected to be eliminated in the fiscal(Act No. 2 of 2015) on March 31, 2015, the corporate tax rate will be

years beginning on or after April 1, 2016. As a result, net deferred tax liabili-

reduced from fiscal years beginning on or after April 1, 2015. Accordingly,

ties decreased by ¥1,464 million ($12,185 thousand) and deferred income

the effective statutory tax rate used to measure deferred tax assets andtaxes increased by ¥2,811 million ($23,396 thousand), respectively.

liabilities was changed from 35.64% to 33.1% for temporary differences
The differences between the statutory tax rate and the effective tax rate for the years ended March 31, 2015 and 2014 were insignificant and not presented.
The differences between the statutory tax rate and the effective tax rate for the year ended March 31, 2013 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

58

Annual Report 2015

Financial Section

2013

38.01%(3.35)
0.30
0.95—(0.60)
35.31%

13. Deposits received and accounts payable with interest rate
Guarantee and deposits received at March 31, 2015 and 2014 are as follows:

Thousands of
U.S. dollars

Millions of yen

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

Average interest
rate (%)

2014¥ 61,172

—

—

—

2015

Total

2015

¥136,690—$  509,130

10,0000.26

146,690

61,172

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

Average interest
rate (%)

168,274—

161,487—

1,400,533

—

—

—

—

—

94,119—97,651—

783,346

66,0000.28

66,0000.31

549,313

328,393

325,138

2,733,192¥389,565¥471,828$3,242,322

Accounts payable with interest rate at March 31, 2015 and 2014 are as follows:

Thousands of
U.S. dollars

Millions of yen

Due within one year
Due after one year
Total—
509,130

2015

Average interest
rate (%)

2014

Average interest
rate (%)

2015¥1,544

0.98¥ 3,277

1.28$12,851

4,630

0.98

13,9741.30¥6,174¥17,251

38,535$51,386(Note) Accounts payable due within one year are included in “Other current liabilities” and accounts payable due after one year are included in “Other long-term liabilities” on the consolidated balance sheets.

The aggregate annual maturities of deposits received at March 31, 2015 are as follows:Year ending March 31

2016
2017
2018
2019
2020
2021 and thereafter
Total

Millions of yen

Thousands of
U.S. dollars¥     —

$      —

40,000332,917

—­

—

—

—

—

—

26,000216,396¥66,000$549,313

The aggregate annual maturities of accounts payable at March 31, 2015 are as follows:Year ending March 31

2016
2017
2018
2019
2020
2021 and thereafter
Total

Millions of yen

Thousands of
U.S. dollars¥1,544$12,851

1,544

12,851

1,543

12,842

1,543

12,842————¥6,174$51,386

Sumitomo Realty & Development Co., Ltd.

59

Notes to Consolidated Financial Statements

14. Net assets

Under the Law, legal earnings reserve and additional paid-in capital could
be used to eliminate or reduce a deficit and capitalized by a resolution of theUnder the Japanese Corporate Law (“the Law”) and its regulations, theshareholders’ meeting.

entire amount paid for new shares is required to be designated as common

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

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

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

designate an amount not exceeding one-half of the price of the new sharesearnings reserve may be transferred to other capital surplus and retained

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

earnings, respectively, which are potentially available for dividends.

Under the Law, in cases where a dividend distribution of surplus is made, theThe maximum amount that the Company can distribute as dividends issmaller of an amount equal to 10% of the dividend or the excess, if any, of 25%

calculated based on the non-consolidated financial statements of theof common stock over the total of additional paid-in capital and legal earn-

Company in accordance with the Law and its regulations.

ings reserve must be set aside as additional paid-in capital or legal earnings
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, 2015, 2014 and 2013 are as follows:
Thousands of
U.S. dollars

Millions of yen

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

2015

2014

2013

2015

¥    995¥    942¥  2,036$    8,281

17,44917,736

14,129145,227¥ 18,444¥ 18,678¥ 16,165$  153,508¥ 58,934¥ 52,024¥ 59,375$  490,504

90,226

91,61476,303750,944¥149,160¥143,638¥135,678$1,241,448

16. Derivative transactions
Hedge accounting was applied to all derivative transactions for the years ended March 31, 2015 and 2014.
The summary of these transactions is as follows:

For 2015(1) Foreign currency-related derivatives
Millions of yen
Hedging accounting

Types of derivative transactionsDeferred hedge
accounting

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

Hedged items

Contract amounts¥14,996Contract amounts due
after one year¥—

Fair value¥(12)

Thousands of U.S. dollars
Hedging accounting

Types of derivative transactions

Hedged items

Deferred hedge
accounting

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.

