Nomura Real Estate Holdings Annual Report 2012 For the Year Ended March 31, 2012

Nomura Real Estate Holdings, Inc.
Shinjuku Nomura Building, 1-26-2
Nishi-Shinjuku, Shinjuku-ku, Tokyo 163-0566, Japan

URL: http://www.nomura-re-hd.co.jp/english

Bearing Fruit…

Annual Report 2012
For the Year Ended March 31, 2012
Printed in Japan

67

Annual Report 2012 Nomura Real Estate Holdings, Inc.

Nomura Real Estate Group Profile

Investor Information(As of March 31, 2012)

The Nomura Real Estate Group comprises Nomura Real Estate Development and other Group companies, and operates in the Residential
Development Business, Building Business, Investment Management & Development Business, Property Brokerage & Consignment Sales Business,
and Other Business. Nomura Real Estate Holdings strategically manages the overall Group as its holding company, and works to improve thecorporate value of the overall Group by providing products and services matched to markets in each area in which Group companies operate.

Corporate Data
Corporate Name:

Nomura Real Estate Holdings, Inc.

Date of Establishment:

June 1, 2004

Representative:

Kamezo Nakai(appointment on June 29, 2011)

Number of Employees:

5,399 (on a consolidated basis)

Fiscal Year:

From April 1 to March 31

Head Office:Shinjuku Nomura Building,
1-26-2 Nishi-Shinjuku, Shinjuku-ku,
Tokyo 163-0566, Japan

General Meetingof Shareholders:

June

Residential Development BusinessThis business segment engages in the development and sales of condominiums, detached housing, residential lots and other properties, as well as housing management and maintenance under contract frommanagement associations after the sale of condominiums.
The Residential Development Business supplies condominium and detached housing primarily in the Tokyo
metropolitan area under the core PROUD brand. By leveraging its integration in development and sales,
the Group seeks to further improve its site selection, product planning and sales capabilities, as well as its
management quality. Through these strategic measures, the Group seeks to enhance brand value.

Stock Information

14.38%

13.46%

Common Stock:
Number of Authorized Shares:
Number of Shares Issued:
Market Listing:Minimum Trading Unit:
Number of Shareholders:¥115,625,903,200
450,000,000
190,456,900
First Section of Tokyo Stock Exchange
100 shares
47,9300.51%
Composition by
Number of
Shareholdings(%)

Ten Largest Shareholders■ Nomura Living Support Co., Ltd.

Name of Shareholder

No. of shares

Shareholding (%)

Nomura Land and Building Co., Ltd.

96,817,500

50.83

Japan Trustee Services Bank, Ltd. (Trust account)

8,382,800

4.40

The Master Trust Bank of Japan, Ltd. (Trust account)

5,504,800

2.89

Japan Trustee Services Bank, Ltd. (Trust account 9)3,347,500

1.75■ Government(0.00%)■■■■■

Nomura Real Estate Holdings Employee Shareholding Association

3,284,382

1.72■ Financial Institutions(14.38%)

Nomura Real Estate Development Co., Ltd.

The Bank of NY Treaty JASDEC Account2,654,300

1.39■ Financial Instruments Firms(0.51%)The Chase Manhattan Bank NA London SL Omnibus Account

1,997,867

1.04■ Other Japanese Firms(51.85%)■ Nomura Real Estate Reform Co., Ltd.

■ PRIME X. Co., Ltd.

19.79%

51.85%SSBT OD05 Omnibus Account–Treaty Clients

1,753,500

0.92■ Other Foreign Investors(19.79%)State Street Bank and Trust Company

1,597,264

0.83■ Individuals and Others(13.46%)

BBH LUX Fidelity Funds Japan Advantage

1,427,600

0.74■ Nomura Real Estate Asset Management Co., Ltd.

Stock Price and Trading Volume on the Tokyo Stock Exchange

Stock Price
(Yen)
2,000

Investment Management & Development BusinessThis business segment engages in the development and sales of profit-generating property for the realestate investment market, asset management under consignment from investment corporations, and asset
management for real estate and real estate securitized instruments private funds.

1,500

1,000

In October 2011, three real estate investment management companies in the Nomura Real Estate Groupmerged and became one of the largest investment management companies in Japan with more than ¥1trillion in assets under management.

500
Trading Volume(Thousandsof Shares)

Contents

050,00040,00002

Consolidated Financial Highlights

18

Overview of the Nomura Real Estate Group04

Segment Information

21

Group Company Profile:05

Message from the President

09

Feature22

Corporate Social Responsibility

14

Segments at a Glance

24

Corporate Governance

16

Major Completed or Acquired Properties in Fiscal 201128

Board of Directors and Statutory Auditors

NREG TOSHIBA BUILDING Co., Ltd.

30,00020,00010,000
0
4
5
2009

6

7

8

9

10 11 12

1
2
2010

3

4

5

6

7

8

9

10 11 12

1
2
2011

3

4

5

6

7

8

9

10 11 12

1
2
2012

3

Annual Report 2012 Nomura Real Estate Holdings, Inc.

Building BusinessThis business segment engages in development, construction, leasing, operation and management ofoffice buildings, commercial facilities and other properties, as well as consulting on CRE utilization.
The Building Business owns and leases office buildings such as Shinjuku Nomura Building, Toshiba Building and Yokohama Business Park, as well as commercial facilities such as Lazona Kawasaki Plaza.

n Nomura Building Management Co., Ltd.

n NREG TOSHIBA FUDOSAN FACILITIESCo., Ltd.

n NREG TOSHIBA BUILDING Co., Ltd.
n YBP Heating and Cooling Supply Co., Ltd.

n Nomura Amenity Service Co., Ltd.

The Nomura Real Estate Group is engaged in developing three lines of business; namely 1)
the Residential Development Business, which develops condominiums and detached housing for sale under the core PROUD brand, 2) the Urban Development Business, whichdevelops office buildings for rent and other properties with revenue streams, and 3) the
Institutional Sales Business, which engages in institutional property brokerage and providing strategic corporate real estate (CRE) support.

■ MEGALOS Co., Ltd.
■ Geo-Akamatsu Co., Ltd.

Other BusinessThis business segment engages in the operation of fitness clubs, construction design andsupervision, and planning, design and management of commercial facilities.

■ Nomura Real Estate Urban Net Co., Ltd.

Property Brokerage & Consignment Sales Business
The business segment engages in real estate brokerage targeting individuals and corporations, and sellscondominiums and detached housing under consignment from other real estate subdivision businesses
outside the Group.
The segment’s individual brokerage operation is focusing on expanding its sales office network primarily
in the Tokyo metropolitan area and on promoting an Internet strategy. The corporate real estate (CRE)
brokerage operation conducts business through a direct networking channel involving more than 5,000
companies cultivated over a long period of time.

In the fitness club operations, MEGALOS
manages 26 facilities mainly in the Tokyo
metropolitan area. The fitness club operations seek to expand their facilities networkby leveraging Group synergies in gathering
information on land for opening new facilities, as well as in the maintenance and management of facilities. Elsewhere within the
Other Business segment, Geo-Akamatsu
provides a wide range of services related tocommercial facilities, including their planning, operation and management.

29

Management’s Discussion and Analysis

40

Notes to Consolidated Financial Statements

34

Consolidated Balance Sheets

66

Independent Auditors’ Report

36

Consolidated Statements of Income

67

Investor Information

37

Consolidated Statements of Comprehensive Income

38

Consolidated Statements of Changes in Net Assets

39

Consolidated Statements of Cash Flows

Forward-looking Statements:
This annual report contains forward-looking statements about the future plans, strategies
and performance of Nomura Real Estate Holdings, Inc. (“the Company”) and its consolidated subsidiaries (“the Group”). These forward-looking statements are not historical facts.
They are estimates, forecasts and projections based on information currently available to theCompany and are subject to a number of risks and uncertainties, which include economic
trends, intensification of competition in the real estate industry, the legal and taxation systems, and other regulations. As such, actual results may differ from those projected.

1

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Nomura Real Estate Holdings, Inc. Annual Report 2012

Consolidated Financial Highlights
Nomura Real Estate Holdings, Inc. and its subsidiaries
Years ended March 31

2007

2008

2009

2010

Operating revenue�����������������������������������������������������������������������������

¥367,237¥411,493¥  448,656¥  434,226

Gross profit���������������������������������������������������������������������������������������

108,668

130,391

100,764

105,576

For the Year:

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

54,374

69,82234,01339,275

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

26,29735,255

13,7704,660

Cash flows from operating activities �������������������������������������������������

(89,850)

7,639(108,031)

19,266

Cash flows from investing activities���������������������������������������������������

(26,787)(13,348)(141,789)(24,571)

Cash flows from financing activities���������������������������������������������������

100,8638,791

295,508

13,098Net income���������������������������������������������������������������������������������������

¥ 200.47¥ 236.09¥    92.21¥    25.69

Cash dividends ���������������������������������������������������������������������������������

20.00

30.00

40.00

25.00

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

¥836,303¥891,700¥1,385,532¥1,405,424

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

214,466

235,551

281,376

349,437

Interest-bearing debt�������������������������������������������������������������������������

394,885

408,016

778,074

759,637

Per Share Data (yen):

Balance Sheet Data (as of March 31):

Ratios (%):
Return on assets (Note 2)������������������������������������������������������������������

6.6

7.9

2.5

2.8

Return on equity�������������������������������������������������������������������������������

19.2

15.8

5.9

1.7

Operating margin �����������������������������������������������������������������������������

14.8

17.0

7.6

9.0

Dividend payout ratio �����������������������������������������������������������������������

10.0

12.7

43.4

97.3

Equity ratio���������������������������������������������������������������������������������������

25.5

26.1

17.0

21.4

Notes: 1. The translation of Japanese yen amounts into U.S. dollar amounts is included solely for the convenience of the reader, using the rate of exchange prevailing on
the Tokyo Foreign Exchange Market on March 31, 2012, which was ¥82.19 = U.S.$1.00.
2. Return on assets = (Operating income + Non-operating income) / Total assets at end of fiscal year

Operating Revenue andOperating Margin

Operating Income and ROA

Net Income and ROE(Millions of yen)

(%)(Millions of yen)

(Millions of yen)

(%)

600,000

20

80,0008

40,00020450,000

15

60,000

630,00015

300,000

10

40,0004

20,00010

150,000

5

20,0002

10,000

5

0

0

0

0

0

07

08

09

10

11

Operating revenue (left axis)
Operating margin (right axis)

FY2011: Year ended March 31, 2012

(FY)

07

(%)

08

09

Operating income (left axis)
Operating ROA (right axis)

10

11

(FY)

0

07

08

Net income (left axis)
ROE (right axis)

09

10

11

(FY)

3

Annual Report 2012 Nomura Real Estate Holdings, Inc.

2011

(Millions of yen)
2012

(Thousands of
U.S. dollars)(Note 1)2012¥  480,983¥  450,807$ 5,484,938

107,222

114,910

1,398,103

42,08349,939607,609

5,472

17,591

214,037

33,94843,877533,848

Key Points of Operating Results
Operating revenue
Operating revenue decreased year on year mainly due to a significant
decrease in the number of units the Residential Development Businesssold. This decrease was partly offset by an increase in gains fromproperty sales and a full-year contribution of revenues from additional
equity acquired in the joint ownership of buildings in fiscal 2010.

(33,731)

7,809

95,017(7,486)(63,296)(770,119)

Operating income
Operating income increased mainly due to an improvement in profit
margins on housing sales and a full-year contribution of revenues
from additional equity acquired in the joint ownership of office properties in fiscal 2010 despite losses that were recorded on property
sales and inventory evaluation.

¥    28.74¥    92.38$      1.12

25.00

25.00

0.30

¥1,474,331¥1,402,624$17,065,639

357,366

376,486

4,580,689

Net income

816,910758,562

9,229,372

2.9

3.7

—

1.8

5.7

8.7

11.1

87.0

27.1

Net income increased substantially due to the absence of an extraordinary loss on valuation of equity investments related to commercialmortgage backed securities (CMBS) recorded in fiscal 2010, and as aconsequence of a reversal of deferred tax assets and liabilities due tothe lowering of corporate income taxation rates. This came despite
the Group recording an extraordinary impairment loss on certain
leased assets.

20.7

22.6

Total Assets, Net Assets andEquity Ratio

Interest-bearing Debt

Consolidated Cash Dividends andDividend Payout Ratio(Millions of yen)

(%)(Millions of yen)

(Yen)(%)

1,500,000

30

1,000,000

50

100

800,000

40

80

1,000,000

20

600,000

30

60

500,000

10

400,000

20

40

200,000

10

20

0

0

07

08

Total assets (left axis)
Equity ratio (right axis)

09

10

11

Net assets (left axis)

(FYE)

0

0

07

08

09

10

11

(FYE)

0

07

08

09

10

11

Cash dividends per share (left axis)
Consolidated dividend payout ratio (right axis)

(FY)

4

Nomura Real Estate Holdings, Inc. Annual Report 2012

Segment Information
Nomura Real Estate Holdings, Inc. and its subsidiaries
Years ended March 31(Millions of yen)
2012

(Thousands of
U.S. dollars)(Note 1)
2012

¥480,983¥450,807$5,484,938

259,070

286,135

244,5212,975,066

95,238100,389

105,701

1,286,061

78,07836,18956,047

63,995

778,620

30,18339,76433,96428,95534,303417,362

Other Business������������������������������������������������������������

16,837

19,836

19,657

20,967

19,081

232,163

Eliminations or Corporate ������������������������������������������

(11,773)(11,051)(9,892)(11,510)(16,794)(204,334)¥ 69,822¥ 34,013¥ 39,275¥ 42,083¥ 49,939$  607,609

26,067

11,787

10,73515,80323,823289,847

Building Business

9,414

15,76921,58722,64425,346308,381

Investment Management & Development Business������

34,778

10,117

8,498

6,773

2,539

30,894

Property Brokerage & Consignment Sales Business ������

6,392

1,554

2,690

1,220

1,926

23,431

2008

2009

2010

2011

¥411,493¥448,656¥434,226

Residential Development Business������������������������������

238,802231,629

Building Business��������������������������������������������������������

56,88990,400Investment Management & Development Business ����

80,555

Property Brokerage & Consignment Sales Business ������

Operating Revenue:

Operating Income:Residential Development Business������������������������������

Other Business������������������������������������������������������������

1,514

1,101

432

652

722

8,789

Eliminations or Corporate ������������������������������������������

(8,343)(6,315)(4,667)(5,010)(4,416)(53,733)

Return on Assets (%) (Note 2)����������������������������������������

7.9

2.5

2.8

2.9

3.7

—

Residential Development Business������������������������������

10.0

3.7

3.5

5.0

6.9

Building Business��������������������������������������������������������

4.6

2.9

4.0

3.6

4.1

Investment Management & Development Business������

10.8

2.8

2.1

1.8

0.8

Property Brokerage & Consignment Sales Business ������

8.8

2.7

6.0

3.1

7.3

Other Business������������������������������������������������������������

5.6

3.9

1.6

2.3

2.6

Inventories ��������������������������������������������������������������������

¥454,621¥481,489¥458,921¥433,386¥396,857$4,828,534

Residential Development Business������������������������������

222,761

287,410276,399

280,211

293,0123,565,058

Building Business��������������������������������������������������������

11,342

3,215

5,921

7,287

7,521

91,507

Investment Management & Development Business������

171,819

138,364

138,341

114,948

82,551

1,004,388

Property Brokerage & Consignment Sales Business ������

42,50846,371

32,67625,2808,255

100,444

Other Business������������������������������������������������������������

6,318

6,132

6,059

6,265

6,183

75,222Eliminations or Corporate ������������������������������������������

(128)

(3)

(475)

(605)

(665)

(8,085)

Notes: 1. The translation of Japanese yen amounts into U.S. dollar amounts is included solely for the convenience of the reader, using the rate of exchange prevailingon the Tokyo Foreign Exchange Market on March 31, 2012, which was ¥82.19 = U.S.$1.00.
2. ROA of each segment = Segment operating income / Segment assets at end of fiscal year

Operating Revenue

Operating Income

Inventories(Millions of yen)

(Millions of yen)

(Millions of yen)

500,000

80,000500,000

400,000

60,000400,000

300,000

300,000

40,000200,000

200,000
20,000100,000

100,00000

0–20,000–100,000

07

08

09

10

11

(FY)

Residential Development Business
Building Business
Investment Management & Development Business
Property Brokerage & Consignment Sales Business
Other BusinessEliminations or corporate–5,000

07

08

09

10

11

(FY)

Residential Development Business
Building Business
Investment Management & Development Business
Property Brokerage & Consignment Sales Business
Other BusinessEliminations or corporate

07

08

09

10

11

(FYE)

Residential Development Business
Building Business
Investment Management & Development Business
Property Brokerage & Consignment Sales Business
Other BusinessEliminations or corporate

Annual Report 2012 Nomura Real Estate Holdings, Inc.

Message from the President
Fiscal 2011 was impacted by the Great East
Japan Earthquake. Customer awareness withregard to housing shifted substantially in the
direction of greater safety and security. Goingforward, the Nomura Real Estate Group willcontinue to be thoroughly customer-oriented
in providing products and services of an evenhigher quality, and in seeking to further
enhance its corporate value.

President

5

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Nomura Real Estate Holdings, Inc. Annual Report 2012

The Next Growth StageWe are crafting a clear, long-term vision with a view to the futureand formulating strategies aimed at even further growth.

Housing Sales Market in Fiscal 2011

Real Estate Investment Market and Office Market

With consumer awareness shifting significantly
toward safety and security, we will continue to bethoroughly customer-oriented and strive to raisethe value of the PROUD brand even further.

The real estate investment and office markets
have both bottomed out, and recovery is anticipated going forward.
Conditions in the real estate investment market cannot be called

The housing sales market in fiscal 2011 was one in which customer

good. However, while J-REIT fund prices sagged as a result of inves-awareness was affected dramatically by the Great East Japan Earth-tors adopting a risk avoidance stance due to the European debt

quake. In our Residential Development Business, for example, we

crisis and other factors, we have seen some positive signs in thewere about to begin sales at PROUD Tower Shinonome Canalmarket recently, such as the public offering of a number of REITs. In

Court, the first skyscraper condominium development to debut

such surrounding, the Nomura Real Estate Group integrated three

after the earthquake. This development drew considerable atten-

asset management companies into a single company, a move thattion with industry and the media questioning whether or not cus-will enable us to strengthen operational capacities and human

tomers would embrace a skyscraper condominium constructed in aresources development as we work to bolster investor services bywaterfront area where soil liquefaction was conceivably a concern.

offering a broad range of investment products and services throughAfter conducting a survey of customer concerns, the Nomura Real

one company in a more convenient “one-stop” format.

Estate Group addressed anxieties by reviewing its product planning

In property development, we promoted the Premium Midsize

and enhancing soil liquefaction countermeasures and disaster pre-

Office (PMO) business. PMO is a proprietary brand of midsize build-paredness even further. Furthermore, the sales department set up aings that offer quality equivalent to that of large-scale locations.

special disaster preparedness booth at the showroom to talk to

Our PMO business has earned high praise for accommodating

potential customers in detail about the building’s safety and secu-

latent corporate need for single-floor offices ranging in space fromrity. As a result of these efforts, PROUD Tower Shinonome Canal

330 to 660 m2.

Court has received a favorable response from buyers, with condo-

In the office market, a number of large projects have beenminium units offered in the first series selling out immediately. We

completed in central Tokyo while vacancy rates continue to be highwere able to perceive how customer awareness was changing sig-

amid a softening trend in rent levels. There have been some signs ofnificantly toward demanding security and safety in a dwelling.

improvement, however, such as tenants that have agreed to renew

In the housing sales market, contract rates remained of a hightheir contracts without downward rent revisions. The Toshiba Build-level as demand was firmly rooted in a market underpinned by low

ing, in which we increased our stake in fiscal 2010, and the newinterest rates and government assistance in the form of an exten-

Nihonbashi Muromachi Nomura Building, which went into opera-sion of the gift tax exemption and other programs. At the sametion, contributed to earnings for the entire term. Additionally, thetime, we actively worked to further strengthen the value of thevacancy rate for our Building Business has stayed at a low level. It

PROUD brand, the mainstay brand of the Nomura Real Estate

was 2.4% as of March 31, 2012.

Group’s Residential Development Business. With integrated development and sales, we are honing our site selection, product planning and sales capabilities, and working to provide a full slate ofafter-sales services for customers. As a result of these ongoing
activities, PROUD has become well known as a high-grade condominium brand. Going forward, we will continue raising the value ofthe PROUD brand and leveraging this strength to the full extent.

Annual Report 2012 Nomura Real Estate Holdings, Inc.

Review of Fiscal 2011 Business Results

Housing sales decreased by approximately 1,000
units due to the impact of the Great East Japan
Earthquake, but earnings improved thanks primarily to improving profit margins in the Residential
Development Business and a full year’s contribution
from the Toshiba Building in the Building Business,in which we increased our stake in fiscal 2010.

represents an attempt to clearly define the aspirations for the
Nomura Real Estate Group and set quantitative targets in themedium-term business plan in line with this trajectory.
Although I cannot speak in detail because we are still in theprocess of formulating a new medium-term business plan, a key
aspect of the plan will be to grow the PROUD brand into the No. 1
brand in the industry, and to secure that status by establishing a
rock-solid position for it at the top. To achieve this, an importantconsideration will be how to build a value chain that will encourage

In the mainstay Residential Development Business, housing sales

customers to continue doing business with the Nomura Real Estate

decreased by approximately 1,000 units compared to fiscal 2010 asGroup into the future. In Japan, the new housing market has beena consequence of construction schedules that were revised substan-overwhelmingly dominant; however, moving forward there will betially following the Great East Japan Earthquake, which disrupted

growth in the used housing market, specifically in terms of chang-

procurement of construction materials and caused a shortage ining dwellings and renovations. We intend to enhance our traditional

power supply. On the other hand, our gross margin ratio of housing

after-sales services on an ongoing basis and incorporate the cus-sales for both condominiums and detached houses rose to 23.3%,

tomer feedback we obtain through these services into future design

the highest it has been since we were listed on the Tokyo Stockand sales activities. With an integrated system for development,

Exchange, as a consequence of sales accrued on land that wassales and management, we have pursued housing safety, security,

acquired at comparatively high profitability after the 2008 globaland quality. We recognize the importance of pooling the collective

financial crisis.

strengths of the Group in strengthening our ongoing business rela-In addition, the Toshiba Building and Nihonbashi Muromachi

tionships with customers even further.

Nomura Building contributed to earnings for the full term. Steadysales activities along with the meticulous management and opera-

Human Resource Development andtion of buildings enabled our Building Business to maintain a low

Other CSR Management Initiatives

vacancy rate of 2.4% as of March 31, 2012.
As a result, in fiscal 2011, revenues declined but earnings
increased compared to fiscal 2010.
Initiatives to Raise Corporate Value

We are crafting a long-term vision and new
medium-term business plan while reinforcing the
Nomura Real Estate Group’s management structure
to paint a picture of the Group’s future.

Nomura Real Estate Holdings issued a CSR Reportin January 2012, stating its goal of promoting corporate social responsibility (CSR) activities centered on four key themes, beginning with humanresource development.
In January 2012, Nomura Real Estate Holdings issued its first CSR
Report. We believe that helping to find solutions to the various challenges facing society and improving people’s lives through businessactivities constitute the foundation of a company’s existence, andFiscal 2012 will be the first year of our new medium-term businessthat CSR management is a core priority. As such, we will continue

plan; however, before the plan was formulated we began a re-to actively raise quality and service levels based on a philosophy of

examination of the management organization to strengthen theputting customers first, engage in environmental initiatives, rigor-

Group’s management structure, the main point of which was theously ensure regulatory compliance, and develop human resources.

introduction of a system of executive officers. Under this new

Human resources, in particular, are the pride of Nomura Real Estatesystem, executive officers are put in charge of developing cohesive

Holdings and our most important asset. We recognize that one ofstrategies for businesses that are grouped together based on

the major tasks of management is determining how to fully utilize

common characteristics and placed under their command.

our exceptional personnel. Skill development programs, training

Currently, within the framework of this new management

sessions and various other systems that support individual employee

structure, we are working to establish a long-term vision for thedevelopment have been introduced and implemented to establish

future to go along with the new medium-term business plan. Thisan environment in which individuals can maximize their potential.

78

Nomura Real Estate Holdings, Inc. Annual Report 2012

Business Outlook for Fiscal 2012

Profit Distribution and Dividend Policy

Housing sales are projected to reach a record-highof 5,800 units, and we expect both revenues andearnings to rise.

We plan to increase the annual dividend per shareto ¥30 in light of our performance forecasts forfiscal 2012.

We are projecting operating revenue of ¥523.0 billion and operating

Nomura Real Estate Holdings’ basic policy on the distribution ofincome of ¥55.0 billion on a consolidated basis in fiscal 2012, which

profits to shareholders is to aim for a payout ratio of approximately

would represent increases in both revenues and earnings in compari-

30% over the medium to long term in line with business perfor-

son to fiscal 2011. As was mentioned earlier, housing sales in themance while comprehensively considering the operating environ-

Residential Development Business in fiscal 2011 was limited to 4,028

ment, capital investment plans, internal reserve levels and otherunits as a result of revised construction schedules following therelevant factors. The annual dividend for fiscal 2012 is slated to beearthquake; however, housing sales are projected to reach a record¥30 per share, which would be a five-yen increase, due to the fact

high of 5,800 units in fiscal 2012. With market conditions beingthat performance is steadily recovering, led by our mainstay Resi-favorable, of the 5,800 units projected for the fiscal year, roughly

dential Development Business.

60% have already been contracted as of the start of the term; and I
think it’s fair to say that acquiring land will be a major factor inmaintaining strong performance in the Residential Development
Business going forward. In fiscal 2011, we acquired land for approximately 6,500 units, and we have been able to build up our inventoryof land for fiscal 2012 and beyond to roughly 20,000 units.

Message to Shareholders and Investors

The Nomura Real Estate Group will pursue higher
corporate value by further solidifying its uniqueand thoroughly customer-oriented business model.

In the Building Business, we are projecting slightly lower earn-

As I mentioned earlier, the Great East Japan Earthquake changed

ings due to the impact of large-scale renovation projects that are

customer awareness in a big way. As the times change, people’s

underway for some properties. In the Investment Management &needs and values will change as well, and new needs will emerge.

Development Business, we have promoted the liquidation of inven-

In response, the Group will constantly ask how it can accommodate

tory assets in property development operations over the pastthis diversification in society’s needs and continue to provide inno-

number of years; and as a result, the business cycle is headed

vative products and services. Moreover, we will pursue higher cor-

toward a return to normal. Going forward, we will continue toporate value as a real estate group that goes beyond conventional

invest in PMO properties among other quality opportunities.

frameworks and anticipates the changing times while further solidi-

We also intend to focus effort on the corporate real estate (CRE)fying our unique and thoroughly customer-oriented business model.

business field. The trend in recent years has been companies moving

I would like to thank all our shareholders and investors for theirfrom owning real estate to utilizing it and focusing more on re-continuing support.

examining their balance sheets. The CRE business provides a solution to this set of needs. For instance, our consolidated subsidiary,
NREG TOSHIBA BUILDING, primarily engages in CRE for the Toshiba
Group and achieved impressive results. We intend to draw on thewisdom of the Nomura Real Estate Group to accumulate CRE expertise, and expand this business to other companies outside of the
Toshiba Group.

President

Annual Report 2012 Nomura Real Estate Holdings, Inc.

9

FeatureThe Nomura Real Estate Group is achieving sustained
growth by accurately identifying customer needs andmarket trends. This feature spotlights operations thatare particularly oriented to such needs and trends.

1

Residential Development Business

PROUD Tower Shinonome Canal Courton the Tokyo Waterfront

Awareness of Market Needs
is Bearing Fruit2
3

Property Development Business

Development of Premium Midsize
Office (PMO) Brand

Investment Management Business

Integration of Three AssetManagement Companies

10

Nomura Real Estate Holdings, Inc. Annual Report 20121

Residential Development Business

PROUD Tower Shinonome Canal Court on the Tokyo Waterfront
In housing sales, the mainstay business of the Nomura Real Estate Group, we have worked to identify
customer needs and raise brand value under an integrated system for development, sales and management.
Here, we look at PROUD Tower Shinonome Canal Court as an example of how the Group successfully
accommodates customer needs.

PROUD Tower Shinonome Canal Court on the Tokyo
Waterfront Sells Out Immediately

earthquakes. We also established disaster preparedness storerooms

Nomura Real Estate put a total of 461 units up for sale in three

generators to enable emergency elevators to run during power out-

phases* for PROUD Tower Shinonome Canal Court, a 52-floor,

ages for approximately 20 additional hours beyond the legally

180-meter-high condominium with 600 units located on the Tokyorequired four hours. Other disaster preparedness measures included

waterfront, and all the units in each of the three phases sold out

reinforcing the base of select interior materials with steel sheeting

immediately.

to prevent furniture from toppling over. In addition to carrying out* December 2011, February 2012, and May 2012

these measures, we proactively explained safety and security fea-

at nine locations throughout the building, and installed emergency

tures to potential customers, which was also a factor that trans-

Giving Tangible Form to Customer Needs after theGreat East Japan Earthquake

formed anxiety about the property into enthusiasm for it.

The property was the first condominium complex on the Tokyo

The Pursuit of Convenience and Comfort

waterfront to be supplied following the Great East Japan Earth-

In addition to liquefaction and disaster preparedness measures,

quake, and so many customers expressed apprehension. “Isn’t soil

another factor responsible for the appeal of the property to custom-liquefaction an issue in a waterfront area?” “What measures will be

ers was the living environment, which combines convenient accesstaken for power outages?” “Are there disaster preparedness facili-

to downtown areas with convenient lifestyle amenities. The condo-

ties?” We conducted a variety of measures to address such con-minium’s location makes it convenient for commuting, and it is also

cerns, which were uncovered via a customer questionnaireclose to retail facilities open 24 hours a day and houses a daycare

conducted after the earthquake. To address the soil liquefaction

center on the premises. These factors make the property very

issue, we reduced liquefaction risk by newly expanding the scope of

appealing for families, its target segment.

foundation improvement work to limit land deformation in

Gross Margin Ratio Rises to 23.3%, Highest Since Going Public
Housing sales (condominiums and detached housing) in fiscal 2011,(Units)(%)

ended March 31, 2012, totaled 4,028 units, a year-on-year decline

6,000

30

of 1,049 units that was the result of revising construction schedules
in the aftermath of the Great East Japan Earthquake. At the same

23.3%

5,000

25

time, properties with high profitability acquired after the onset of the

4,000

20

global financial crisis made a significant contribution for the year,

3,000

15

2,000

10

1,000

5

0

0

and as a result the gross margin ratio rose to 23.3%, its highest level
since we listed our stock publicly in 2006.
In fiscal 2012, ending March 31, 2013, we are projecting recordhigh housing sales of 5,800 units (condominiums and single-family
detached houses) as PROUD Tower Sagami-Ono, PROUD Funabashi
and other properties hit the market. The contract rates as of the startof fiscal 2012 stands at a solid 59.8%.

08

09

Number of housing units sold (left axis)

1011Gross margin ratio (right axis)(FY)

Annual Report 2012 Nomura Real Estate Holdings, Inc.

11

PROUD Tower Shinonome Canal Court located on the Tokyo waterfront

Tokyo
Yurakucho

Moreover, the property is also equipped with environmentallyconscious facilities, such as a solar power generation system, that
embody the PROUD ECO Vision of “Reduce,” “Create,” and “Utilize.” PROUD Tower Shinonome Canal Court is the first condomin-

Ginza 1-chome

Ginza
Shiodome

Yurakucho Lineium in Tokyo to earn a 3-star overall rating in the Tokyo Metropolitan
ToyosuGovernment’s Tokyo Apartment Environmental Performance Indication Program (fiscal 2009 standard).

Shinonome
Canal Court City Block

Taking Feedback from Customers Leads to Sustained
GrowthRinkai Line

Our stance toward faithfully incorporating customer wants andneeds has been cultivated with the PROUD brand, which the

Shinonome
Yurikamome Line

Nomura Real Estate Group has continued to develop. PROUD Tower
Shinonome Canal Court sold out immediately, we believe, because

Daiba

we listened to customers and put their needs into tangible form.
We intend to continue expanding the business by faithfully
identifying customer needs and giving form to them.
Conveniently located within five kilometers of downtown areas

12

Nomura Real Estate Holdings, Inc. Annual Report 20122

Property Development Business

Development of Premium Midsize
Office (PMO) Brand
Expanding Operations by Meeting Customers’ Office Needs

PMO Business Provides New Category of Office Building
Responding to customer demand for midsize office buildings with quality
equivalent to that of a large-scale office building, Nomura Real Estate,through its PMO business, is developing office buildings with exactly
those specifications: midsize with quality equivalent to that of large-scale
office buildings. The PMO business started in 2008 with the PMO
Nihonbashi Honcho building and now encompasses properties in three
central Tokyo wards. In addition to the highly polished buildings themselves, the PMO business pursues customer satisfaction in terms of bothfacilities and service by providing thorough building management, adiverse range of services and meticulous support. Quality not before
available in smaller buildings is provided by the PMO business, and thisfact has translated into robust support from customers, with completedbuildings maintaining high occupancy rates.
In fiscal 2011, a total of five buildings were sold, including PMO
Hatchobori II and PMO Akihabara, and land for development was
acquired in Tamachi, Kanda Tsukasamachi and Ginza 8chome. To date,
we have planned and developed 15 buildings in three wards in central
Tokyo. Going forward, we will work to strengthen the brand while
expanding the business.

PMO Property List
Leased floor area

Completion

Status1

PMO Nihonbashi Honcho

Name

Nihonbashi Honcho, Chuo-ku

Location

2,540 m2

June 2008

Sold

2

PMO Hatchobori

Hatchobori, Chuo-ku

2,074 m2

May 2009

Sold

3

PMO Iwamotocho

Iwamotocho, Chiyoda-ku

1,041 m2

May 2009

Sold

4

PMO Higashi Nihonbashi

Higashi-nihonbashi, Chuo-ku

1,859 m2

October 2009

Sold

5

PMO Akihabara

Iwamotocho, Chiyoda-ku

3,037 m2

January 2010

Sold

6

PMO Nihonbashi Odenmacho

Nihonbashi Odemmacho, Chuo-ku

2,054 m2

March 2010

In full operation

7

PMO Hatchobori II

Hatchobori, Chuo-ku

3,174 m2

June 2010

Sold

8

PMO Akihabara II

Higashi-kanda, Chiyoda-ku

2,700 m2

January 2011

In full operation

July 2011

In full operation

1,341 m2

9

PMO Nihonbashi 2chome

Nihonbashi, Chuo-ku

10

PMO Nihonbashi Muromachi Project

Nihonbashi Muromachi, Chuo-ku

Around 3,800 m2

January 2013 (scheduled)

In construction

11

PMO Yaesu-dori Project

Hatchobori, Chuo-ku

Around 4,900 m2

May 2013 (scheduled)

In construction

12

PMO Tamachi Project

Shiba, Minato-ku

Around 3,900 m2

September 2013 (scheduled)

In planning

13

PMO Kanda Tsukasamachi Project

Kanda Tsukasamachi, Chiyoda-ku

Around 3,400 m2

September 2013 (scheduled)

In planning

14

PMO Ginza 8chome Project

Ginza, Chuo-ku

Around 1,900 m2

February 2014 (scheduled)

In planning

15

PMO Nihonbashi Kayabacho Project*

Nihonbashi Kayabacho, Chuo-ku

Around 3,400 m2

August 2014 (scheduled)

In planning* Property for acquisition in the fiscal year ending March 31, 2013

Annual Report 2012 Nomura Real Estate Holdings, Inc.

3

Investment Management Business

Integration of Three AssetManagement Companies
We are working to meet the broad investment needs of investors
and facilitate growth in our Investment Management Business.

Asset Management with Diverse Products and Services
In October 2011 we integrated Nomura Real Estate Investment Management
Co., Ltd., Nomura Real Estate Asset Management Co., Ltd., and Nomura
Real Estate Capital Management Co., Ltd., which were asset management companies in the Nomura Real Estate Group, and reinitiated thebusiness as the new Nomura Real Estate Asset Management Co., Ltd.
The consolidation has allowed us to integrate asset management expertise and management functions that had been dispersed throughout the
Nomura Real Estate Group and thereby build a system for quickly andprecisely meeting diverse asset management needs.
The company, which is one of the largest asset and investment management companies in Japan with assets under management exceeding¥1 trillion, will take advantage of its market recognition and presence tofurther enhance its property information collection capabilities and integrate the handling of real estate financial products, such as REITs andprivate equity funds, in order to plan and develop new products tailored
to investor needs.
Moreover, in connection with real estate financial products, which
are growing increasingly diverse and sophisticated, we are integrating
related investment management and operations expertise to consolidate
knowledge and experience in the company, which should help us develop
personnel with more advanced expertise and extensive investment management experience and raise returns for client investors.
Under an investor-oriented (profits–of–investors–first) philosophy,
we will strive to provide investment opportunities to investors andmaximize returns.
Trend in Assets Under Management(¥ billion)

1,500

Joint investment, etc.

REITs

Private Funds

1,200

900

600

300

0

99

00

01

02

03

04

05

06

07

08

09

10

11

(FY)

13

14

Nomura Real Estate Holdings, Inc. Annual Report 2012

Segments at a Glance
Main Business

Operating revenue

Operating income(Millions of yen)

(Millions of yen)

Residential Development Business■ Sales of housing■ Management ofcondominiums

300,000

30,000
Other

200,000

Management ofcondominiums

20,000100,000

Sales ofhousing

10,000

0

0

09 10

11

(FY)

09 10

11

(FY)

09 10

11

(FY)

09 10

11

(FY)

09 10

11

(FY)

09 10

11

(FY)

Building Business■ Office leasing (owned)■ Office leasing (subleasing)■ Commercial facility leasing■ Property management
and facility management

120,000

30,000Other

80,000Property management
and facility management

20,00040,000Commercial facility
leasing

10,000

Office leasing(subleasing)
Office leasing (owned)

0

09 10

11

0

(FY)

Investment Management & Development Business■ Property development■ Investment management

80,0009,000

60,000Investment
management

40,000

6,000

3,000

20,000Propertydevelopment

0

09 10

11

0

(FY)

Property Brokerage & Consignment Sales Business■ Property brokerage■ Consignment sales■ Real property sales

40,0003,000

30,000Other

20,000Real property sales

2,000Consignment sales

10,0001,000

Property brokerage

0

09 10

11

0

(FY)

Other Business■ Fitness club operation■ Architectural planningand management■ Planning of commercial
facilities

750

25,00020,000Other

15,00010,000Fitness club

5,000

500

250

0

0

09 10

11

(FY)

Annual Report 2012 Nomura Real Estate Holdings, Inc.

Composition of operating revenue
and operating income (%)

Operating-related indicesFiscal 2011 topics

Condominium and detached housing
unit sales

52.3%
43.8%

(Units)

6,000

4,000

2,000

0

n Operating revenue n Operating income

09 10

11

(FY)

Vacancy rate at fiscal year-end

22.6%

(%)

46.6%

4

6

2

n Operating revenue n Operating income

0

09 10

4.7%

(Billions of yen)

1,500

1,000
Private Funds, etc.

500
Listed REITs
n Operating revenue n Operating income

0

09 10

11 (FYE)

Number of transactions and totaltransaction value of brokerage

7.3%(Transactions)

(Millions of yen)

6,000

30,000
Number of transactions

3.5%

The Building Business strove to improve utilization rates by expanding marketing activities closely tailored to tenant needs. As a result, the vacancy rate at
the end of the fiscal year improved 1.6 percentage points year on year, to2.4%. Nihonbashi Muromachi Nomura Building, which was completed in September 2010, and the acquisition of additional equity in joint ownership ofToshiba Building contributed to income.
The property management and building management operations continued to work on earnings commissions and receiving orders for interior renovations from tenants.

11 (FYE)

Assets under management at
fiscal year-end

13.7%

The housing sales segment implemented strategies to boost the value of the
PROUD brand and strove to further strengthen site selection, product planning,and sales capabilities by leveraging the strengths from the integration of development and sales. As a result, the combined number of condominiums anddetached houses sold was 4,028 units, including PROUD CITY Akabane,
PROUD CITY Inagekaigan and PROUD SEASON Inagekaigan.
The condominium management segment strengthened its initiatives forenhancing customer satisfaction while actively receiving consignment orders
for managing condominiums from both inside and outside the Group. As aresult, revenues increased from condominiums under management reaching
130,987 units.

4,000

20,0002,000

10,000The property development segment worked on furthering the property development business while promoting the sales of real estate investment products.
The segment recorded the sales of five properties, including PMO Hatchobori II
and PMO Akihabara.
The investment management segment focused on the stable management of the various funds operated by the Nomura Real Estate Group. In October 2011, the three real estate asset management companies within the Groupmerged, primarily in order to strengthen capacities for gathering information
on real estate properties, expand investment opportunities and enhance management capability.