60

Annual Report 2015

Financial Section

Contract amounts$124,811

Contract amounts due
after one year$—

Fair value$(100)

(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
Exceptional accounting Interest rate swap contracts
Bank loans and bonds
for interest rate swaps
Fixed rate payments / Floating rate receipts
Exceptional 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
Deferred hedge
accounting

Contract amounts

Contract amounts due
after one year¥  472,000¥  472,000¥(2,379)

1,280,626

1,136,956

—(*)

4,000

4,000

—(*)

Fair value

Thousands of U.S. dollars
Hedging accounting

Types of derivative transactions

Hedged items

Interest rate swap contracts
Bank loans
Fixed rate payments / Floating rate receipts
Exceptional accounting Interest rate swap contracts
Bank loans and bonds
for interest rate swaps
Fixed rate payments / Floating rate receipts
Exceptional 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
Deferred hedge
accounting

Contract amounts

Contract amounts due
after one year

$ 3,928,423$3,928,423$(19,800)

10,658,560

9,462,805—(*)

33,29233,292—(*)

Fair value(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 2014(1) Foreign currency-related derivatives
Millions of yen
Hedging accounting

Types of derivative transactionsDeferred hedge
accounting

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

Hedged items

Contract amounts¥11,757

Contract amounts due
after one year¥—

Fair value¥67(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
Exceptional accounting Interest rate swap contracts
Bank loans and bonds
for interest rate swaps
Fixed rate payments / Floating rate receipts
Exceptional 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
Deferred hedge
accounting

Contract amounts

Contract amounts due
after one year

Fair value¥472,000¥472,000¥(2,597)

987,222844,131

—(*)

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.

61

Notes to Consolidated Financial Statements

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 fitnessbusiness and restaurant business.
Information by business segment for the years ended March 31, 2015, 2014 and 2013 is summarized as follows:
Millions of yen
Reportable segments
Leasingbusiness

For 2015
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

Salesbusiness

Construction
business

Brokeragebusiness¥  285,942¥263,963¥187,260¥57,724¥11,946¥  806,835¥     —

3,175

244

1,735

762

2,420

8,336

(8,336)—289,117264,207

188,995

58,486

14,366815,171(8,336)

806,835

Other business

Total

Consolidated financial
statements amounts

Adjustments¥  806,835¥  104,442¥ 43,781¥ 12,963¥16,462¥ 1,882¥  179,530¥ (13,635)¥  165,895¥3,123,993¥844,623¥ 16,327¥18,404¥19,674¥4,023,021¥500,783¥4,523,804¥   31,047¥    184¥    958¥     263¥   149¥   32,601¥    918¥   33,519

1,188

2,623

—

—

—

3,811

—

3,811

140,475

3,924

1,572

640

1,781

148,392

4,632

153,024

Millions of yen
Reportable segments
Leasingbusiness

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

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)¥  780,273—

283,730

234,093

201,190

57,211

16,090792,314(12,041)

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¥   34,277¥  1,034¥   35,311

26

15,042———

15,068—15,068

173,648

2,474

1,891

286

294

178,593327

178,920

Millions of yen
Reportable segments
Leasingbusiness

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

62

Annual Report 2015

Financial Section

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)¥  736,652—

278,317232,149

171,082

50,957

15,791

748,296(11,644)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

60,651

Thousands of U.S. dollars
Reportable segments

For 2015

Leasingbusiness

Revenue from operations:$ 2,379,875
Customers
Intersegment
26,425
Total
2,406,300
Segment profit$   869,263
Segment assets$26,000,774
Other:$   258,402
Depreciation and amortization
Loss on impairment of fixed assets
9,888	Increase in property and
1,169,164
equipment, and intangible assets

Salesbusiness

Construction
business

Brokeragebusiness

Total

Adjustments

Consolidated financial
statements amounts$2,196,945$1,558,552$480,433

2,031

14,4406,342$ 99,426$ 6,715,231$       —

$ 6,715,231

20,142

69,380(69,380)

2,198,976

1,572,992—

486,775

119,568

6,784,611(69,380)

6,715,231$  364,386$7,029,738$  107,890$137,012$ 15,665$ 1,494,216$ (113,484)$ 1,380,732$  135,888$153,175$163,746$33,483,321$4,167,982$37,651,303$    1,531$    7,973$  2,189$  1,241$   271,336$    7,640$   278,976

21,831———

31,719—31,719   32,659   13,084  5,327

14,822

1,235,056   38,552

1,273,608

Intercompany eliminations between the Company and its consolidated

Other business

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, 2015, 2014 and 2013.

dated subsidiaries to corporate assets for the years ended March 31, 2015,2014 and 2013.