The property brokerage segment worked on enhancements to its nomu.com
Internet media website, while actively promoting proposal-based marketing.
The segment also developed a branch network closely tied to local communities to further strengthen retail operations. This included new openings of the
Fuchu Center and Higashi-totsuka Center in the Tokyo area, as well as the
Esaka Center as a new sales base in the Osaka area.

Total transaction
valuen Operating revenue n Operating income

0

0

09 10

11

(FY)

Number of MEGALOS Members
at fiscal year-end

4.1%

150,000

1.3%

100,000

50,000n Operating revenue n Operating income

0

09 10

11 (FYE)

Note:	Operating income for each business does not include “eliminations or corporate” insegment information.
	The shares of consolidated operating income by business have been calculated
based on operating income for each segment.

The fitness club segment implemented various campaigns and events to recruit
new members and improve membership retention. The segment also opened
new clubs MEGALOS Katsushika and MEGALOS Kaminagaya.

15

16

Nomura Real Estate Holdings, Inc. Annual Report 2012

Major Completed or Acquired Properties
in Fiscal 20112

1 PROUD CITY Inagekaigan
Residence I

5 PROUD TOWER Shakujii Koen
Nerima-ku, Tokyo

Mihama-ku, Chiba City, Chiba Prefecture

2 PROUD CITY Inagekaigan
Season-gai-ku

6 PROUD Ogikubo
Suginami-ku, Tokyo

Mihama-ku, Chiba City, Chiba Prefecture

3 PROUD Tsunashima
Kohoku-ku, Yokohama City,
Kanagawa Prefecture

1

3

4 PROUD TOWER Kobe Kenchomae
Chuo-ku, Kobe City, Hyogo Prefecture

4

6

7 PROUD SEASON Higashi-

Funabashi Garden Avenue
Funabashi City, Chiba Prefecture

8 PROUD Yokohama-Nakayama
Midori-ku, Yokohama City,
Kanagawa Prefecture

5

7

8

Annual Report 2012 Nomura Real Estate Holdings, Inc.

CLOSE UPOHANA—The New Brand in Housing“OHANA” is a Hawaiian word that means a place bound by

OHANA Yasaka-Hagiyama-Cho

family, close friends, and parent-and-child ties, where people are
accepted just as they are.

The 5 Product Concepts of OHANA
Location

 ell-suited to family living
W(Emphasis on living environment, transportation
convenience and amenities)

SpaceE asy living for families(Emphasis on both private and common areas)

Affordability

Emphasis on price and running costs

Convenience andConsiderationE mphasis on consideration for mothers andconvenience after moving in

Safety and SecurityE mphasis on disaster prevention, personal safety
and maintenance

We have been promoting PROUD as our housing brand since
2002. In August 2011, however, we launched a new housing
brand, OHANA.
The business philosophy behind OHANA is to supply safe
and comfortable housing to the market that families can buy
for a reasonable price of between ¥20 million and ¥40 million.
Guided by this philosophy, we intend to develop this brandmainly in suburban areas, while holding down costs mainly
through alliances.
We have already completely sold two properties, which will
be recorded in sales in fiscal 2012. One is OHANA Yasaka-Hagiyama-Cho (141 units: Higashimurayama City, Tokyo). The otheris OHANA Hiratsuka-Momohama (134 units: Hiratsuka City,
Kanagawa Prefecture). We are steadily acquiring land, withplans to supply 1,000 units annually going forward.

OHANA Hiratsuka-Momohama

OHANA Projects
Fiscal 2012

Fiscal 2013

Fiscal 2014

OHANA
YasakaHagiyama-Cho

ToyotaTamadaira
Project(141 units;
Higashimurayama City,
Tokyo)(151 units; Hino City,
Tokyo)

OHANA
HiratsukaMomohama

Tamagawajosui
Project

Kamifukuoka
Project(323 units;
Higashiyamato City,
Tokyo)(365 units; Fujimino
City, Saitama
Prefecture)*Soka-Yatsuka
Project—(134 units; Hiratsuka
City, Kanagawa
Prefecture)—(127 units; Soka City,
Saitama Prefecture)* Land acquired in fiscal 2012

Kita-Toda
Project(274 units; Toda City,
Saitama Prefecture)*

17

18

Nomura Real Estate Holdings, Inc. Annual Report 2012

Overview of the Nomura Real Estate Group

Group Philosophy of the Nomura Real Estate GroupThe Group Philosophy is a commitment to both ourselves and to our customers and society.
By showing this commitment and continuously delivering a level of customer satisfaction at least commensuratewith it, we are determined to be a group that people can count on even more than in the past.

Group Message

Bringing Tomorrow Today
The Group Message crystallizes the philosophy of the Nomura Real Estate Group.

Group Mission

We hold each and every meeting in high esteem and are grateful for the fruit it hasborn. Our enthusiasm due to the dynamism of group effort and highly creative
individuals enables us to produce the best quality service and product. Giving back to
the customers and society is also a high priority for us.
The Group Mission is positioned at the core of the philosophy of the Nomura Real Estate Group.
It expresses the shared mission, sense of identity and goals for which the Nomura Real Estate Groupeverlastingly works.

Group Spirit

Aim to be a unique business group with creativity
The spirit of placing customers first
To the future with a youthful spirit and enthusiasm
Pursuit of a trustworthy brandCorporate citizenship
The Group Spirit is the Group’s attitude toward achieving its mission, and represents the value that all membersof the Nomura Real Estate Group should continually share, and treasure.

Annual Report 2012 Nomura Real Estate Holdings, Inc.

Nomura Real Estate
Development Co., Ltd.

Nomura Building Management
Co., Ltd.

http://www.nomura-re.co.jp/english/index.
html

http://www.nomura-bm.co.jp/(Japanese only)

Nomura Real Estate Development operates inthree fields of business: residential development,
which includes condominium and detachedhousing development and sales under the PROUD
brand; corporate real estate (CRE), which involves
real property development and brokerage services for corporate clients; and investment management, which targets high-profit investment.

Nomura Building Management handles facility
management and efficient property management, as well as the renewal of building interiors. The company provides expertise regarding
all aspects of management of buildings.

Nomura Real Estate AssetManagement Co., Ltd.

Nomura Living Support
Co., Ltd.

http://www.nre-am.co.jp/english/index.html

http://www.nomura-ls.co.jp/(Japanese only)

In October 2011, three investment management companies in the Nomura Real EstateGroup merged and became one of the largest
real estate investment management companies
in Japan with more than ¥1 trillion in assets
under management. Nomura Real Estate AssetManagement provides one-stop shopping for abroad variety of financial products and investment management services that meet a wide
range of real estate investment needs, including
privately placed real estate funds, to listed realestate investment trusts (REIT), debt investment
in domestic real estate, overseas real estate fundof funds, and discretionary investment management contracts with institutional investors.

Nomura Living Support responds to a broad
range of customer needs, from managing condominiums to interior coordination and consultation. This company is responsible for the
management and maintenance aspects of the
Nomura Real Estate Group’s residential development, sales and management operations.

Nomura Real Estate Urban Net
Co., Ltd.

NREG TOSHIBA BUILDING
Co., Ltd.

http://www.nomura-un.co.jp/(Japanese only)

http://www.toshiba-building.co.jp/building/index_ j.htm(Japanese only)This company’s services, which include residential real estate brokerage, assist residential relocation and commercial real estate
brokerage. The company also provides consignment sales business.

NREG TOSHIBA BUILDING offers services spanning the development, leasing and management of office buildings, commercial facilities,
warehouses, condominiums and other properties, as well as property brokerage and consulting on corporate real estate (CRE) utilization.

19

20

Nomura Real Estate Holdings, Inc. Annual Report 2012

MEGALOS Co., Ltd.

PRIME X. Co., Ltd.

http://www.megalos.co.jp/(Only in Japanese)

http://www.prime-x.co.jp/(Only in Japanese)

Under the philosophy of “transforming customer satisfaction into happiness,” MEGALOS
plans, develops and manages fitness facilities
offering top-of-the-line service and equipmentthat are housed in the best facilities in each area.

Based on the accumulated real estate expertiseof the Nomura Real Estate Group, Prime X
develops Internet advertising businesses thatspecialize in business in the real estate andhousing industries.
Prime X delivers proposals that maximize
customer benefits, ranging from the creation of
corporate websites and project homepages tocreating and managing membership organizations, and handling project sales promotions.

YBP* Heating and Cooling
Supply Co., Ltd.

Nomura Real Estate ReformCo., Ltd.

* YBP=Yokohama Business Park

http://www.nomura-rf.co.jp/(Only in Japanese)

This company is responsible for the supply ofheating and cooling services to Yokohama Business Park, a large-scale business facility, throughits district heating and cooling system.
Using a “best-mix” system that combines
gas and electricity, the company uses energy
efficiently to curtail costs and minimize environmental impact.

Geo-Akamatsu Co., Ltd.
http://www.geo-akamatsu.co.jp/(Only in Japanese)
Geo-Akamatsu provides a full range of property
consulting and other services that maximize its
40 years of accumulated expertise. These services include surveys of commercial facilities,
project planning, leasing, commercial spacedesign and property management.

Nomura Real Estate Reform meets the growing
demand for renovation by applying the expertise in condominium renovation accumulated by
Nomura Living Support. The company actively
offers renovation proposals to customers wholive in houses or condominiums sold by the
Nomura Real Estate Group, as well as to customers who have purchased properties brokered by the Group.

Annual Report 2012 Nomura Real Estate Holdings, Inc.

Group Company Profile
NREG TOSHIBA BUILDING Co., Ltd.
NREG TOSHIBA BUILDING joined the Nomura Real Estate Groupin December 2008, with the aim of leveraging the Group’s
expertise to effectively utilize, develop and add value to realestate owned by the Toshiba Group as part of a CRE* strategy.
The corporate philosophy of NREG TOSHIBA BUILDING is tocontribute socially and culturally by creating rich lifestyles forpeople through the provision of housing, offices and commercial facilities. Guided by this corporate philosophy, the company
is involved with a wide range of businesses connected with realestate, including leasing, property management, land development, condominium sales, brokerage, and consulting.
* CRE (Corporate Real Estate): This is a real estate strategy formed from amanagement perspective that aims to maximize corporate value by effectively utilizing corporate real estate.
* Source: Ministry of Land, Infrastructure, Transport and Tourism“Overview of Guidelines (Proposal) for Implementing a CRE Strategy,”
March 2008

Toshiba Building(Location: Minato-ku, Tokyo/ Floor space: 158,732 m2)
Head Office

Toshiba Building, 1–1, Shibaura 1-chome, Minato-ku,
Tokyo 105-6691
Chairman and Representative Director

Toshiaki Takahashi
LAZONA Kawasaki Plaza(Location: Saiwai-ku, Kawasaki City, Kanagawa Prefecture/
Floor space: 98,035 m2)

President and Representative Director

Kazuyoshi Yamamori
Established

June 1, 1972
Capital¥14,372 million (as of March 31, 2012)
Number of Employees

130
Websitehttp://www.toshiba-building.co.jp/building/index_ j.htm(Japanese only)

Umeda Sky Building(Location: Kita-ku, Osaka City, Osaka Prefecture/
Floor space: 34,192 m2)

21

22

Nomura Real Estate Holdings, Inc. Annual Report 2012

Corporate Social Responsibility
Four Key CSR Themes
Based on our Group message of “Bringing Tomorrow Today,” theNomura Real Estate Group promotes CSR activities centered on four
key CSR themes with emphasis on the spirit of corporate citizenshipthat has been handed down since our founding. We will create newvalue for society by addressing social issues through our daily businessactivities, with the aim of fulfilling our obligations to all stakeholders.

Enhancing Quality
and Services

Eco-friendly
Initiatives

Ensuring
Compliance

Developing
Human Resources

Support for Childcare
The Group has instituted childcare leave, shortened working hours
for childcare, and nursing care leave programs in order to promotea workplace where every employee can choose an optimal working
arrangement to demonstrate his or her abilities. For example, at
Nomura Real Estate Development and Nomura Living Support, there
is a childcare leave program for employees with children up to three
years of age and a childcare program with shorter working hours
that can be used until children of employees start elementary school.
These programs are intended to help prevent employees fromhaving to relinquish their jobs due to childcare responsibilities.

Together with Communities and Society
We actively conduct a variety of initiatives to help create better communities and a better society through our business operations.
Great East Japan Earthquake Initiatives

Stakeholder Relations
Together with Customers
The Nomura Real Estate Group is involved in a range of initiatives tofurther facilitate communication with customers and incorporate
feedback from them into business activities. We are striving tocreate new value for society, offering products and services that are
not only safe and secure but also of a higher level of quality.
Integrated Construction, Sales and Management System
The Nomura Real Estate Group has adopted an integrated systemfor construction, sales and management that unites these threefunctions as a team in promoting business, and that consolidates
a series of processes, from site acquisition to after-sales service
and management after residents move in. Customer views andopinions are fed back into the system through company representatives and utilized to provide higher-quality products andservices rooted in safety and security.
Disaster Preparedness at Managed Properties
The Nomura Real Estate Group is actively working on initiatives toprovide support for safe and secure condominium living in order toenhance the awareness of condominium residents for disaster preparedness. As one part of this initiative, Nomura Living Support
provides support for disaster preparedness measures, helping condominium associations formulate and implement disaster preparedness drills and earthquake response manuals. The company has also
created the Disaster Preparedness Guidebook, a set of guidelines
for dealing with earthquakes and power outages, and distributes it
free of charge to all condominium associations contracted for
management.

The Nomura Real Estate Group donated a total of ¥50 million
through the Central Community Chest of Japan to help people
directly affected by the Great East Japan Earthquake and aid in theregion’s recovery.
In addition, each Group company has their own initiatives forproviding assistance in recovery from the Great East Japan Earthquake. Nomura Real Estate Development, for example, has instituted a volunteer leave program to support employees in theireffort to provide assistance to the disaster-stricken region. As a way
to support people directly impacted by the Great East Japan Earthquake, Nomura Living Support has recruited live-in “Smile” supporters (building managers) for Tokyo metro area properties on apriority basis from among those affected by the disaster, and managers were hired for two properties.
Educational Support Activities at Yokohama Business Park:
Local Elementary School Students Participate in Biotope
Tours and Rice-growing Classes
Yokohama Business Park (YBP) has a biotope* designed to teachchildren about the importance of nature. In the tours of the biotope
conducted on an ongoing basis, representatives from the Kanagawa
Prefectural Fisheries Technology Center give a presentation on fish
identification and the children observe killifish and loach fish swimming in the biotope pond.
In addition, rice-growing classes are held from May to November
every year in cooperation with local farmers. YBP also holds events
such as the Exhibit of Urban Design for Firefly Habitats. Throughthese activities, YBP proactively interacts with local children andhelps maintain safe and secure communities.

Together with Employees
We are focused on ensuring pleasant working conditions, enhancing health management programs and conducting human resource
development so that diverse values are respected by all and individual abilities are demonstrated to the maximum extent.

* Area with environmental conditions that provide a living place for plants and animals

A biotope tour
The Exhibit of Urban Design for
Firefly Habitats

Annual Report 2012 Nomura Real Estate Holdings, Inc.

Environmental Measures
Group Environmental Philosophy
In April 2010, Nomura Real Estate Holdings formulated the Nomura
Real Estate Group Environmental Philosophy at a meeting of theEnvironmental Committee*, which sought to engage in environmental issues at the Group level. This Group Environmental Philosophy
represents our basic philosophy on promoting environmentally sensitive initiatives in each area of business.
* The Environmental Committee was subsumed by the CSR Committee in April 2011.

Nomura Real Estate Group
Environmental Philosophy
The Group has a mission of utilizing the power andblessings of nature to create communities and spaces inharmony with the environment in order to pass down the
Earth’s beauty to future generations.

Installation of “enecoQ” Condominium Energy
Management System Commences at PROUD Properties
Given increasing awareness of energy efficiency and electricity conservation since the Great East Japan Earthquake, the idea of using
electricity wisely is gaining widespread traction.
In response, the Nomura Real Estate Group has partnered with
FamilyNet Japan Corp. and developed the new “enecoQ” Mansion
Energy Management System (MEMS), which combines electric power
and the Internet in an attempt to shift peak power consumption.
The system was first installed at PROUD CITY Motosumiyoshi,
and plans call for steady adoption at PROUD condominiums above
a certain size (at least 100 units) in the Tokyo metro area, including
PROUD Funabashi, in an effort to reduce environmental impact.

The enecoQ Concept

We will pursue the realization of ideal environmental
quality with a strong will and increased sensitivity to
the environment.

PROUD ECO Vision
Nomura Real Estate Development has established the PROUD ECO
Vision, an environmental concept for harmonizing comfortableliving and the environment at PROUD condominiums.
The PROUD ECO Vision standardizes diverse energy efficiency
technologies and designs, and seeks harmony with nature whilepursuing comfort for residents. It
also seeks to tie these measures in
Reducewith the larger society’s environmental efforts. This vision of “eco”
is pursued based on three standpoints: “Reduce,” “Create,” and“Utilize.”

UtilizeCreateReducePROUD ECO Vision
We bolster thermal insulation as ameans to realize energy consumption cuts and adopt an array of energy-saving equipment as astandard.
CreateWe actively utilize renewable energies through solar panels, wind
generators and other facilities and are also involved in systems forreusing rainwater.
Utilize
Environmental sensitivity is achieved through various energy-efficientdesign considerations and systems, including passive design for controlling radiant heat, airflow velocity (ventilation) and humidity levels.

enecoQ Features

1. High-voltage power received under blanket contracts combined with Internet utilization
2. Use of “smart plans,” unique electricity billing plans basedon demand
3. 
Establishment of proprietary MEMS Management Center,
which enables remote operations to be conducted forcommon areas and other spaces

CSR Site
Nomura Real Estate Holdings is involved in a variety of initiatives tofulfill its corporate social responsibilities. More detailed information
can be found in our CSR Report and on our website.

Nomura Real Estate Holdings CSR website:

http://www.nomura-re-hd.co.jp/english/csr/index.html

23

24

Nomura Real Estate Holdings, Inc. Annual Report 2012

Corporate Governance
Basic Viewpoints Regarding Corporate Governance
The Company believes that it must be governed in a way that continuously maximizes corporate value over the long term, whileconsideration is given to the interest of shareholders and all otherstakeholders related to the Nomura Real Estate Group. Furthermore, we aim to enhance the earning power of the entire Group,
and while acting as a holding company in managing and supervising the business activities of our subsidiaries, we will strive to build
a highly transparent management organization.

Corporate Governance System
The Company’s Board of Directors comprises five directors. The
Board of Directors with the executive officers in attendance decides
important corporate matters and supervises the execution of business operations by directors and executive officers. Statutory auditors attend meetings of the Board of Directors and provide theiropinions as the need arises. Furthermore, the Company has introduced a system of executive officers with an aim to strengthenGroup management, to separate and enhance the business execution function from the decision-making and supervisory functions of
the Board of Directors. Each executive officer appointed by the
Board of Directors is delegated management authority based on the
Company’s internal rules and other stipulations to execute businessunder the direction of the president & CEO and policies approved by
the Board of Directors of the Company.

The Board of Statutory Auditors comprises five statutory auditors, three of whom are external auditors. The Board formulates
such matters as audit policies and the division of auditing roles, andreceives reports and conducts discussions regarding important matters relating to audits carried out on the basis of those policies anddivided roles.
The Company has adopted a statutory auditor system. The
Company believes that management supervision should be conducted primarily by statutory auditors. The Company enhances theeffectiveness of its audit activities through measures that include theestablishment of an Office of Statutory Auditors and the assignmentof specialized staff to assist the statutory auditors. Furthermore, themajority of statutory auditors are external statutory auditors, which
preserves their independence from management and creates a structure that enables them to perform operational audits appropriately.
The Company also has established risk management, complianceand internal audit systems, each of which report regularly to theBoard of Directors. Such reports enable the Board to effectively
supervise directors’ execution of duties.
As a holding company, the Company convenes Group Management Meetings, comprised of the Company’s directors and thepresidents of major subsidiaries as members. The purpose of thesemeetings is to unify intentions to promote group management andverify the progress of the budgets of each operating company andthe execution status of other business operations.

Corporate Governance System

General Meeting of Shareholders
Appointment/dismissal

Appointment

Appointment/dismissal

Board of Directors(5 directors)

Audit

Board of Statutory Auditors(5 statutory auditors)

Appointment/dismissal

Office of Statutory Auditors
Representative Director
Group Management Meeting
CSR Committee

The filing company

Risk Management Committee

Various departments

Guidance and support

Internal Audit
Department
Monitoring

Operating Companies

Audit

Certified Public
Accountants(Auditing Firm)

25

Annual Report 2012 Nomura Real Estate Holdings, Inc.

Internal Audit System and Statutory Auditor System
Internal Audit System
The Nomura Real Estate Group has established an internal audit
department at each group company, with the exception of somesmall companies. Each department is supervised under the direct
jurisdiction of the Group company president or an officer who does
not hold an additional office in a business operations division, whichallows the department to maintain organizational independence.
In addition, we have established the Internal Audit Departmentin the Company that, in collaboration with the auditing firm,
supervises the internal audit functions of the entire Group andperforms monitoring, evaluation and auditing in each division
within the Company.
Statutory Auditor Audit System
The Company has appointed full-time staff in the Office of Statutory Auditors to support statutory auditor audits. Each statutory
auditor attends meetings of the Board of Directors and other important meetings and audits the execution of the duties of directors
while cooperating with the Internal Audit Department and theauditing firm as needed.
Statutory Auditor Mitsuru Nakajima’s considerable degree ofprofessional insight is backed by many years of business experiencein finance and accounting.
Accounting Audits
The Company has concluded an auditing contract with Ernst &Young ShinNihon LLC (the auditing firm). In addition to regularaccounting audits by the auditing firm, the Company discusses andverifies accounting issues with the auditing firm as needed andstrives to follow appropriate accounting procedures.
All of the certified public accountants that carry out work of theauditing firm have no more than seven years of continued experience in auditing the Company, and the auditing firm has adopted
autonomous measures to ensure that its employees who carry out
work do not participate for longer than a designated period in the
Company’s account auditing.
Assistants associated with accounting audit operations comprise six certified public accountants, seven assistant certified public
accountants, etc., and nine other staff.

Compensation of Directors and Statutory Auditors
 olicy and Decision-making Method Regarding theP
Amount and Calculation of Compensation and Other
Remuneration for Directors and Statutory Auditors
At the second annual General Meeting of Shareholders on June 26,
2006, it was resolved that the maximum annual compensation limit
for directors and statutory auditors would be ¥650 million and¥120 million, respectively.
The Company’s compensation of directors and statutory auditors consists of fixed monthly compensation and variable compensation, comprising bonuses and stock-related compensation. Bonuses

are determined according to the Company’s business performance
during the relevant fiscal year, as well as to individual contribution tothat performance. Stock-related compensation, in the form of stock
options, is designed to align executives’ interests with those of theCompany’s shareholders, and to further enhance corporate value.
Stock options are either market-value stock options, on which theexercise price (the amount payable when the right is exercised) is
determined on the basis of market prices, or share compensation
stock options, which have exercise prices of ¥1 per share. Stockrelated compensation is not provided for statutory auditors.
Total Compensation of Directors and Statutory Auditors by
Type of Remuneration (Fiscal 2011)
Total compensation by type of
remuneration (¥ million)
Total
compensaBasiction
compensa(¥ million)tion

Directors
Statutory auditors

Stock
optionBonus

Retirement
benefits

Headcount

280

178

25

76

—

6

(excluding external
statutory auditors)

62

49

—

12

—

2

External directors
and auditors
Total

40
383

34
261

—
25

6
96

—
—

3
11

Notes: 1. The annual General Meeting of Shareholders on June 26, 2006 resolvedthat the maximum annual compensation limit for directors and statutory auditors would be ¥650 million and ¥120 million, respectively.
2. The compensation and other remuneration that external statutory
auditors Yasuaki Fukui and Mitsuru Nakajima received from the parent
company of Nomura Real Estate Holdings and its subsidiaries in theyear under review totaled ¥21 million.

Compensation of Accounting Auditors
Policy for Deciding the Compensation of Accounting Auditors
The Company takes factors such as the days spent performing
accounting audits, and the scale and business characteristics of theCompany comprehensively into consideration in reaching an appropriate decision regarding the compensation of its auditing firm’s certified public accountants and other accounting audit personnel.
Compensation paid to the auditing firm’s certified public
accountants for fiscal 2011 was as follows.
Compensation of Certified Public Accountants in Detail(Fiscal 2011)
Compensation paid for audit
certification activities (¥ million)

Compensation paid for
non-audit activities (¥ million)

The Company

58

2

Consolidated subsidiaries

113

31

Total

171

33

26

Nomura Real Estate Holdings, Inc. Annual Report 2012

Risk Management
Risk Management System
The Company has established a Risk Management Committee
whose members include officers in charge of administrative operations at the Company and Group companies, for the purpose ofpromoting risk management activities within the Group. The Committee deliberates matters relating to risk management, compliance, and information security for the entire Group, and also
cooperates and provides guidance with regard to countermeasureswhen risks occur.
The Group’s businesses handle large quantities of personal
information in various operations due to business requirements.
They endeavor to comply with various laws and regulations pertaining to this personal information, such as the Law Concerning Protection of Personal Information, and also handle information in theproper manner. Moreover, the Group has established internal rules,
such as “Information Security Provisions,” and “Rules for Handling
Personal Information,” which set forth guidelines on handling personal information and appointing information security managers,
among other matters. In these ways, the Group strives to train andeducate employees.
Formulation of Risk Management Regulations
The Nomura Real Estate Group believes that ensuring sound management by properly addressing risks is fundamental to corporations. Accordingly, the Group has established Risk Management
Regulations as its fundamental risk management guidelines. Risk

management is predicated on the crucial task of understanding risk.
The Group has thus established timely and proper reporting rules,
including prompt escalation of situational reports to management
after unforeseen incidents have occurred, in addition to regularly
monitoring risks.

Compliance
Compliance Systems
The Nomura Real Estate Group regards compliance, including theobservance of laws and regulations and corporate ethics, as one of
the most important management issues. As a set of relevant guidelines, it has formulated the Nomura Real Estate Group Code of
Action. To promote continuous educational and awareness activities for executives and employees of the entire Group, we haveestablished a CSR Committee and CSR Promotion Department in
the Company. It provides advice, guidance and support to Group
companies. In addition, Compliance Officers and Compliance Leaders have been appointed at Group companies in an effort to ensurethat compliance pervades throughout the Group.
Nomura Real Estate Group Risk Hotline
The Nomura Real Estate Group Risk Hotline serves as a point of contact for whistle-blowing by Group employees. Two internal reporting
channels are available: one to internal directors and the other tooutside legal counsel. In the event that a compliance issue cannot be
resolved in the workplace or in other related circumstances, employees may choose to consult with either point of contact.

Flow of Communication

Nomura Real Estate Group Compliance Promotion Framework

Nomura Real Estate Holdings

Nomura Real Estate Holdings

Chairman, Risk Management Committee

Board of Directors
Chairman and President

CSR Promotion Department

Nomura Real EstateGroup Companies

ChairmanGroup Compliance Officer(Director in charge of CSR
Promotion Department,
Nomura Real Estate
Holdings)

Risk Management
Committee
Secretariat

CSR Promotion Department

Committee
members

Communication Manager• Communication at Group Companies
Formulation of guidelines, etc.
• Establishment of emergency communication networks at Group
companies

Employees of Group Companies

Nomura Real EstateGroup Companies
Compliance Officers

Committee
members(Directors in charge of administrative
operations at Group companies)

Compliance Leaders(General managers of administrative
operations at Group companies)

Compliance Promoters, etc.
(Appointed at each company)

Risk Management
Committee, etc.

Annual Report 2012 Nomura Real Estate Holdings, Inc.

Investor Relations Activities

Matters Concerning Parent Company

Communication with Analysts and Institutional Investors
The Company holds earnings briefings twice a year (at around thetime of announcing annual and semi-annual results) where it
explains business results and forward-looking matters such as management policies. The Company also communicates actively withinstitutional investors overseas through the overseas investor relations (IR) activities it conducts periodically.

The relationship between the Company and Nomura Land andBuilding Co., Ltd. (NLB) and Nomura Holdings Inc., the Company’s
parent companies, are as follows.
1. Capital relationship	NLB held a 50.8 % shareholding in Nomura Real Estate Holdings
as of March 31, 2012. Nomura Holdings Inc. is the parent company of NLB, and correspondingly also the parent company of
Nomura Real Estate Holdings. Going forward, the shareholding
ratio of the parent company of Nomura Real Estate Holdings
could conceivably fluctuate as a result of events such as theparent companies selling their shares in Nomura Real Estate Holdings, or the infusion of capital in Nomura Real Estate Holdings.
2. Personal relationships
	Mitsuru Nakajima, a part-time statutory auditor of the Company,
is concurrently a director of NLB. Apart from him, no directors,
officers or employees of the Company are concurrently serving ator on secondment from another company.
		 The relationship between Nomura Real Estate Group and its
parent companies does not exert any influence on the Nomura
Real Estate Group’s free marketing activities or management
decisions. Furthermore, the parent companies and their subsidiaries apart from the Nomura Real Estate Group do not competewith the Group’s business operations.
		 The Company performs business management independently from the parent company based on the Company’s own
responsibility.

Information Transmitted via the IR Website
The Nomura Real Estate Holdings’ IR website was upgraded in April
2012. The Company’s consolidated financial statements, earnings
briefing materials, annual reports and other IR-related information
are provided through this website.

Nomura Real Estate Holdings IR Website:
http://www.nomura-re-hd.co.jp/english/ir/index.html

27

28

Nomura Real Estate Holdings, Inc. Annual Report 2012

Board of Directors and Statutory Auditors(As of June 28, 2012)

President

Kamezo Nakai

Director

Director

Director

Director

Seiji Matsumoto

Takao Orihara

Yukoh Yoshida

Hiroyuki Kimura

Statutory Auditor

Statutory Auditor

Yoji Kurihara

Shigeaki Yoshioka

Statutory Auditor*

Statutory Auditor*

Statutory Auditor*

Shigeru Matsushima

Mitsuru Nakajima

Satoshi Ogishi* Shigeru Matsushima, Mitsuru Nakajima and Satoshi Ogishi are external statutory auditors as provided for in Article 2, Item 16 of the Companies Act.

Annual Report 2012 Nomura Real Estate Holdings, Inc.

Management’s Discussion and Analysis
Trends in the Real Estate Industry

million. However, operating income rose ¥7,855 million, or 18.7%,

The condominium market in the Tokyo metropolitan area during

to ¥49,939 million, and net income rose ¥12,120 million, or

calendar year 2011 saw sales decrease 0.1% year on year, to 44,499

221.5%, to ¥17,591 million.

units. Contract rates at average first month were down 0.6 of a

Net income rose ¥4,571 million due to the reversal of deferredpercentage point, to 77.8%. Despite these marginal declines, thetax assets and deferred tax liabilities as a result of a reduction in themarket remained at a high level. While the impact of the Great East

corporate income tax rate.

Japan Earthquake temporarily constrained supply, the businessenvironment was firm, with real demand solid, underpinned byOperating Results by Segment

government policy support in the form of low interest rates and■ Residential Development Businessextended exemptions from gift taxes.

In the Residential Development Business segment, we implemented

In the real estate investment market, the fund procurement

strategies to boost the value of the PROUD brand and strove toenvironment continued to improve and J-REITs were active infurther strengthen site selection, product planning, and sales capa-

increasing capital by public offerings. Regarding investment unit

bilities by leveraging the strengths from the integration of develop-

prices, while some investors avoided risk because of the European

ment and sales. Condominium sales during the fiscal year underdebt crisis and other factors, there were signs of a recovery on

review included PROUD CITY Akabane (Kita-ku, Tokyo), PROUD

expectations for the benefits of additional monetary easing by the

CITY Inagekaigan (Mihama-ku, Chiba City, Chiba Prefecture), andBank of Japan.

PROUD TOWER Kobe Kenchomae (Chuo-ku, Kobe City, Hyogo

In the office market, the office building vacancy rate in the fivePrefecture), while sales of detached houses included PROUD

wards of central Tokyo remained at a high level of 9.0% at the end

SEASON Higashi-Funabashi Garden Avenue (Funabashi City, Chiba

of December 2011. Rent levels also remained soft. Given these

Prefecture), and PROUD SEASON Inagekaigan (Mihama-ku, Chiba

conditions, the business environment is expected to remain difficult

City, Chiba Prefecture).

for the time being.

In housing management operations, we stepped up measures
to increase customer satisfaction, and at the same time actively

Analysis of Operating Results

solicited external consignment orders, in addition to managing resi-

Against this backdrop, the Nomura Real Estate Group recorded adences within the Group, as we worked to boost earnings.

¥9,723 million impairment loss, reflecting the fact that some leased

Residential Development Business segment operating revenue

assets in property, plant and equipment saw a decline in profitabil-

declined ¥41,614 million, or 14.5%, year on year, to ¥244,521 mil-ity. However, the Group’s mainstay Residential Development Busi-lion, while operating income rose ¥8,019 million, or 50.7%, toness achieved a large year-on-year increase in earnings for two main

¥23,823 million. The higher earnings on lower operating revenue

reasons. One was a significant improvement in profitability. The

were mainly attributable to a decrease in unit sales accompanying

other was a full year’s contribution to earnings from office buildings

the postponement of construction work on some properties

that began operating in the previous fiscal year. Consolidated oper-

because of the Great East Japan Earthquake, but an increase inating revenue declined ¥30,176 million, or 6.3%, to ¥450,807

profit margins on properties sold.

Average prices and contract rates forcondominiums in the Tokyo metropolitan area
(For the calendar years)

Vacancy rates in the five wards of central Tokyo(As of December 31)

J-REIT market capitalization(As of March 31)(Millions of yen)

(%)

(%)

(Trillions of yen)

50

100

10

5

40

80

8

4

30

60

6

3

20

40

4

2

10

20

2

1

0

0

0

07

08

■ Average price (left axis)

09
■

10

11

(Year)

0

07

08

09

10

11

(Year)

08

09

10

11

12

(Year)

Contract rate (right axis)

Source: Real Estate Economic Institute Co., Ltd.

Source: Miki Shoji Co., Ltd.

Source: The Association for Real Estate Securitization

29

30

Nomura Real Estate Holdings, Inc. Annual Report 2012

■ Building BusinessIn investment management operations, we focused on the

In the Building Business segment, amid a persistently challenging

stable management of the various funds operated by the Nomura

business environment, we worked to increase utilization rates by

Real Estate Group. On October 1, 2011, we integrated three Group

stepping up sales activities to meet tenant needs. As a result ofasset management companies in order to enhance our ability tothese efforts, the vacancy rate at the end of the fiscal year declined

gather information on properties, expand investment opportunities

1.6 percentage points year on year, to 2.4%. Full-year revenue

and improve our management capabilities, and Nomura Real Estate

contributions from Nihonbashi Muromachi Nomura Building (Chuo-

Asset Management Co., Ltd. was established.

ku, Tokyo), which was completed in September 2010, and from

Investment Management & Development Business segment

Toshiba Building (Minato-ku, Tokyo), where we acquired an addi-

operating revenue rose ¥7,948 million, or 14.2%, year on year, totional ownership interest, contributed to our performance. In the¥63,995 million, while operating income declined ¥4,233 million,

property management and building management business, theor 62.5%, to ¥2,539 million. This increase in sales with a decline in

Company continued to earn commissions and receive tenant orders

profits was mostly because we promoted sales of products withfor interior works.

lower profit margins.

As a result, Building Business segment operating revenue rose
¥5,312 million, or 5.3%, year on year, to ¥105,701 million, while■ Property Brokerage & Consignment Sales Business

operating income rose ¥2,701 million, or 11.9%, to ¥25,346

The Company promoted strategic use of Internet media in its prop-

million.

erty brokerage operations and actively promoted proposal-based
businesses. We also developed our branch network closely tied to■ Investment Management & Development Businesslocal communities to further strengthen retail operations by opening

In property development operations, the Company promoted thethe new branches. In April 2011, we opened the Fuchu Center

development business and product sales. We also actively devel-(Fuchu, Tokyo) and Higashi-Totsuka Center (Totsuka-ku, Yokohama,

oped the Premium Mid size Office (PMO) brand of mid size office

Kanagawa Prefecture). In August 2011, we opened the Esaka Centerbuildings with the quality of large-scale buildings. During the fiscal(Suita City, Osaka) as a new sales base in the Osaka area.

year under review, we booked sales of five properties, including

Property Brokerage & Consignment Sales Business segment

PMO Hatchobori II (Chuo-ku, Tokyo) and PMO Akihabara (Chiyoda-

operating revenue rose ¥5,347 million, or 18.5%, year on year, toku, Tokyo).

¥34,303 million, while operating income rose ¥705 million, or
57.9%, to ¥1,926 million. This increase in sales and profits was
mostly because of the transfer of some real property to other seg-

Property Brokerage &Other Business
Consignment Sales Business
1.3%
3.5%
Investment
Management &Development Business
Breakdown of
4.7%
Residential
consolidated
operating income
by segment

Building Business
46.6%

ments and higher commissions in property brokerage operations.
■ Other BusinessIn the fitness club business segment, the Company implemented
various campaigns and events to recruit new members and improve

Development Business
43.8%

membership retention. We also opened two new clubs: MEGALOS

FY2011

Katsushika (Katsushika-ku, Tokyo) in September 2011, and MEGA-(millions of yen)

LOS Kaminagaya (Konan-ku, Yokohama, Kanagawa Prefecture) in¥49,939

December 2011.
Other Business segment operating revenue declined ¥1,885
million, or 9.0%, year on year, to ¥19,081 million, while operating(Millions of yen)

■ Residential Development Business

23,823(43.8%)■ Building Business

25,346(46.6%)■ Investment Management & Development Business

2,539(4.7%)■ Property Brokerage & Consignment Sales Business

1,926(3.5%)

722(1.3%)■ Other BusinessNote: Since operating income for each business does not include “eliminations or
corporate” in segment information, the sum of operating income of the businesses presented in the pie chart differs from the total amount shown in thecenter of the pie chart. The shares of consolidated operating income by businesshave been calculated based on operating income for each segment.

income rose ¥69 million, or 10.6%, to ¥722 million.

Annual Report 2012 Nomura Real Estate Holdings, Inc.

Major operating-related indices for each business are shown in the table below.
Years ended March 31

Residential Development Business:
Condominium sales (units) ����������������������������������������
Detached housing sales (units)������������������������������������
Gross margin ratio of housing sales (%) ��������������������
Completed housing units held in inventories (units)����
Rental condominium sales for investors (units)������������
Condominiums under management (units)����������������
Building Business:
Vacancy rate at year-end(Offices, commercial facilities) (%)*��������������������������
Investment Management & Development Business:
Assets under management (millions of yen)����������������
Property Brokerage & Consignment Sales Business:
Brokerage (number of transactions)����������������������������
Brokerage-total transaction value (millions of yen)������
Other Business:
Members of MEGALOS����������������������������������������������

2008

2009

2010

2011

2012

3,463
347
22.7
275
747
103,102

3,135
255
21.8
265
621
110,365

3,696
415
16.1
535
248
121,212

4,497
580
16.4
113
138
127,567

3,397
631
23.3
114
739
130,987

2.2

2.6

4.8

4.0

2.4

1,031,528

1,235,611

1,204,546

1,126,601

1,153,898

4,047
406,635

4,184
293,047

5,219
386,446

5,774
425,274

5,762
452,950

120,543

129,944

128,365

127,707

133,033* Figures shown for fiscal 2007 and earlier were calculated by including the leased floor area of residential projects.

Analysis of Financial Position

Cash Flows

As of March 31, 2012, total assets stood at ¥1,402,624 million,■ Cash flows from operating activities

down ¥71,706 million from a year earlier. This was mostly because

Net cash provided by operating activities amounted to ¥43,877 mil-real estate for sale and other inventory assets (down ¥36,529 mil-lion, an increase of ¥9,929 million from the previous fiscal year. Thislion), and property, plant and equipment (down ¥22,856 million)

was primarily due to declines in property for sale and other inven-declined.

tory assets.

Total liabilities decreased ¥90,827 million to ¥1,026,138 million.
This was mostly because of decreases in long-term loans payable■ Cash flows from investing activities(down ¥25,694 million), commercial papers (down ¥20,000 million),

Net cash provided by investing activities amounted to ¥7,809 mil-deposits received (down ¥14,813 million) and short-term loans pay-lion, a change of ¥41,540 million from the net cash used in theable (down ¥12,653 million).

previous fiscal year. This mostly reflected proceeds from sales of

Net assets rose ¥19,120 million year on year to ¥376,486

property, plant and equipment and intangible assets, proceeds frommillion. This was mostly because retained earnings increased

sales and liquidation of investment securities, and proceeds from

¥12,831 million.

collection of lease and guarantee deposits.
■ Cash flows from financing activities

Net cash used in financing activities amounted to ¥63,296 million,
an increase of ¥55,810 million from the previous fiscal year. This
mostly reflected repayments of long-term loans payable and a net
decrease in short-term loans payable, and a decrease in commercial
papers.