18. Comprehensive income
Amounts reclassified to net income in the current period that were recognized in other comprehensive income in the current or previous periods and tax effects
for each component of other comprehensive income (loss) for the years ended March 31, 2015, 2014 and 2013 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 effects
		Tax effects
Total
Deferred gains (losses) on hedges:
Decrease during the fiscal year
Reclassification adjustments
		 Amounts before tax effects
		Tax effects
Total
Foreign currency transaction adjustments:
Increase during the fiscal year
Remeasurements of defined benefit plans:
Increase during the fiscal year
Reclassification adjustments
		 Amounts before tax effects
		Tax effects
Total
Total other comprehensive income

2015

2014

2013

2015

¥72,459¥28,994¥33,694$603,071

145(1,335)

329

1,207

72,60427,65934,023604,278(21,547)(9,863)(12,104)(179,334)

51,057

17,796

21,919424,944(693)(1,283)(2,501)(5,768)

832

880

1,943

6,925

139

(403)

(558)

1,157

(129)

141

171

(1,074)

10

(262)

(387)

83

3,498

4,220

1,741

29,114

355

—

—

2,955

(272)

—

—

(2,264)

83

—

—

691

(18)

—

—

(150)

65

—

—

541

¥54,630¥21,754¥23,273$454,682

Sumitomo Realty & Development Co., Ltd.

63

Notes to Consolidated Financial Statements

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, 2015
and 2014 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 year2015

¥2,504,743
262,387
2,767,130
3,921,410¥  289,596(142,456)
147,140¥  283,006

2014¥2,383,506
121,237
2,504,743
3,494,748¥  292,981(3,385)289,596¥  432,235

2015$20,846,800
2,183,828
23,030,628
32,637,620$ 2,410,287(1,185,651)
1,224,636$ 2,355,439(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, 2015 and 2014 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, 2015 and 2014 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

2015

2014

2015

¥144,858
19,737¥186,432—$1,205,643
164,270¥ (29,458)(6,383)(3,811)¥ (31,420)(9,522)(14,570)$ (245,177)(53,125)(31,719)

Income and expenses for investment and rental properties for the years ended March 31, 2015 and 2014 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)

2015¥178,920
93,587
85,333(5,659)¥ 17,665
10,092
7,573
1

2014

¥167,364
87,454
79,910(15,884)¥ 24,136
15,104
9,032
(13)

2015

$1,489,139
778,918
710,221(47,099)$  147,025
83,99563,0308(Notes)*A s 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.
*O ther 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 ¥2,075
million ($17,270 thousand) and ¥2,734 million at March 31, 2015 and 2014, respectively.

21. Subsequent events
On June 26, 2015, the shareholders of the Company approved payments of a year-end cash dividend of ¥11 ($0.09) per share or a total of ¥5,214 million ($43,396
thousand) to shareholders of record at March 31, 2015. Such appropriations are recognized in the period in which they are approved by the shareholders.

64

Annual Report 2015

Financial Section

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, 2015 and 2014, 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, 2015, 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, 2015 and 2014, and their financial performance and cash flows for each of the years in the three-year period
ended March 31, 2015, 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, 2015 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 7, 2015
Tokyo, Japan

Sumitomo Realty & Development Co., Ltd.

65

Corporate Data / Investor Information
As of March 31, 2015

Corporate Data

Investor Information

Head Office

Shinjuku NS Building,
4-1, Nishi-Shinjuku 2-chome
Shinjuku-ku, Tokyo 163-0820, Japan
Phone: +81-3-3346-2342
Facsimile: +81-3-3346-1829

Corporate Website

Paid-in Capital

Number of Common Stock

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

Number of Shareholders

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

11,287

Date of Establishment

Stock Exchange Listing

December 1, 1949

Tokyo Stock Exchange

Number of Employees

Major Shareholders

11,855 (Consolidated)

Breakdown of Shareholders¥122,805 million

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.