31

32

Nomura Real Estate Holdings, Inc. Annual Report 2012

Basic Policy Concerning Profit Distribution, andDividends for Fiscal 2011 and Fiscal 2012

Business and the Investment Management & Development Busi-

The Company’s basic policy regarding the distribution of profits toincreases in vacancy rates, falls in asset values, or drops in profit

shareholders is to aim at a payout ratio of approximately 30% overratios. In addition, declining investment unit prices and weakening

the medium to long term, in accordance with annual business per-demand for investment funds are possibilities in the REIT market.

formance, comprehensively considering the operating environment,

Such events could have an adverse impact on the Group’s businesscapital investment plans, retained earnings, and other relevant

performance.

ness, moreover, such events could also spark declines in office rents,

factors.
In fiscal 2011, we paid a year-end dividend of ¥12.50 per share,
as forecast. Combined with the interim dividend paid previously, thetotal annual dividend was ¥25.00 per share.

(2) Changes to real estate-related legislation or the tax
system
A number of laws and regulations apply to the various businesses ofFor fiscal 2012, ending March 31, 2013, the Company intends

the Nomura Real Estate Group, which will be subject to new regula-to pay interim and year-end dividends of ¥15.00, for a total

tions as it expands its operational scope in the future. Going for-annual dividend of ¥30.00, which would represent a ¥5.00 year-

ward, the Group may face new obligations and expense burdens if

on-year increase.

the Building Standards Law, the Building Lots and Buildings Transaction Business Law, the Financial Instruments and Exchange Law, orConsolidated Performance Outlook for Fiscal 2012

other real estate-related laws are revised, or if new legislation is

In fiscal 2012, the Company projects ¥523,000 million in operating

implemented. Such events could adversely affect the Group’s busi-

revenue, ¥55,000 million in operating income, and ¥19,000 million

ness performance.

in net income.

Furthermore, if the tax system related to real estate is revised,
this could lead to an increase in expenses for holding, acquisition,

Risks Affecting the Business of Nomura Real EstateGroupand sales of assets, or a decline in the purchasing sentiment of

We believe that the following major risks have the potential to sig-of companies and revisions of their investment plans. Such eventsnificantly impact the operating results and financial condition of the

could have an adverse impact on the Group’s business

Nomura Real Estate Group, as well as the stock prices. It should be

performance.

customers. It could also prompt a change in the facility strategies

noted that matters concerning the future in this document havebeen determined based on information available to the Group on(3) Licenses and permits for major businesses

the scheduled submitting date of the fiscal 2011 annual securities

The Group obtains licenses and permits, such as real estate brokeragereport.

and construction licenses, when carrying out business activities.

(1) Trends in the real estate market

mits to be cancelled. However, in the future, if such licenses or

The Group’s performance for the fiscal year under review resulted inpermits are cancelled for whatever reason, this could adversely

increased profit compared to the previous fiscal year. However, fears

affect the Group’s business performance.

Currently, there are no reasons for any of these licenses or per-over the impact of the European debt crisis and stagnation in overseas economies continue to create uncertainty.

(4) Impact of interest-bearing debt

In the future, certain events could still cause a decline in pur-The balance of interest-bearing debt at March 31, 2012 stood atchasing sentiment among customers of the Residential Develop-¥758,562 million, down ¥58,347 million from a year earlier (equiva-

ment Business and the Property Brokerage & Consignment Sales

lent to 54.1% of total assets, 1.3 percentage points less than at theBusiness, our core businesses. These events include the current

end of the previous fiscal year). When raising funds by borrowing,

economic slowdown, an associated deterioration in corporate earn-

the Group attempts to deal with the risk of a short-term rise inings, a decline in consumer spending, a rise in interest rates, or aninterest rates mainly by taking out long-term, fixed-rate loans. How-

excess supply in the real estate market. There may also be falls in

ever, an increase in borrowing costs due to a rise in market interest

selling prices or increases in inventories due to a decline in purchas-rates could have a negative impact on the Group’s business perfor-

ing sentiment, or losses on valuation of inventories. For the Building

mance and financial condition.

Annual Report 2012 Nomura Real Estate Holdings, Inc.

(5) M&A

acquisition or engages specialists to remove such pollution. How-

The Company has positioned M&A as an important strategy for

ever, it is possible that the aforementioned assessments fail to con-long-term growth, and aims at boosting Group enterprise value by

firm the full extent of soil pollution, or that the seller is unable toimplementing M&A that can be expected to generate synergies

fulfill his or her guarantee against defects even if soil pollution iswhile making the most of the advantages offered by the holding

detected. Detection of soil pollution on land purchased by thecompany system.

Group, therefore, could lead to changes in the Group’s original

However, in the event of changes in the operating environment,

business schedules or to the incurrence of the additional expenses,

the expected growth of the acquired company, or the synergy

which could have a negative impact on its business performance or

expected from the acquisition, may not be realized. This could havefinancial condition.

an adverse impact on the Group’s business performance.

(9) Asbestos(6) Natural disasters

Some of the buildings owned by the Group have been sprayed with

Natural disasters, such as earthquakes and wind and flood damage,

materials that include asbestos. The Group has engaged third-party

as well as sudden accidents, could lead to damage or destruction oforganizations to assess such buildings. According to the results ofreal estate owned or managed by the Group. Such incidents could

those assessments, the said materials are showing no signs of age-have a negative impact on the Group’s business performance andrelated degradation and are in stable condition. In the future, how-financial condition.

ever, it is possible that asbestos may be scattered if age-relateddegradation occurs. Such an event could require removal or contain-(7) Personal information

ment of the asbestos in question, resulting in the incurrence ofIn the course of carrying out its operations, the various businesses

additional costs that could have an adverse effect on the Group’sof the Group handle large quantities of personal information. The

business performance or financial condition.

Group endeavors to comply with various laws and regulations pertaining to personal information, such as the Law Concerning Pro-

(10) Concentration of revenues in fourth quarter

tection of Personal Information, and also handle information in the

In the Residential Development Business, which accounts for more

proper manner. Moreover, Group companies have produced various

than 50% of the Group’s revenues, housing sales are registered as

documents, such as “Information Security Provisions,” “Rules forsales when properties are handed over to the customers. In many

Handling Personal Information” and “Guidelines for Entrusting thecases, however, the completion and handover occur in February or

Handling of Personal Information.” In these ways, the Group strives

March of each year, in accordance with the requirements of cus-to train and educate employees and protect the interests of

tomers taking up residence. For this reason, a large proportion ofcustomers.

the Group’s revenues is concentrated in the fourth quarter of eachIn the event of external leakage of personal information due tofiscal year.

unforeseen circumstances, however, confidence in the Group could
be lost, leading to a decrease in sales and the incurrence of expenses(11) Capital Relationship with the Parent Companies

to pay compensation for damages. This could have an adverse

The Company’s parent companies are Nomura Holdings, Inc. andimpact on the Group’s business performance.

NOMURA LAND AND BUILDING Co., Ltd. As of March 31, 2012,
Nomura Land and Building owned 50.8% of the Company’s shares,(8) Soil pollution

while Nomura Holdings owned 100% of the shares of Nomura

Under the Soil Contamination Countermeasures Law, owners ofLand and Building. This holding percentage could change in theland are obliged to evaluate and report on the soil pollution status

event of a sale of the Company’s shares by the parent companies orof their properties with respect to the presence of specific harmfula capital increase of the Company.

substances, and also to take measures to remove such polluting
substances.
When considering purchases of land for business use, theGroup conducts historical and pollution assessments in advance. If
the presence of pollution is confirmed, the Group either cancels the

33

34

Nomura Real Estate Holdings, Inc. Annual Report 2012

Consolidated Balance Sheets
Nomura Real Estate Holdings, Inc. and its subsidiaries
March 31, 2011 and 2012
(Thousands of
U.S. dollars)(Note 1)

(Millions of yen)
ASSETS

Current Assets:
Cash and deposits (Notes 2(3) and 3)
Notes and accounts receivable–trade
Short-term investment securities (Notes 2(3), 3 and 4)
Real estate for sale (Note 6)
Real estate for sale in process
Land held for development
Equity investments (Notes 3 and 4)
Deferred tax assets (Note 10)
Other
Allowance for doubtful accounts
Total current assets

Investments and Other Assets:
Investment securities (Notes 3 and 4)
Lease and guarantee deposits (Note 3)
Deferred tax assets (Note 10)
Other
Allowance for doubtful accounts
Total investments and other assets

Property, Plant and Equipment:
Land (Notes 6 and 15)
Buildings and structures (Notes 6 and 15)
Construction in progress (Note 6)
Machinery and equipment (Note 6)
Other
Accumulated depreciation
Net property, plant and equipment

Intangible Assets
Total Assets
See notes to consolidated financial statements.

2011

2012

2012

¥   52,068
14,271
30,000210,565
122,781
99,76060,94821,19725,424(89)¥   45,458
13,18725,000124,840
197,638
74,131
41,89518,50544,868(190)$   553,087
160,446
304,173
1,518,921
2,404,641
901,947
509,738
225,149545,906(2,310)636,925585,332

7,121,698

43,14023,791
23,6014,251(19)
94,76445,94923,622
24,6983,468(19)97,718559,061
287,403
300,501
42,200(237)
1,188,928

483,929
321,780
6,851
8,397
606
821,563(88,990)732,573

471,901
318,068
11,3698,453
1,607
811,398(101,682)
709,716

5,741,590
3,869,907
138,325
102,849
19,557
9,872,228(1,237,154)
8,635,074

10,069¥1,474,331

9,858¥1,402,624

119,939$17,065,639

Annual Report 2012 Nomura Real Estate Holdings, Inc.

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

(Millions of yen)
LIABILITIES AND NET ASSETS

2011

2012

2012

Current Liabilities:
Notes and accounts payable–trade
Short-term loans payable (Notes 3, 5 and 6)
Commercial papers
Income taxes payable (Note 10)
Deposits received
Provision for bonuses
Provision for directors’ bonuses
Provision for loss on business liquidation
Provision for loss on disasterAccounts payable-otherAccrued interest
Accrued consumption taxes
Advances received
Other
Total current liabilities¥   43,081
160,896
20,00010,09929,288
4,135
176
113
2,608
5,840
2,357
2,056
19,485
10,975311,109¥   36,352
148,243—
6,109
14,475
4,336
268
77
413
4,946
2,318
3,353
27,734
8,725
257,349$   442,287
1,803,660—
74,328176,120
52,754
3,258
936
5,028
60,17528,20240,798337,444
106,157
3,131,147

Noncurrent Liabilities:
Bonds payable
Long-term loans payable (Notes 3, 5 and 6)
Lease and guarantee deposits received (Note 6)
Deferred tax liabilities (Note 10)
Deferred tax liabilities for land revaluation
Provision for retirement benefits (Note 7)
Provision for loss on subleasing business
Other
Total noncurrent liabilities
Total Liabilities

33,000603,01455,36083,6405,034
15,8492,002
7,957
805,856
1,116,965

33,000577,319
55,64372,3184,370
15,6191,583
8,937
768,789
1,026,138

401,509
7,024,204
677,000
879,886
53,176
190,034
19,263
108,7319,353,803
12,484,950

115,574
92,90491,497(2)299,973

115,626
92,955
104,328(2)
312,907

1,406,812
1,130,983
1,269,361(26)
3,807,130(1,076)
354
5,962
(677)
4,563
647
52,183357,366(2,040)
405
6,625
(831)
4,159
713
58,707
376,486(24,820)
4,931
80,607(10,116)
50,602
8,676
714,2814,580,689¥1,474,331¥1,402,624$17,065,639

Net Assets:
Shareholders’ equity (Note 11):
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity
Accumulated other comprehensive income:
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Revaluation reserve for land
Foreign currency translation adjustments
Total accumulated other comprehensive income
Subscription rights to shares
Minority interests
Total Net Assets
Total Liabilities and Net Assets
See notes to consolidated financial statements.

35

36

Nomura Real Estate Holdings, Inc. Annual Report 2012

Consolidated Statements of Income
Nomura Real Estate Holdings, Inc. and its subsidiaries
Years Ended March 31, 2011 and 2012
(Thousands of
U.S. dollars)(Note 1)

(Millions of yen)
2011

2012

2012

Operating Revenue:¥480,983¥450,807$5,484,938

Operating revenue

480,983

450,8075,484,938

Operating Expenses:

438,900

400,868

4,877,329

Operating cost

373,761

335,897

4,086,834

65,13964,971

790,495

Operating Income

42,08349,939607,609

Other Income and Expenses:(23,783)(24,971)(303,820)

Selling, general and administrative expenses

Interest income

65

63

761

Dividends income

455

1,093

13,303Equity in earnings of affiliates
Gain on sales of property and equipment (Note 8)

17

5

66

11,066

218

2,649

—

300

3,645

Interest expenses(14,903)(14,329)(174,341)

Loss on valuation of equity investments(14,767)

—

—

(852)

(9,723)(118,294)(2,612)——

Reversal of provision for loss on disaster

Impairment loss (Note 9)
Loss on disaster
Loss on adjustment for changes of accounting standard for
asset retirement obligations
Other, net
Income before Income Taxes and Minority Interests

(684)

—

—

(1,568)(2,598)(31,609)18,30024,968

303,789

Income Taxes (Note 10):
Income taxes–current

15,884

10,918132,842

Income taxes–deferred(7,753)(10,091)(122,782)

Total income taxes
Income before minority interests
Minority interests in income
Net Income
See notes to consolidated financial statements.

8,131

827

10,06010,16924,141

293,729

4,697

6,550

79,692¥  5,472¥ 17,591$  214,037

Annual Report 2012 Nomura Real Estate Holdings, Inc.

Consolidated Statements of Comprehensive Income
Nomura Real Estate Holdings, Inc. and its subsidiaries
Years Ended March 31, 2011 and 2012
(Thousands of
U.S. dollars)(Note 1)

(Millions of yen)

Income before Minority Interests

2011

2012

2012

¥10,169¥24,141$293,729

Other Comprehensive Income (Note 18):
1,104

(961)

(11,698)

Deferred gains or losses on hedges

75

50

615

Valuation difference on available-for-sale securities
Revaluation reserve for land

(37)

663

8,071

Share of other comprehensive income of affiliates accounted
for using the equity method

(252)

(154)

(1,877)

Total other comprehensive income

890

(402)

(4,889)Comprehensive Income (Note 18)¥11,059¥23,739$288,840¥ 6,362¥17,187$209,123

4,697

6,552

79,717(Breakdown)Comprehensive income attributable to owners of the parent
Comprehensive income attributable to minority interests
See notes to consolidated financial statements.

37

38

Nomura Real Estate Holdings, Inc. Annual Report 2012

Consolidated Statements of changes in net assets
Nomura Real Estate Holdings, Inc. and its subsidiaries
Years Ended March 31, 2011 and 2012
Millions of yen

Balance at March 31, 2010

Number ofshares issued

Capitalstock

CapitalsurplusRetainedearnings

Valuation Deferred
Foreigndifference on gains or Revaluation currency Subscription
Treasury available-for- losses on reserve for translation rights tostock sale securities hedges
landadjustments shares

Minority
interests

Total net
assets¥349,437

190,331,000¥115,528¥92,858¥ 89,357¥(2)¥(2,181)¥280¥5,999¥(425)¥520¥47,503

Issuance of new shares

56,000

46

46

—

—

—

—

—

—

—

—

92

Dividends from surplus

—

—

—

(3,332)

—

—

—

—

—

—

—

(3,332)

Net income

—

—

—

5,472

—

—

—

—

—

—

—

5,472

Purchases of treasury stock

—

—

—

—

(0)

—

—

—

—

—

—

(0)

Net changes of items other thanshareholders’ equity

—

—

—

—

—

1,105

75

(37)

(252)

126

4,680

5,697

190,387,000¥115,574¥92,904¥ 91,497¥(2)¥(1,076)¥355¥5,962¥(677)¥646¥52,183¥357,366

Issuance of new shares

69,900

52

51

—

—

—

—

—

—

—

—

104

Dividends from surplus

—

—

—

(4,760)

—

—

—

—

—

—

—

(4,760)Net income

—

—

—

17,591

—

—

—

—

—

—

—

17,591

Purchases of treasury stock

—

—

—

—

(0)

—

—

—

—

—

—

(0)

Balance at March 31, 2011

Net changes of items other thanshareholders’ equity
Balance at March 31, 2012

—

—

—

—

—

(964)

50

663

(154)

67

6,524

6,186

190,456,900¥115,626¥92,955¥104,328¥(2)¥(2,040)¥405¥6,625¥(831)¥713¥58,707¥376,486

Valuation Deferred
Foreigndifference on gains or Revaluation currency Subscription
Treasury available-for- losses on reserve for translation rights tostock sale securities hedges
landadjustments shares

Minority
interests

Total net
assets$634,908$4,348,045(Thousands of U.S. dollars) (Note 1)

Balance at March 31, 2011

Capitalstock

CapitalsurplusRetainedearnings$1,406,184$1,130,355$1,113,242$(25)$(13,097) $4,316

Issuance of new shares

628

628

—

—

—

—

—

—

—

—

1,256

Dividends from surplus——(57,918)

—

—

—

—

—

—

—

(57,918)

Net income——

214,037

—

—

—

—

—

—

—

214,037

Purchases of treasury stock

—

—

—

(1)

—

—

—

—

—

—

(1)

—

(11,723)

615

8,071

(1,877)811

79,37375,270$(26) $(24,820) $4,931$80,607$(10,116) $8,676$714,281$4,580,689

Net changes of items other thanshareholders’ equity
Balance at March 31, 2012

—

—

—

$1,406,812$1,130,983$1,269,361$72,536$(8,239) $7,865

See notes to consolidated financial statements.
Note: The number of issued shares outstanding increased by 56,000 shares in the year ended March 31, 2011 due to a general offering and third party allotment, andincreased by 69,900 shares in the year ended March 31, 2012 due to the exercise of stock options.

Annual Report 2012 Nomura Real Estate Holdings, Inc.

Consolidated Statements of cash flows
Nomura Real Estate Holdings, Inc. and its subsidiaries
Years Ended March 31, 2011 and 2012
(Thousands of
U.S. dollars)(Note 1)

(Millions of yen)

Cash Flows from Operating Activities:
Income before income taxes and minority interests
Depreciation and amortization
Impairment loss
Gain on sales of property, plant and equipment
Equity in earnings of affiliates
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in provision for retirement benefits
Decrease in provision for loss on business liquidation
Increase (decrease) in provision for loss on subleasing business
Increase (decrease) in provision for loss on disaster
Interest and dividends income
Interest expenses
Decrease in notes and accounts receivable–trade
Decrease in inventories
Decrease in equity investments
Increase (decrease) in notes and accounts payable–trade
Decrease in deposits received
Other, net
SubtotalInterest and dividends income received
Interest expenses paid
Income taxes paid
Net cash provided by operating activities

2011

2012

2012

¥18,300
12,836852(11,066)
(17)
(54)
404
(45)
65
2,608
(520)
14,903
1,525
26,117
10,001
5,315(25,553)
3,297
58,968265(15,059)(10,226)
33,948¥24,968
13,535
9,723
(218)
(5)
101
(230)
(37)
(419)
(2,195)(1,156)
14,3291,084
36,5296,700(6,730)(14,813)(9,002)
72,164
1,396(14,327)(15,356)
43,877$303,789
164,674
118,294(2,649)(66)
1,231(2,800)(446)(5,100)(26,701)(14,064)
174,341
13,187444,447
81,514(81,880)(180,226)(109,529)
878,016
16,990(174,321)(186,837)
533,848(6,226)
75

(81)
3,846

(986)
46,799Cash Flows from Investing Activities:
Purchase of investment securities
Proceeds from sales and liquidation of investment securities
Payments for investments in subsidiaries resulting in change
in scope of consolidation
Proceeds from purchase of investments in subsidiaries resulting
in change in scope of consolidation
Purchase of property, plant and equipment and intangible assets
Proceeds from sales of property, plant and equipment and intangible assets
Payments for loans receivableCollection of loans receivable
Payments for lease and guarantee deposits
Proceeds from collection of lease and guarantee deposits
Repayments of lease and guarantee deposits received
Proceeds from lease and guarantee deposits received
Other, net
Net cash provided by (used in) investing activities(13,664)

—

—

2,169
(37,571)
18,820—128(1,032)
3,580(5,497)
5,367
120(33,731)—(14,098)
15,070(4)
18(1,995)
3,614(4,102)
2,515
3,026
7,809

—
(171,530)
183,361(47)
213(24,275)
43,972(49,907)30,60236,81595,017

Cash Flows from Financing Activities
Net increase (decrease) in short-term loans payable
Increase (decrease) in commercial papers
Repayments of finance lease obligations
Proceeds from long-term loans payable
Repayments of long-term loans payable
Proceeds from issuance of corporate bonds
Redemption of bonds
Proceeds from issuance of common stock
Proceeds from issuance of common stock to minority shareholders
Purchase of treasury stock
Cash dividends paid
Cash dividends paid to minority shareholders
Net cash used in financing activities

29,00020,000(116)
76,850(130,769)
12,928(12,010)04(0)(3,331)(42)(7,486)(20,500)(20,000)(162)
98,392(116,240)
—
—
0
—
(0)
(4,760)(26)(63,296)(249,422)(243,339)(1,974)
1,197,135(1,414,289)
—
—
1
—
(1)
(57,918)(312)(770,119)Net Decrease in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of the Fiscal Year
Cash and Cash Equivalents at End of the Fiscal Year (Note 2(3))(7,269)89,335¥82,066(11,610)82,066¥70,456(141,254)
998,490$857,236

See notes to consolidated financial statements.

39

40

Nomura Real Estate Holdings, Inc. Annual Report 2012

Notes to Consolidated Financial Statements
Nomura Real Estate Holdings, Inc. and its subsidiaries
March 31, 2011 and 2012

1.

Basis of Presentation of Consolidated Financial Statements
The accompanying consolidated financial statements of Nomura Real Estate Holdings, Inc. (the “Company”) and its consolidated
subsidiaries (collectively, the “Group”) have been prepared in accordance with the provisions set forth in the Financial Instruments and Exchange Act of Japan and its related accounting regulations, and accounting principles generally accepted in Japan(“Japanese GAAP”), which are different in certain respects as to the application and disclosure requirements of International
Financial Reporting Standards.
The accompanying consolidated financial statements have been compiled from the consolidated financial statements of theCompany prepared in accordance with Japanese GAAP, and translated into English for the benefit of readers outside Japan. In
addition, the notes to the consolidated financial statements include information which may not be required under Japanese
GAAP but is presented herein as additional information.
The translations of the Japanese yen amounts into U.S. dollars are included solely for the convenience of readers using theprevailing exchange rate at March 31, 2012 of ¥82.19=U.S.$1.00. These translations should not be construed as representations
that the Japanese yen amounts have been, could have been, or could in the future be, converted into U.S. dollars at this or any
other rate of exchange.

2.

Significant Accounting Policies(1) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries that the Company controls directly or indirectly. Companies over which the Company exercises significant influence in terms of their operating
and financial policies have been included in the accompanying consolidated financial statements on an equity basis.
All significant intercompany balances and transactions have been eliminated in consolidation. All material unrealized profit
included in the assets resulting from transactions among the consolidated companies has been eliminated.

(2) Foreign Currency Translation
All current and non-current accounts denominated in foreign currencies are translated into Japanese yen at the spot exchange
rates in effect at the consolidated balance sheet date. Differences arising from such translation are recognized as gain or loss.
The asset and liability accounts of the overseas subsidiaries and affiliates are translated into Japanese yen at the exchange rates
prevailing at the respective balance sheet dates of the subsidiaries and affiliates and the revenue and expense accounts aretranslated into yen at the average rates of exchange for the year. Differences arising from such translation are presented as“Foreign currency translation adjustments” in Net Assets.

(3) Cash and Cash Equivalents
In preparing the Consolidated Statements of Cash Flows, cash on hand, readily-available deposits and short-term, highly-liquid
investments with a maturity of three months or less at the time of purchase and with an insignificant risk of market value fluctuation are considered to be cash and cash equivalents.
A reconciliation between cash and deposits in the Consolidated Balance Sheets and cash and cash equivalents at March 31,
2012 and 2011 is presented in Note 12.

(4) Recognition of Revenues
Revenues from sales of housing and other real estate are recognized upon delivery and acceptance by customers.

(5) Inventories
Inventories are mainly stated at cost, determined by the specific identification cost method (the amounts of inventories in theaccompanying Consolidated Balance Sheets are computed based on the write-down method reflecting decreased profitability).
Write-downs of inventories as a result of a decrease in profitability for the years ended March 31, 2011 and 2012 were
¥10,066 million and ¥8,382 million ($101,985 thousand), respectively.

Annual Report 2012 Nomura Real Estate Holdings, Inc.

(6) Short-term Investments and Investment Securities
Held-to-maturity debt securities are stated at amortized cost by the straight-line method.
Available-for-sale securities with market value are stated at fair market value based on market quotations at the balance
sheet date.
Unrealized gains and losses are reported, net of the applicable taxes, as a separate component of Net Assets. Cost of securities sold is determined by the moving-average method. Available-for-sale securities without market value are stated at cost by
the moving-average method.

(7) Property and Equipment (except for leased assets)
Depreciation of property and equipment is computed mainly by the straight-line method.
Estimated useful lives used in the computation of depreciation are generally as follows:
Buildings and structures 2 to 65 years(8) Software (except for leased assets)
Costs of software for internal use are amortized using the straight-line method over an estimated useful life of five years.

(9) Leased Assets
Leased assets are depreciated using the straight-line method, assuming the lease period to be the useful life and the residual
value to be zero.
Finance leases, other than those that transfer ownership, that started on or before March 31, 2008, are accounted for as
operating leases.

(10) Amortization of Goodwill
Goodwill is amortized using the straight-line method over a period of 14 to 20 years.

(11) Allowance for Doubtful Accounts
In order to prepare for possible bad debt losses on notes and accounts receivable and loans, allowance for doubtful accounts isprovided at an amount calculated on the basis of a historical bad debt ratio for a certain reference period for normal claims, plus
an estimated uncollectible amount determined on the basis of individual assessments for specific claims with potential losses.

(12) Income Taxes
Current income taxes are stated at the estimated amount payable during each fiscal year for corporation, enterprise and inhabitants’ taxes in the Consolidated Statements of Income.
The tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting andincome tax purposes is recognized as deferred income taxes.

(13) Provision for Retirement Benefits
In order to provide for employees’ retirement benefits, the Company and its subsidiaries account for the liability for retirement
benefits based on the estimated amounts of projected benefit obligation and plan assets at the end of the fiscal year.
Prior service cost is accounted for as an expense calculated using the straight-line method based on a certain number ofyears (i.e., 10 years), which is equal to or less than the average remaining service period of the employees in service during theperiod in which it arises.
Actuarial gain or loss is included in the Consolidated Statements of Income from the year following the fiscal year in which
the gain or loss is recognized on a straight-line basis over a 10-year period, which is shorter than the average remaining service
period of the eligible employees.

41

42

Nomura Real Estate Holdings, Inc. Annual Report 2012(14) Per Share Information
Basic net income per share is computed by dividing the net income available for distribution to shareholders of common stock by
the weighted-average number of shares of common stock outstanding during each fiscal year. Diluted net income per share iscomputed by dividing the net income available for distribution to the shareholders by the weighted-average number of shares ofcommon stock outstanding during each fiscal year assuming full conversion of convertible bonds and full execution of warrants.
Net assets per share for the years ended March 31, 2011 and 2012 were ¥1,599.57 and ¥1,664.78 ($20.26), respectively.
Net income per share for the years ended March 31, 2011 and 2012 was ¥28.74 and ¥92.38 ($1.12), respectively.
Diluted net income per share for the years ended March 31, 2011 and 2012 was ¥28.70 and ¥92.29 ($1.12), respectively.

(15) Land Revaluation
Under the “Law Concerning Revaluation Reserve for Land” promulgated on March 31, 1998, the Company revalued its land
held for business use. The tax amount for the difference between the appraisal value and the carrying amount is accounted for
as “Deferred tax liabilities for land revaluation” in Noncurrent Liabilities and the difference net of such tax amount is recorded as“Revaluation reserve for land” in Net Assets.
Method of revaluation:
The value of land is determined based on a reasonable adjustment to the assessed value of the fixed assets as stipulated in Item
3, Article 2 of the “Enforcement Ordinance Concerning Land Revaluation” (Ordinance No. 119 enacted on March 31, 1998).
Date of revaluation: March 31, 2002
At March 31, 2011 and 2012, market value was not less than book value after revaluation.

(16) Derivative Financial Instruments
In principle, net assets and liabilities arising from derivative financial instruments are measured at fair value, with any changes in
unrealized gain or loss credited or charged to income. Hedging transactions are accounted for using deferral hedge accounting,which requires the unrealized gains or losses to be deferred as assets or liabilities until the losses or gains on the underlying
hedged items are recognized.
As to interest rate swaps that meet certain hedging criteria, the Company applies exceptional treatment where the Company
does not record these instruments at fair value but charges or credits the net cash flows from these instruments to the interest
arising from the hedged borrowings and corporate bonds. For currency swaps and foreign exchange forwards that meet certain
hedging criteria, the Company records cash flows from securities and loans denominated in foreign currencies at an amountdetermined by the swaps and forwards, and no gain or loss is recognized.

(17) Provision for Loss on DisasterIn order to provide for the expected expenditure for recovery costs, etc. related to the Great East Japan Earthquake, the Company recognized a provision for loss on disaster at an estimated amount as of the end of the fiscal year.

(18) Accounting Standard for Accounting Changes and Error Corrections
Effective from the fiscal year under review, the Company adopted the “Accounting Standard for Accounting Changes and Error
Corrections” (ASBJ Statement No. 24 issued on December 4, 2009) and the “Guidance on Accounting Standard for Accounting
Changes and Error Corrections” (ASBJ Guidance No. 24 issued on December 4, 2009).

3.

Financial Instruments(1) Policies on Financial Instruments
It is the policy of the Company and its consolidated subsidiaries to limit its fund management to safe and highly liquid deposits
while raising funds primarily through loans from financial institutions and the issuance of corporate bonds. Derivatives are utilized for hedging against the risks described below not for speculative purposes.

Annual Report 2012 Nomura Real Estate Holdings, Inc.

(2) Details of Financial Instruments and Risks
Short-term investment securities comprise safe and highly liquid negotiable deposits held for the purpose of managing temporary surplus funds.
Equity investments and investment securities primarily consist of stocks, investment units, units in an investment trust, preferred investments and investments in silent partnerships held for the purpose of business promotion, all of which are exposed
to market price fluctuation and issuer credit risk. Currency swaps and forward exchange contracts are used to hedge risks fromexchange rate fluctuations on securities in foreign currencies. Interest rate swaps are used to hedge risks arising from fluctuations in interest rates on long-term borrowings.
Derivative transactions used by the Company are as follows:
Hedging instruments

Hedged items

Interest rate swap contracts

Borrowings

Currency swaps and foreign exchange forward contracts

Securities denominated in foreign currencies

The Company and its consolidated subsidiaries evaluate hedge effectiveness by comparing the cumulative changes in market
fluctuations or in cash flows of the hedged items to the corresponding changes in the hedging derivative instruments.

(3) Policies and Systems for Risk Management
The Company regularly checks the market value of equity investments and investment securities, as well as the financial conditions of their issuers.
The Finance Department conducts execution of derivative transactions and risk management based on the risk management
policies and operational plan determined by the Director in charge of Finance. The Finance Department also reports the status oftransactions and risk information to the Director on a regular basis. The consolidated subsidiaries conduct execution of derivativetransactions and risk management in accordance with internal policies. The Company considers there is no substantial credit risk
associated with these transactions because of the transactions being conducted only with highly creditworthy financial institutions.
Based on the reports from each division of the Company and the consolidated subsidiaries, the Finance Department of theCompany creates and updates cash flow plans in a timely manner, managing liquidity risk through such methods as ensuringthat a specific amount of on-hand liquidity is always available.

(4) Supplemental Information on Fair Values
The fair values of financial instruments are based on their market prices. The fair values of financial instruments with no available
market prices are determined by using prices calculated in a reasonable manner. However, as various factors are incorporated
into these calculations, the resulting values may differ if different assumptions are provided.

43

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Nomura Real Estate Holdings, Inc. Annual Report 2012

(5) Fair Values of Financial Instruments
The book values, fair values and differences of financial instruments as of March 31, 2012 are as follows. Items for which fairvalue is extremely difficult to determine have not been included.
Book value

Fair value

Difference

2012(Millions ofyen)(Thousands of
U.S. dollars)(Millions ofyen)(Thousands of
U.S. dollars)(Millions ofyen)(Thousands of
U.S. dollars)(1) Cash and deposits¥45,458$553,087¥45,458$553,087

¥—

$—

25,000304,173

25,000304,173——(2) Short-term investment securities(3) Investment securities

31,075

378,090

31,093378,306

18

216

101,533

1,235,350

101,551

1,235,566

18

216

1

Total assets(1) Short-term loans payable 2

34,500419,759

34,500419,759——(2) Bonds payable

33,000401,509

34,133415,292

1,133

13,783(3) Long-term loans payable

691,062

8,408,104705,713

8,586,357

14,650178,253

Total liabilities

758,562

9,229,372

774,346

9,421,408

15,783

192,036

Derivative transactions 3

¥11

$134

¥11

$134

¥—

$—

Notes: 1. Includes government bonds, etc. presented as lease and guarantee deposits on the Consolidated Balance Sheets.
2. Current portion of long-term loans payable is included in (3) Long-term loans payable.
3.	For derivative transactions, stated values are the net amounts of receivables and payables arising from the transactions. Figures in parentheses
are liability amounts.

Notes:
1. Investments in non-consolidated subsidiaries and affiliates are as follows:
Investment securities (investments in silent partnership, etc.)¥23,339 million ($283,960 thousand)

2. Method of measuring the fair value of financial instruments
Assets(1) Cash and deposits
As these instruments are settled within a short term and their fair values and book values are nearly identical, their bookvalues are assumed as their fair values.
(2) Short-term investment securities
As these instruments, primarily comprising negotiable deposits, are settled within a short term and their fair values and bookvalues are nearly identical, their book values are assumed as their fair values.
(3) Investment securities
For stocks and investment units, fair values are determined mainly at the price quoted on an exchange. For investment trusts,
fair values are determined at an amount reasonably calculated based on a reasonable estimate of the management.
Please see Note 4. Securities for information on those securities in (2) and (3).
Liabilities(1) Short-term loans payable
As these instruments are settled within a short term and their fair values and book values are nearly identical, their bookvalues are assumed as their fair values.
(2) Bonds payable
Market prices of the bonds issued by the Company.
(3) Long-term loans payable
For long-term loans payable, fair value is determined by discounting the total amount of principal and interest at the assumed
interest rate on new loans of the same type. Long-term loans with floating interest rates are hedged by interest rate swaps
subject to the exceptional treatment, and, therefore, the fair value is determined by discounting the total amount of interest
and principal together with the interest rate swap at the interest rate assumed in a reasonable manner for new loans of thesame type.
Derivatives
Please see Note 13. Derivative Financial Instruments for information on derivative transactions.

Annual Report 2012 Nomura Real Estate Holdings, Inc.

3. Financial instruments for which fair value is extremely difficult to determineBook value
2012

Investment in silent partnership(Millions of yen)(Thousands of
U.S. dollars)¥57,570$700,446

Financial instruments for which there is no fair value and for which the fair value is extremely difficult to determine are notincluded in (3) Investment securities.
4. Redemption schedule for financial assets with maturities
Within 1 year

1–5 years

5–10 years

Over 10 years

2012(Millions ofyen)(Thousands of
U.S. dollars)(Millions ofyen)(Thousands of
U.S. dollars)(Millions ofyen)(Thousands of
U.S. dollars)(Millions ofyen)(Thousands of
U.S. dollars)

Cash and deposits¥45,367$551,971

¥—

$—

¥—

$—

¥—

$—

Short-term investment
securities and investment
securities

—

—

—

—

—

—

—

—

Held-to-maturity debt
securities

—

—

—

—

—

—

—

—

Government andmunicipal bonds, etc.

5

61

297

3,614

498

6,065

—

—

Corporate bonds

—

—

—

—

—

—

—

—

—

Available-for-salesecurities with maturities
Debt securities
Others
Total

—

—

—

—

—

—

—

25,000304,173

—

—

—

—

—

—

¥70,372$856,205¥297$3,614¥498$6,065¥—$—

5. Repayment schedule for bonds payable and long-term loans payable at March 31, 2012
Within 1 year
(Millions ofyen)

Bonds payable(Thousands of
U.S. dollars)¥— $—Long-term loans payable

113,743

Total¥113,743 $1,383,901

1,383,901

1–2 years(Millions ofyen)¥— $—138,459

4.

(Thousands of
U.S. dollars)

Bonds payable¥— $—Long-term loans payable

94,473

Total¥94,473 $1,149,441

1,149,441

1,684,623¥138,459 $1,684,623

4–5 years(Millions ofyen)(Thousands of
U.S. dollars)

2–3 years(Millions ofyen)

3–4 years(Thousands of
U.S. dollars)¥ 10,000 $  121,669
110,409

1,343,341¥120,409 $1,465,010(Millions ofyen)(Thousands of
U.S. dollars)¥  3,000 $   36,501
112,878

1,373,383¥115,878 $1,409,884

Over 5 years(Millions ofyen)(Thousands of
U.S. dollars)¥ 20,000 $  243,339
121,100

1,473,415¥141,100 $1,716,754

Securities
The following tables summarize the acquisition cost, book value and fair value of securities held by the Company as of March
31, 2011 and 2012.

(1) Held-to-maturity Debt Securities with Fair Value(Millions of yen)
2011

Book value

Fair value

Difference

Government and municipal bonds, etc.

¥307

¥313

¥6

Subtotal

307

313

6
(2)

Securities whose fair value exceeds book value:

Securities whose fair value does not exceed book value:
Government and municipal bonds, etc.

431

429

Subtotal

431

429

(2)

Total

¥738

¥742

¥4

45

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Nomura Real Estate Holdings, Inc. Annual Report 2012

(Millions of yen)
2012

(Thousands of U.S. dollars)Book value

Fair value

DifferenceBook value

Fair value

Difference

Government and municipal bonds, etc.

¥729

¥747

¥18

$8,869$ 9,087$218

Subtotal

729

747

18

8,869

9,087

218

Government and municipal bonds, etc.

76

76

(0)

929

927

(2)

Subtotal

76

76

(0)

929

927

(2)

¥805

¥823

¥18

$9,798$10,014$216

Securities whose fair value
exceeds book value:

Securities whose fair value does notexceed book value:

Total(2) Available-for-sale Securities with Fair Value(Millions of yen)
Acquisition
cost

Book value

Difference

Stocks¥   136¥   426

¥290

Other

5,280

5,320

40

Subtotal

5,416

5,746

330

2011

Securities whose book value exceeds acquisition cost:

Securities whose book value does not exceed acquisition cost:
Stocks

507

446

(61)

Other

49,65947,831(1,828)Subtotal

50,16648,277(1,889)Total¥55,582¥54,023¥(1,559)(Millions of yen)2012

Acquisition
cost

Book value(Thousands of U.S. dollars)
Difference

Acquisition
cost

Book value

Difference$4,210

Securities whose book value exceeds
acquisition cost:
Stocks¥   136¥   482¥346$1,655$5,865

Other

3,144

3,244

100

38,251

39,464

1,213

Subtotal

3,280

3,726

446

39,90645,3295,423

Securities whose book value does notexceed acquisition cost:
Stocks

507

376

(131)

6,167

4,576

(1,591)

Other

47,79043,992(3,798)581,463535,244(46,219)

Subtotal

48,29744,368(3,929)587,630

539,820(47,810)

Total¥51,577¥48,094¥(3,483)$627,536$585,149$(42,387)(3) Sales of Available-for-sale Securities
The table below presents sales of available-for-sale securities and corresponding aggregate gains and aggregate losses for theyears ended March 31, 2011 and 2012.
2011(Millions of yen)Type

Sales amount

Aggregate
gains

Aggregate
lossesStocks

¥0

¥0

—

Other

—

—

—

Total

¥0

¥0

—
2012

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

Aggregate
gains

Aggregate
losses¥   38

¥0

¥29

5,000

0

—

¥5,038

¥0

¥29

Type

Sales amount

Stocks
Other
Total

Aggregate
gains

Aggregate
losses$   468$0$350

60,835

1—$61,303$1$350

Sales amountAnnual Report 2012 Nomura Real Estate Holdings, Inc.

5.

Short-term Loans Payable and Long-term Loans Payable
Short-term loans payable as of March 31, 2011 and 2012 mainly consisted of borrowings from banks with weighted-averageinterest rates of 0.5% in 2011 and 0.4% in 2012.
Long-term loans payable and bonds payable as of March 31, 2011 and 2012 are summarized as follows:(Thousands of
U.S. dollars)(Millions of yen)
2011

2012

2012

Unsecured bonds (1.7%), due 2014

¥10,000¥ 10,000$121,669

Unsecured bonds (2.1%), due 2017

10,00010,000121,669

Unsecured bonds (2.0%), due 2020

10,00010,000121,669

Secured bonds (1.8%), due 2016

3,000

3,000

36,501Long-term loans payable*
Secured52,61941,301

502,507

Unsecured

656,291

649,761

7,905,598

Lease obligations**
SubtotalLess amounts due within one year

415

1,385

16,854742,325

725,447

8,826,467(106,027)(113,929)(1,386,166)¥636,298¥611,518$7,440,301*	Long-term loans payable as of March 31, 2011 and 2012 mainly consisted of borrowings from domestic Japanese banks and life insurance companies with weighted-average interest rates of 1.2% in 2011 and 1.1% in 2012.
**	The weighted-average interest rate for lease obligations is not shown because for some consolidated subsidiaries the lease obligations recordedin the Consolidated Balance Sheets are the amounts before deducting the interest equivalents included in the total lease commitments.