22.07%
9.71%
27.44%
37.10%
3.68%

Number of shares held(Thousands)

Percentage ofshares held

24,232
20,492
11,99011,88810,359
7,527
7,500
6,740
6,130
5,946

5.09%
4.30%
2.52%
2.50%
2.18%
1.58%
1.58%
1.42%
1.29%
1.25%

The Master Trust Bank of Japan, Ltd. (Trust account)
Japan Trustee Services Bank, Ltd. (Trust account)
Sumitomo Mitsui Banking Corporation
The Bank of New York Mellon SA/NV10
Japan Trustee Services Bank, Ltd. (Trust account 4)
Obayashi Corporation
Shimizu Corporation
Mitsui Sumitomo Insurance Co., Ltd.
The Sumitomo Warehouse Co., Ltd.
State Street Bank West Client-Treaty 505234

Stock Price and Trading Volume on Tokyo Stock Exchange
Yen

Yen

1,800

6,000

Stock Price (right scale)

1,500

5,000

TOPIX (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

2010

2011

2012

2013

2014

2015

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

2010

66

Annual Report 20152011

Financial Section

2012

2013

2014

2015

0

History

Global Events

1949‌Izumi Real Estate Co., Ltd. established as the successor to the holding company of the Sumitomo zaibatsu
following the breakup of the conglomerate.
‌‌Izumi Real Estate Co., Ltd. changed its name to Sumitomo Realty & Development Co., Ltd.

1963

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

1949

1964

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

‌Tokyo Olympic Games‌Listed on the Tokyo Stock Exchange and Osaka Securities Exchange.

1980

1970

1973

1973

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

–

1957

1974

‌Established Sumitomo Real Estate Sales Co., Ltd., a consolidated subsidiary.
Established Sumitomo Fudosan Syscon Co., Ltd., a consolidated subsidiary.
‌Completed construction of 30-story Shinjuku NS Building in Shinjuku, Tokyo; moved Company headquarters there
from Shinjuku Sumitomo Building.

Black Monday

2000

1997
1998

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

–‌Commenced Shinchiku Sokkurisan remodeling business.
‌‌Entered high-quality business hotel market. Opened Villa Fontaine Nihonbashi and hotels at two other locations.

1999

2001

‌The number of managed STEP brokerage offices exceeded 200.

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

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

2004‌‌Commenced sales of World City Towers (Minato Ward, Tokyo).

2006‌Established Sumitomo Fudosan Reform Co., Ltd., a consolidated subsidiary.

2015

2011

–

C
‌ ommenced 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.
‌Commenced luxury condominium leasing business. Completed construction of La Tour Shibakoen.

2010

‌
September
11 terrorist
attacks‌Commenced sales of City Towers Toyosu (Koto Ward, Tokyo).

2008‌Completed construction of Shinjuku Central Park City (Shinjuku Ward, Tokyo).

‌Lehman crisis‌Opened Grand Mansion Gallery.

2011

‌
The
Great East Japan
Earthquake‌European sovereign
debt crisis‌Record-high yen against
the U.S. dollar‌Completed construction of Sumitomo Fudosan Shinjuku Grand Tower (Shinjuku Ward, Tokyo).
‌Completed construction of Sumitomo Fudosan Shibuya Garden Tower (Shibuya Ward, Tokyo).
‌Launched a Custom-order Condominium service.

2013‌Commenced construction of Roppongi 3-chome Project (Minato Ward, Tokyo).

2015‌Introduction of euro2001

‌‌Established Sumitomo Fudosan Bellesalle Co., Ltd., a consolidated subsidiary.

2012

2014

1989

Collapse of Berlin Wall‌Nikkei Stock Average
all-time high

2000

2001

1985
1987

1996

2008

‌Second oil crisis

The Plaza Accord‌Commenced American Comfort custom home construction business.

1981

1999

1978

there from Tokyo Sumitomo Building in Marunouchi, Tokyo.

1980

1995

First oil crisis‌‌Completed construction of 52-story Shinjuku Sumitomo Building in Shinjuku, Tokyo; moved Company headquarters

1975

1982

1964

‌Commenced sales of J∙RESIDENCE.

‌Cumulative units contracted topped 90,000 in Shinchiku Sokkurisan remodeling operations.
‌Number of condominium units brought to market over the full year was the highest in Japan for the first time.
‌Completed construction of Tokyo Nihonbashi Tower (Chuo 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.

67

Sumitomo Realty & Development Co., Ltd.

Annual Report 2015

Shinjuku NS Building, 4-1, Nishi-Shinjuku 2-chome
Shinjuku-ku, Tokyo 163-0820, Japan
Phone: +81-3-3346-2342 Facsimile: +81-3-3346-1829
http://www.sumitomo-rd.co.jp/english/

Printed in Japan