The following table shows the maturities of long-term loans payable subsequent to March 31, 2012.
(Millions of yen)(Thousands of
U.S. dollars)

2013¥113,743$1,383,901

2014

138,459

1,684,623

2015

110,409

1,343,341

2016

112,878

1,373,384

2017 and thereafter

215,573

2,622,856¥691,062$8,408,105

Years ending March 31,

The following table shows the maturities of lease obligations subsequent to March 31, 2012.
(Millions of yen)(Thousands of
U.S. dollars)2013¥  186$ 2,265

2014

149

1,815

2015

100

1,216

2016

73

882

2017 and thereafter

877

10,676¥1,385$16,854

Years ending March 31

47

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Nomura Real Estate Holdings, Inc. Annual Report 2012

6.

Pledged Assets and Secured Liabilities
Pledged assets and secured liabilities at March 31, 2011 and 2012 are summarized as follows:(1) Pledged Assets and Secured Liabilities(Thousands of
U.S. dollars)(Millions of yen)
2011

2012

2012

¥ 8,751¥ 8,758$106,562

7,455

7,455

90,703

44

37

452

¥16,250¥16,250$197,717¥   663¥   537$  6,534

Long-term loans payable(Repayment periods of more than one year)

887

350

4,252

Lease and guarantee deposits received

82

74

912

¥ 1,632¥   961$ 11,698

Pledged assets:
Buildings and structures
Land
Other property and equipment
Secured liabilities:
Short-term loans payable(Including the current portion of long-term loans payable)

Total(2) Pledged Assets and Secured Liabilities for Non-recourse Loans(Thousands of
U.S. dollars)(Millions of yen)
2011

2012

2012

Pledged assets:
Real estate for sale

¥ 4,609¥ 4,484$ 54,552

Buildings and structures

16,614

10,346

125,878

Land

70,684

61,377746,774

13

43

526

¥91,920¥76,250$927,730

Construction in progress
Total
Secured liabilities:
Short-term loans payable

6,203

233

2,837

Long-term loans payable

44,86640,181

488,883

Total¥51,069¥40,414$491,720

These liabilities have arisen in relation to SHINJUKU MIRAI DEVELOPMENT, LLC and other companies, and the repayment
obligations of these liabilities are limited to the assets of said companies including the pledged assets stated above. TJ Properties
Special Purpose Company, Ltd. has, pursuant to the provisions of Article 128 of the Act on Securitization of Assets (Act No. 105
of 1998), pledged its assets as general security for specified corporate bonds of ¥3,000 million ($36,501 thousand) and therepayment obligations of said company are limited to these pledged assets.

Annual Report 2012 Nomura Real Estate Holdings, Inc.

7.

Retirement Benefits(1) Outline of Retirement Benefit Plans
The Company does not have a retirement benefit plan. Among its consolidated subsidiaries that have adopted defined benefit
plans, two subsidiaries have a lump-sum pension plan and a defined benefit corporate pension plan and one of them has alsoestablished a retirement benefit trust. Six subsidiaries have adopted only a lump-sum pension plan. Also, one consolidated subsidiary has a defined benefit lump-sum pension plan as well as a defined contribution pension plan. In certain cases, additional
retirement benefit payments have been made.
In order to provide for employees’ retirement benefits, the Company and its subsidiaries account for the liability for retirement benefits based on the estimated amounts of projected benefit obligation and plan assets at the end of the fiscal year. Prior
service cost is accounted for as an expense calculated by using the straight-line method based on a certain number of years (i.e.,
10 years), which is equal to or less than the average remaining service period of the employees in service during the period inwhich it arises. Actuarial gains and losses are accounted mainly for as an expense for an amount allocated to each period byusing the straight-line method based on a certain number of years (i.e., 10 years), which is equal to or less than the averageremaining service period of the employees in service during the fiscal year in which it arises, starting from the following fiscal year.

(2) Details of Retirement Benefit Obligation(Thousands of
U.S. dollars)(Millions of yen)

(1) Projected benefit obligation(2) Plan assets at fair value

2011

2012

¥(21,181)¥(21,822)$(265,504)

2012

7,876

9,214

112,105(153,399)(13,305)(12,608)(4) Unrecognized actuarial gain or loss

1,214

352

4,280

(5) Unrecognized prior service cost

(3,758)(3,363)(40,915)¥(15,849)¥(15,619)$(190,034)(3) Unfunded retirement benefit obligation (1)+(2)(6) Provision for retirement benefits (3)+(4)+(5)Note: Certain consolidated subsidiaries applied a simplified method to calculate their projected benefit obligation.

(3) Details of Retirement Benefit Expenses(Thousands of
U.S. dollars)(Millions of yen)

(1) Service cost

2011

2012

2012

¥1,488¥1,307$15,900(2) Interest cost

465

389

4,735

(3) Less: Expected return on plan assets

(146)

(157)

(1,909)(4) Amortization of actuarial gain or loss

579

635

7,727

(5) Amortization of prior service cost

(4,813)

(298)

(396)

(6) Additional retirement benefit payments

38

71

866

(7) Other

152

160

1,948

¥2,278¥2,009$24,454

Retirement benefit expenses

Notes: 1. Retirement benefit expenses of consolidated subsidiaries applying a simplified method are included in “(1) Service cost.”
2.	“(7) Other” shows the contributions paid to defined contribution pension plans. Certain consolidated subsidiaries use a simplified method
to calculate their projected benefit obligation.

Assumptions used in accounting for the retirement benefit plans are summarized as follows:
2011

2012

Discount rate

2.00%

2.00%

Expected rate of return on plan assets

2.00%

2.00%

49

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Nomura Real Estate Holdings, Inc. Annual Report 2012

8.	Gain on Sales of Property and Equipment
The breakdown of gain on sales of property and equipment for the fiscal year ended March 31, 2012 is as follows:
Gain on sales

Land
Buildings
Total

9.

(Millions of yen)(Thousands of
U.S. dollars)¥1,029$12,523(811)(9,874)¥  218$ 2,649

Impairment Loss
The Group recognized impairment loss on the following groups of assets for the fiscal year ended March 31, 2012:
Primary use

Type

Leased assets

Buildings

OthersLand(16 locations in total)

Tangible fixed assets–others

Location

Fukuoka-shi, Fukuoka Prefecture and other locations

Assets of the Group are grouped into the smallest unit that generates identifiable cash flows that are largely independent ofcash flows from other assets or groups of assets. The headquarters building and certain other assets are considered to be sharedassets. As a result, with respect to sixteen groups of assets that the Group plans to sell or with negative operating profit forseveral consecutive periods, the carrying amount has been reduced to the recoverable amount and the amount of reduction has
been recognized as an impairment loss of ¥9,723 million ($118,294 thousand) in extraordinary loss for the fiscal year underreview. The impairment loss is broken down into an impairment loss of ¥6,640 million ($80,787 thousand) on land and an
impairment loss of ¥3,083 million ($37,507 thousand) on buildings and tangible fixed assets–others. The recoverable amount ofthese groups of assets is measured at the net realizable value or value in use and the net realizable value is, in turn, determinedbased on the expected sales price and the appraisal value provided by real estate appraisers. Value in use of the assets is calculated by discounting future cash flows at a rate of 4.8%.

10. Income Taxes
The statutory tax rate in Japan for the Company and its domestic subsidiaries was 40.7% for the years ended March 31, 2011
and 2012.
The table below presents an itemized breakdown of factors generating differences between the statutory tax rate and theeffective tax rates of the Company and its consolidated subsidiaries for the years ended March 31, 2011 and 2012:
Significant differences between the statutory tax rate and the effective tax rate
Statutory tax rate

2011

2012

40.7%

40.7%

Adjustments:
Permanent differences including entertainment expenses

2.0

1.7

Effect of tax rate change—(32.6)

Valuation allowance

—

(7.6)

Other

1.7

1.1

Effective tax rates

44.4%

3.3%

Annual Report 2012 Nomura Real Estate Holdings, Inc.

The table below presents an itemized breakdown of deferred tax assets and liabilities as of March 31, 2011 and 2012:
Significant components of the Company’s deferred tax assets and liabilities(Thousands of
U.S. dollars)(Millions of yen)
2011

2012

2012

¥14,258¥14,133$171,958

13,8829,450

114,981

Impairment loss

—

3,145

38,268Tax loss carryforwards

—

2,543

30,939Provision for retirement benefits

6,466

5,666

68,935
9,737

Deferred tax assets:
Unrealized profits
Inventory write-downs

Provision for loss on subleasing business

1,040

800

Provision for loss on disaster

1,058

—

—

Provision for bonuses

1,711

1,587

19,308Loss on valuation of equity investments

116,025

10,469

9,536

Accrued enterprise taxes

912

—

—

Excess of depreciation

2,482

2,333

28,380

Revaluation of assets on consolidation

4,394

2,912

35,428925

936

11,389Valuation difference on available-for-sale securities
Other
Gross deferred tax assets

7,306

6,258

76,14564,90359,299721,493

Valuation allowance(8,376)(5,188)(63,124)

Total deferred tax assets

56,527

54,111

658,369

Revaluation of assets on consolidation(65,932)(57,366)(697,962)

Reserve for deferred income taxes(27,698)(24,135)(293,654)

Other(1,737)(1,725)(20,989)

Total deferred tax liabilities(95,368)(83,226)(1,012,605)

Net deferred tax liabilities¥(38,842)¥(29,115)$(354,236)

Deferred tax liabilities:

Corporate income tax rate change and its effects on deferred tax assets and deferred tax liabilities
Effective fiscal years which begin on or after April 1, 2012, the corporate tax rate will be reduced and the special reconstruction
corporate tax will be imposed following the enactment of two new legal statutes promulgated on December 2, 2011; a corporate tax law partial amendment (Act No. 114 of 2011) and a reconstruction funding act in the aftermath of the Great East Japan
Earthquake (Act No. 117 of 2011). In accordance with this reform, the statutory tax rate, which is used to measure deferred tax
assets and deferred tax liabilities, is reduced to 38.0% from 40.7% for temporary differences that are expected to be eliminatedduring the period from the fiscal year beginning on April 1, 2012 to the fiscal year beginning on April 1, 2014, and to 35.6% for
temporary differences that are expected to be eliminated during and after the fiscal year beginning on April 1, 2015.
Due to this tax rate change, net deferred tax liabilities (the amount after deducting deferred tax assets) decreased ¥7,952
million ($96,752 thousand), income taxes-deferred decreased ¥8,146 million ($99,121 thousand), and valuation difference on
available-for-sale securities decreased ¥195 million ($2,376 thousand) as of March 31, 2012, whereas net income after deducting minority interests increased ¥4,571 million ($55,623 thousand) for the fiscal year ended March 31, 2012.

51

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Nomura Real Estate Holdings, Inc. Annual Report 2012

11. Shareholders’ Equity
Companies in Japan were previously subject to the Commercial Code of Japan (the “Code”); however, the Code was supersededby the Companies Act of Japan (the “Act”) which went into effect on May 1, 2006.
Under the Act, all funds obtained through the issuance of common stock must be treated as common stock and, by resolution of the board of directors, an amount equivalent to less than half of those funds may be appropriated to the capital reserve(a component of capital surplus).
The Act provides that an amount equal to 10% of the amount to be distributed as distributions of capital surplus (otherthan the capital reserve) and retained earnings (other than the legal reserve) be transferred to the capital reserve and the legal
reserve, respectively, until the sum of the capital reserve and the legal reserve equals 25% of the capital stock account.
As of March 31, 2012, the Company’s capital reserve amounted to ¥92,956 million ($1,130,983 thousand), and no legal
reserve was recorded.

12. Supplementary Cash Flow information
A reconciliation of cash and deposits in the Consolidated Balance Sheets as of March 31, 2011 and 2012 and cash, and cash
equivalents in the Consolidated Statements of Cash Flows for the years than ended is as follows:(Thousands of
U.S. dollars)(Millions of yen)
2011

2012

Cash and deposits¥52,068¥45,458$553,087

Short-term investment securities

30,00025,000304,173

(2)

(2)

(24)

¥82,066¥70,456$857,236

Time deposits with maturities of more than three months
Cash and cash equivalents

2012

13. Derivative Financial Instruments(1) Derivatives to which hedge accounting is not applied
There are no derivative transactions to which hedge accounting is not applied.

(2) Derivatives to which hedge accounting is applied(a) Currency-related derivatives
Contract amount
Hedge accounting
methodType of derivatives

Deferral hedge
accounting

Currency
swaps

Contract amount due
after one year

Fair value

Major hedged
items(Millions ofyen)(Thousandsof U.S.
dollars)

Securities
denominated inforeigncurrencies¥1,779$21,643

—

—

¥11

$134

¥1,779$21,643

—

—

¥11

$134

Total

(Millions ofyen)(Thousandsof U.S.
dollars)(Millions ofyen)(Thousandsof U.S.
dollars)

Note: The fair value is determined based on the quoted price obtained from the counterparty financial institutions to the derivatives transactions.

(b) Interest rate-related derivatives
Contract amount
Hedge accounting
methodType of derivatives

Exceptional
treatment forinterest rate
swaps
Total

Major hedged
itemsInterest rateLong-term debt
swaps
Receive floatingrate/
Pay fixed rate

Fair value(Thousandsof U.S.
dollars)(Millions ofyen)(Thousandsof U.S.
dollars)¥546,443 $6,648,534¥453,570 $5,518,552(Note)(Note)¥546,443 $6,648,534¥453,570 $5,518,552——(Millions ofyen)(Thousandsof U.S.
dollars)

Contract amount due
after one year
(Millions ofyen)

Note: The interest rate swaps which qualify for hedge accounting and meet specific matching criteria are not remeasured at market value, but thepaid or received under the swap agreements is recognized and included in interest expenses of income of the long-term debt as hedged items.
Accordingly, the fair value of the interest rate swaps is considered to be included in the fair value of the long-term debt.

Annual Report 2012 Nomura Real Estate Holdings, Inc.

14. Leases
Details of significant lease transactions are as follows:
The table below presents the future lease payments and receipts of operating leases subsequent to March 31, 2011 and 2012.
(Thousands of
U.S. dollars)(Millions of yen)

Operating leases

2011

2012

2012

Future lease payments:
Due within 1 year

¥ 6,822¥ 4,842Due after 1 year

19,525

14,599$ 58,917
177,631

Total¥26,347¥19,441$236,548¥14,314¥12,295$149,589

Future lease receipts:
Due within 1 year
Due after 1 year

77,52862,175756,477

Total¥91,842¥74,470$906,066

Note: The note for finance leases has been omitted due to lack of materiality.

15. Real Estate for Rent
Some of the Company’s subsidiaries own rental office buildings and rental facilities (including land) in Tokyo and other regions.
The book values in the Consolidated Balance Sheets, changes during the fiscal year under review, and fair values of realestate, of which some portions are used as rental property, are determined as follows:(1) Fair value of rental and other properties in the fiscal year ended March 31, 2012
Book value
March 31, 2011

Other properties used asrental properties

March 31, 2012

March 31, 2012

(Thousandsof U.S.
dollars)(Millions ofyen)(Thousandsof U.S.
dollars)(Millions ofyen)¥691,968 $8,419,121¥(21,956)$(267,142)¥670,012 $8,151,979(243)(2,957)(Millions ofyen)

Rental properties

Fair value

Increase/Decrease

25,028

304,50924,785(Thousandsof U.S.
dollars)

301,552(Millions ofyen)(Thousandsof U.S.
dollars)¥679,413 $8,266,368
48,500590,096

Notes: 1.	Book values in the Consolidated Balance Sheets are the amounts determined by deducting accumulated depreciation and accumulated
impairment losses from the acquisition cost.
2.	Fair values as of March 31, 2012 are determined by the Company (including adjustments based on certain indexes) based primarily on theirvalues according to real estate appraisal standards. However, if there have been no fluctuations in appraisal values or indexes considered
to appropriately reflect market values since the recent appraisal or acquisition from third parties, the Company uses the appraisal values oramounts derived from the indexes as the fair values at March 31, 2012.
3.	In the above table, Other properties used as rental properties includes portions used by the Company and certain consolidated
subsidiaries.

(2) Income and loss on rental properties in the fiscal year ended March 31, 2012
Others (gains (losses)
on sale of property, etc.)

Operating income

Rental properties
Other properties used as rental properties(Millions of yen)(Thousands of
U.S. dollars)(Millions of yen)(Thousands of
U.S. dollars)¥27,571$335,450¥(8,393)$(102,117)

1,112

13,533——

Notes: 1.	As real estate of which some portions are used as rental property includes portions used by the Company and certain consolidated subsidiaries for providing services as well as management and administration, operating income for this type of real estate is not recorded.
2.	Others include gain on sales of noncurrent assets (¥218 million ($2,649 thousand)) and impairment loss (¥8,826 million ($107,382
thousand)).

53

54

Nomura Real Estate Holdings, Inc. Annual Report 2012

16. Segment Information
The Company and its consolidated subsidiaries mainly operate in five business segments: (1) Residential Development, (2) Building, (3) Investment Management & Development, (4) Property Brokerage & Consignment Sales, and (5) Other.
Results by segment for the fiscal years ended March 31, 2011 and 2012 were as follows:
Results by segment for the fiscal year ended March 31, 2011
(Millions of yen)

Operating revenue andoperating income
Operating revenue:
External customers
Inter-segment
Subtotal
Segment income
Segment assets
Other items
Depreciation and amortization
Amortization of goodwill
Investment in affiliates
accounted for using
equity method
Increase in property,
plant and equipment
and intangible assets

Property
Investment
Brokerage &Management & Consignment
Development
Sales

Residential
Development

Building

Other

Subtotal

Eliminations or
corporate

Total¥285,494
641
286,135
15,803¥313,078¥ 93,027
7,362
100,389
22,644¥624,749¥ 55,488
559
56,047
6,773¥379,753¥27,293
1,662
28,955
1,220¥39,790¥19,681
1,286
20,967652¥28,604¥  480,983
11,510492,493
47,094¥1,385,974¥—(11,510)(11,510)(5,010)¥88,357¥  480,983—
480,983
42,083¥1,474,331¥    32929¥ 10,088236¥    989—¥   179—¥ 1,026—¥   12,610
265

¥225
—

¥   12,836
265

12

754

8,526

90

—

9,381

—

9,381

342

49,104

17,905340

544

68,235(31,274)

36,961

Notes: 1.	The “Other” category, which represents operating segments that are not included in reportable segments, includes fitness club and otherbusinesses.
2. (1) The deduction of ¥5,010 million shown in the eliminations or corporate column for segment income includes a deduction of ¥84 million
for the elimination of inter-segment transactions and a deduction of ¥4,926 million for corporate expenses not allocated to reportablesegments. These corporate expenses mainly consist of general and administrative expenses not attributable to reportable segments.
		 (2) The addition of ¥88,357 million shown in the eliminations or corporate column for segment assets includes a deduction of ¥34,632
million for the elimination of inter-segment transactions and an addition of ¥122,989 million for corporate assets not allocated toreportable segments.
		 (3) The figure shown in the eliminations or corporate column for increase in property, plant and equipment and intangible assets is mainly
attributable to reclassifications between segments.
3. The segment income by segment is reconciled to the operating income stated in the consolidated financial statements.

Results by segment for the fiscal year ended March 31, 2012
(Millions of yen)

Operating revenue andoperating income
Operating revenue:
External customers
Inter-segment
Subtotal
Segment income
Segment assets
Other items
Depreciation and amortization
Amortization of goodwill
Investment in affiliates
accounted for using
equity method
Increase in property,
plant and equipment
and intangible assets

Property
Investment
Brokerage &Management & Consignment
Development
Sales

Residential
Development

Building

Other

Subtotal

Eliminations or
corporate

Total¥243,801
720
244,521
23,823¥346,684¥100,149
5,552
105,701
25,346¥618,055¥ 62,808
1,187
63,9952,539¥318,422¥25,897
8,406
34,303
1,926¥26,459¥18,152929
19,081
722¥27,956¥  450,807
16,794
467,601
54,355¥1,337,575¥—(16,794)(16,794)(4,416)¥65,049¥  450,807—
450,80749,939¥1,402,624¥    332
29¥ 10,472
236¥  1,195—¥   206—¥ 1,108—¥   13,313
265

¥222
—

¥   13,535
265

12

748

2,661

20

—

3,441

—

3,441

463

8,126

4,014

254

2,258

15,11523

15,138Annual Report 2012 Nomura Real Estate Holdings, Inc.

(Thousands of U.S. dollars)

Residential
Development

Property
Investment
Brokerage &Management & Consignment
Development
Sales

Building

Operating revenue andoperating income
Operating revenue:
External customers$2,966,310 $1,218,499 $  764,182
Inter-segment
8,756
67,562
14,438Subtotal
2,975,066 1,286,061
778,620
Segment income
289,847
308,381
30,894
Segment assets$4,218,078 $7,519,831 $3,874,218
Other items
Depreciation and amortization $    4,043 $  127,407 $   14,540
Amortization of goodwill
357
2,866
—
Investment in affiliates
accounted for using
equity method
143
9,106
32,377
Increase in property, plantand equipment andintangible assets
5,631
98,87048,839Other

Eliminations or
corporate

Subtotal

Total$315,088
102,274
417,362
23,431$321,924$220,859 $ 5,484,938 $— $ 5,484,938
11,304204,334 (204,334)—
232,1635,689,272 (204,334)
5,484,938
8,789
661,342(53,733)
607,609$340,141 $16,274,192 $791,447 $17,065,639$  2,508—$ 13,481 $   161,979 $2,695 $   164,674
—
3,223
—
3,223

243

—

41,8703,093

27,466

183,899

41,870287

184,186

Notes: 1.	The “Other” category, which represents operating segments that are not included in reportable segments, includes fitness club andother businesses.
2. (1) The deduction of ¥4,416 million ($53,734 thousand) shown in the eliminations or corporate column for segment income includes a
deduction of ¥1,082 million ($13,169 thousand) for the elimination of inter-segment transactions and a deduction of ¥5,499 million($66,902 thousand) for corporate expenses not allocated to reportable segments. These corporate expenses mainly consist of generaland administrative expenses not attributable to reportable segments.
		 (2) The addition of ¥65,049 million ($791,447 thousand) shown in the eliminations or corporate column for segment assets includes a
deduction of ¥39,919 million ($485,694 thousand) for the elimination of inter-segment transactions and an addition of ¥104,968 million($1,277,141 thousand) for corporate assets not allocated to reportable segments.
3. The segment income by segment is reconciled to the operating income stated in the consolidated financial statements.

Impairment loss on noncurrent assets by reportable segments for the years ended March 31, 2011 and 2012 is summarized
as follows:(Millions of yen)

2011

Impairment loss

Residential
Development¥—

Building¥84

Investment
Management &Development

Property Brokerage& Consignment
Sales

¥768

¥—

Total

¥852

(Millions of yen)

2012

Impairment loss

Residential
Development¥—

Building¥592

Investment
Management &Development¥8,234

Property Brokerage& Consignment
Sales

¥—

Other (Note)

¥897

Total

¥9,723(Thousands of U.S. dollars)

2012

Impairment loss

Residential
Development$—

Building

Investment
Management &Development$7,204$100,178

Note: The amount shown in the “Other” column relates to fitness club business.

Property Brokerage& Consignment
Sales

$—

Other (Note)

Total$10,912$118,29455

56

Nomura Real Estate Holdings, Inc. Annual Report 2012

The following table presents the amortization and balance of goodwill as of and for the years ended March 31, 2011 and2012 by reportable segments:(Millions of yen)

2011

Residential
Development

Investment
Management &Development

Building

Property Brokerage& Consignment
Sales

Total

Amortization¥ 29¥  236¥—¥—¥  265

Balance at March 31,
2011

351

4,182

—

—

4,533

(Millions of yen)

2012

Residential
Development

Investment
Management &Development

Building

Property Brokerage& Consignment
Sales

Total

Amortization¥ 29¥  236¥—¥—¥   265

Balance at March 31,
2012

322

3,946

—

—

4,268

(Thousands of U.S. dollars)
Investment
Management &Development

Property Brokerage& Consignment
Sales

Residential
Development

Building

Amortization$  356$ 2,866$—$—$ 3,223

Balance at March 31,
2012

3,920

48,012——

51,932

2012

Total

17. Contingent Liabilities
Contingent liabilities as of March 31, 2011 and 2012 were as follows:(Thousands of
U.S. dollars)(Millions of yen)
2011

2012

Guarantees for home loans of house purchasers from banks
and other2012¥80,083¥48,896$594,919

Guarantees for loans to business partners in the business ofcommercial buildings for rent

948

881

10,721¥81,031¥49,777$605,640

18. Consolidated Statement of Comprehensive Income
The amount of recycling and amount of income tax effect associated with other comprehensive income for the year ended
March 31, 2012

Valuation difference on available-for-sale securities:
Amount recognized during the year
Amount of recycling
Before income tax effect
Income tax effect
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges:
Amount recognized during the year
Amount of recycling
Before income tax effect
Income tax effect
Deferred gains or losses on hedges
Revaluation reserve for land:
Income tax effect
Share of other comprehensive income of affiliates accounted for using the equity method:Amount recognized during the year
Income tax effect
Share of other comprehensive income of affiliates accounted for using the equity method
Total other comprehensive income(Millions ofyen)(Thousands of
U.S. dollars)¥(2,346)998(1,348)
387
(961)

$(29)
13
(16)
4
(12)

145
(114)
31
19
50

2
(2)
0
1
1

663

8

(149)
(5)
(154)
¥   (402)

(2)
0
(2)
$ (5)

Annual Report 2012 Nomura Real Estate Holdings, Inc.

19. Schedule of Asset Retirement Obligations
A presentation of this schedule is omitted pursuant to the provisions of Article 92-2 of the Consolidated Financial Statements
Regulations as the amount of asset retirement obligations is not more than 1% of the total amount of liabilities and net assets
as of the end of the fiscal year under review.

20. Subsequent Events
Payment of Dividends
At the 8th Annual General Meeting of Shareholders held on June 28, 2012, a resolution for the payment of dividends of ¥12.5($0.15) per share, ¥2,381 million ($28,966 thousand) in total, to shareholders of record as of March 31, 2012 was approved.
Change of Parent Company
Nomura Holdings, Inc. purchased additional shares of NOMURA LAND AND BUILDING Co., Ltd. from JAFCO Co., Ltd., The Asahi
Fire and Marine Insurance Company Limited and Obayashi Corporation on May 24, 2011, and acquired the majority of thevoting rights in NOMURA LAND AND BUILDING Co., Ltd., which is the parent company of Nomura Real Estate Holdings, Inc.
With this stock acquisition, Nomura Holdings, Inc. became the parent company of NOMURA LAND AND BUILDING Co., Ltd. andthus also became the new parent company of Nomura Real Estate Holdings, Inc.

21. Stock Options
In accordance with the Companies Act of Japan, on November 30, 2007, the Company granted certain stock options to certain
directors, executive officers and employees of the Company and its consolidated subsidiaries.
Information regarding the Company’s stock option plans is summarized as follows:

1. Amount and account title of costs related to stock options(Thousands of
U.S. dollars)(Millions of yen)
2011

Selling, general and administrative expenses

¥232

2012

2012

¥195

$2,368

2. Description
Nomura Real Estate Holdings, Inc.
FY2007

2nd issue of stock options

3rd issue of stock options

Recipients

Directors of the Company’s
subsidiaries (43 persons)

Directors of the Company(5 persons)
Directors of the Company’s
subsidiaries (45 persons)
Employees of the Company’s
subsidiaries (116 persons)Type/number of shares
reserved (See note)

Common stock:52,300 shares

Common stock:180,400 shares

Grant dateNovember 30, 2007

November 30, 2007

Vesting conditions

No conditions attached

No conditions attachedService period

No period specified

No period specified

Exercisable period

November 30, 2008 –November 29, 2013

November 30, 2009 –November 29, 2014

57

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Nomura Real Estate Holdings, Inc. Annual Report 2012

Nomura Real Estate Holdings, Inc.
FY2008

2nd issue of stock options

3rd issue of stock options

Recipients

Directors and executive
officers of the Company’s
subsidiaries (51 persons)

Directors of the Company(5 persons)
Directors and executive
officers of the Company’s
subsidiaries (52 persons)
Employees of the Company’s
subsidiaries (122 persons)Type/number of shares
reserved (See note)

Common stock:61,300 shares

Common stock:
191,200 shares

Grant dateAugust 11, 2008

August 11, 2008

Vesting conditions

No conditions attached

No conditions attachedService period

No period specified

No period specified

Exercisable period

August 11, 2009 –August 10, 2014

August 11, 2010 –August 10, 2015

Nomura Real Estate Holdings, Inc.
FY2009

1st issue of stock options

2nd issue of stock options

3rd issue of stock options

Recipients

Directors of the Company(8 persons)

Directors and executive
officers of the Company’s
subsidiaries (51 persons)

Directors of the Company(8 persons)
Directors and executive
officers of the Company’s
subsidiaries (51 persons)
Employees of the Company’s
subsidiaries (129 persons)Type/number of shares
reserved (See note)

Common stock:
21,200 shares

Common stock:
59,500 shares

Common stock:
202,700 shares

Grant dateAugust 11, 2009

August 11, 2009

August 11, 2009

Vesting conditions

No conditions attached

No conditions attached

No conditions attachedService period

No period specified

No period specified

No period specified

Exercisable period

August 11, 2010 –August 10, 2015

August 11, 2010 –August 10, 2015

August 11, 2011 –August 10, 2016

Nomura Real Estate Holdings, Inc.
FY2010

1st issue of stock options

2nd issue of stock options

3rd issue of stock options

Recipients

Directors of the Company(7 persons)

Directors and executive
officers of the Company’s
subsidiaries (57 persons)

Directors of the Company(7 persons)
Directors and executive
officers of the Company’s
subsidiaries (57 persons)
Employees of the Company’s
subsidiaries (147 persons)Type/number of shares
reserved (See note)

Common stock:
20,000 shares

Common stock:
66,100 shares

Common stock:
226,400 shares

Grant dateAugust 23, 2010

August 23, 2010

August 23, 2010

Vesting conditions

No conditions attached

No conditions attached

No conditions attachedService period

No period specified

No period specified

No period specified

Exercisable period

August 23, 2011 –August 22, 2016

August 23, 2011 –August 22, 2016

August 23, 2012 –August 22, 2017

Annual Report 2012 Nomura Real Estate Holdings, Inc.

Nomura Real Estate Holdings, Inc.
FY2011

1st issue of stock options

2nd issue of stock options

3rd issue of stock options

Recipients

Directors of the Company(6 persons)

Directors and executive
officers of the Company’s
subsidiaries (57 persons)

Directors of the Company(6 persons)
Directors and executive
officers of the Company’s
subsidiaries (57 persons)
Employees of the Company’s
subsidiaries (152 persons)Type/number of shares
reserved (See note)

Common stock:
17,900 shares

Common stock:
66,700 shares

Common stock:
227,800 shares

Grant dateAugust 23, 2011

August 23, 2011

August 23, 2011

Vesting conditions

No conditions attached

No conditions attached

No conditions attachedService period

No period specified

No period specified

No period specified

Exercisable period

August 23, 2012 –August 22, 2017

August 23, 2012 –August 22, 2017

August 23, 2013 –August 22, 2018

MEGALOS CO., LTD.
FY2008

2nd issue of stock options

Recipients

Directors of the Company(3 persons)
Employees of the Company(14 persons)Type/number of shares
reserved (See note)

Common stock:
32,000 shares

Grant date

December 1, 2008

Vesting conditions

No conditions attachedService period

No period specified

Exercisable period

December 1, 2010 –November 30, 2015

MEGALOS CO., LTD.
FY20092nd issue of stock options

Recipients

Directors of the Company(3 persons)
Employees of the Company(12 persons)Type/number of shares
reserved (See note)

Common stock:27,000 shares

Grant dateAugust 3, 2009

Vesting conditions

No conditions attachedService period

No period specified

Exercisable period

August 3, 2011 –August 2, 2016

59

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Nomura Real Estate Holdings, Inc. Annual Report 2012

MEGALOS CO., LTD.
FY2010

1st issue of stock options

2nd issue of stock options

Recipients

Directors of the Company(3 persons)

Directors of the Company(3 persons)
Employees of the Company(12 persons)Type/number of shares
reserved (See note)

Common stock:7,900 shares

Common stock:
28,000 shares

Grant dateAugust 23, 2010

August 23, 2010

Vesting conditions

No conditions attached

No conditions attachedService period

No period specified

No period specified

Exercisable period

August 23, 2011 –August 22, 2016

August 23, 2012 –August 22, 2017

FY2011

1st issue of stock options

2nd issue of stock options

Recipients

Directors of the Company(3 persons)

Directors of the Company(3 persons)
Employees of the Company(11 persons)Type/number of shares
reserved (See note)

Common stock:7,900 shares

Common stock:
26,000 shares

Grant dateAugust 22, 2011

August 22, 2011

Vesting conditions

No conditions attached

No conditions attachedService period

No period specified

No period specified

Exercisable period

August 22, 2012 –August 21, 2017

August 22, 2013 –August 21, 2018

3. Scale of offer and status of changes(1) Number of stock options
Nomura Real Estate Holdings, Inc.
FY2007

2nd issue of stock options

3rd issue of stock options

Previous fiscal year end——

Granted——Forfeited——

Vested——End of the year——

11,000173,900

—

—

6,700

—

Non-vested: (shares)

Vested: (shares)
Previous fiscal year end
VestedExercised
Forfeited
End of the year—

13,8004,400

160,100

Annual Report 2012 Nomura Real Estate Holdings, Inc.

Nomura Real Estate Holdings, Inc.
FY2008

2nd issue of stock options

3rd issue of stock options

Previous fiscal year end——

Granted———Non-vested: (shares)

Forfeited—

Vested——End of the year——

17,700191,200——

Vested: (shares)
Previous fiscal year end
VestedExercised

8,500

—

Forfeited—

17,8009,200

173,400

1st issue of stock options

2nd issue of stock options

3rd issue of stock options

Previous fiscal year end——

188,300

Granted———Forfeited———

Vested——188,300

End of the year

—

—

—

3,500

29,60014,400188,300

End of the year
Nomura Real Estate Holdings, Inc.
FY2009Non-vested: (shares)

Vested: (shares)
Previous fiscal year end
Vested——Exercised

3,500

7,100

—

Forfeited

—

—

700

End of the year—

22,500202,000

1st issue of stock options

2nd issue of stock options

3rd issue of stock options

Previous fiscal year end——

223,000

Granted———Forfeited

—

—

700

Vested

—

—

7,000

End of the year——

215,300

20,00066,100

3,400

—

—

7,000

Exercised

17,10027,000—Forfeited

—

—

—

2,900

39,10010,400Nomura Real Estate Holdings, Inc.
FY2010Non-vested: (shares)

Vested: (shares)
Previous fiscal year end
VestedEnd of the year

61

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Nomura Real Estate Holdings, Inc. Annual Report 2012

Nomura Real Estate Holdings, Inc.
FY2011

1st issue of stock options

2nd issue of stock options

3rd issue of stock options

Non-vested: (shares)
Previous fiscal year end
GrantedForfeited
Vested———17,90066,700227,800——

700

17,90066,700End of the year—
227,100

Vested: (shares)
Previous fiscal year end
VestedExercised
Forfeited
End of the year——

17,90066,700————17,90066,700—

2nd issue of stock options

Non-vested: (shares)
Previous fiscal year end—

Granted—Forfeited—

Vested—End of the year—

Vested: (shares)
Previous fiscal year end

20,000

Vested—Exercised—

Forfeited
End of the year—
20,000MEGALOS CO., LTD.
FY20092nd issue of stock options

Non-vested: (shares)
Previous fiscal year end

25,000Granted—Forfeited—

VestedEnd of the year

25,000—

Vested: (shares)
Previous fiscal year end
Vested——MEGALOS CO., LTD.
FY2008——25,000Exercised—

Forfeited

3,000

End of the year

22,000Annual Report 2012 Nomura Real Estate Holdings, Inc.

MEGALOS CO., LTD.
FY2010

1st issue of stock options

2nd issue of stock options

Previous fiscal year end—

26,000Granted

—

—
3,000

Non-vested: (shares)

Forfeited—

Vested——End of the year—

23,0007,900—

Vested——Exercised——

Forfeited

—

—

7,900

—

1st issue of stock options

2nd issue of stock options

Vested: (shares)
Previous fiscal year end

End of the year
MEGALOS CO., LTD.
FY2011
Non-vested: (shares)
Previous fiscal year end
GrantedForfeited
VestedEnd of the year

—

—

7,900

26,000

—

3,000

7,900

—

—

23,000——

Vested: (shares)
Previous fiscal year end
Vested7,900—

Exercised——

Forfeited

—

—

7,900

—

End of the year
(2) Unit price data
Nomura Real Estate Holdings, Inc.
FY2007
Exercise price (¥)

2nd issue of stock options

3rd issue of stock options

1

3,380

Average price upon exercise (¥)

1,265

—

Fair value on grant date (¥)

2,903

714

2nd issue of stock options

3rd issue of stock options

1

2,255

Nomura Real Estate Holdings, Inc.
FY2008Exercise price (¥)
Average price upon exercise (¥)

1,313

—

Fair value on grant date (¥)

2,131

770

1st issue of stock options

2nd issue of stock options

3rd issue of stock options

1

1

1,663

Average price upon exercise (¥)

1,426

1,207

—

Fair value on grant date (¥)

1,533

1,533

641

Nomura Real Estate Holdings, Inc.
FY2009Exercise price (¥)

63

64

Nomura Real Estate Holdings, Inc. Annual Report 2012

Nomura Real Estate Holdings, Inc.
FY2010

1st issue of stock options

2nd issue of stock options

3rd issue of stock options

1

1

1,194

Average price upon exercise (¥)

1,197

1,154

—

Fair value on grant date (¥)

1,119

1,119

437

Exercise price (¥)

Nomura Real Estate Holdings, Inc.
FY2011

1st issue of stock options

2nd issue of stock options

3rd issue of stock options

Exercise price (¥)

1

1

1,457

Average price upon exercise (¥)

—

—

—

1,045

1,045

315

Fair value on grant date (¥)
MEGALOS CO., LTD.
FY2008

2nd issue of stock options

Exercise price (¥)

740

Average price upon exercise (¥)—

Fair value on grant date (¥)

184

MEGALOS CO., LTD.
FY20092nd issue of stock options

Exercise price (¥)

1,010

Average price upon exercise (¥)—

Fair value on grant date (¥)

259

MEGALOS CO., LTD.
FY2010Exercise price (¥)

1st issue of stock options

2nd issue of stock options

1

1,093

Average price upon exercise (¥)——

Fair value on grant date (¥)

983

219

1st issue of stock options

2nd issue of stock options

1

1,105

MEGALOS CO., LTD.
FY2011
Exercise price (¥)
Average price upon exercise (¥)
Fair value on grant date (¥)

—

—

1,033

235

Note: With respect to stock options outstanding at March 31, 2012, the number of stock options is calculated based on the number of shares ofcommon stock which would be required to be issued if all such stock options were to be exercised.

Annual Report 2012 Nomura Real Estate Holdings, Inc.

4. Method for estimating per share fair value of stock options
The per share fair value of the stock options granted during the fiscal year ended March 31, 2012 (FY2011) was estimated as follows:(1) Valuation technique used

Black-Scholes method(2) Main base data and estimation methods
a. Nomura Real Estate Holdings, Inc.
Nomura Real Estate Holdings, Inc.
1st issue of FY2011 stock options
Expected volatility of theshare price (Note 1)

51.8%

Nomura Real Estate Holdings, Inc.
2nd issue of FY2011 stock options
51.8%

Nomura Real Estate Holdings, Inc.
3rd issue of FY2011 stock options
50.1%

Expected remaining life of
the option (Note 2)

3.5 years

3.5 years

3.5 years

Expected dividend (Note 3)¥25 ($0.30) per share¥25 ($0.30) per share¥25 ($0.30) per share

0.29%

0.29%

0.39%

Risk-free interest rate (Note 4)

Notes: 1.	Volatility of share price for the 1st and 2nd issues of 2011 stock options were calculated based on the actual stock price for the past three
years and six months (from February 2008 to August 2011); and for the 3rd issue, four years and six months (from February 2007 to
August 2011).
2.	Calculated with an assumption that the stock option is exercised at the middle of the exercise period as the Company does not have sufficient data for a more precise estimation.
3. Based on the expected dividend for the fiscal year ended March 31, 2012 at the grant date.
4. Based on the yield of Japanese government bonds for the period equivalent to the expected remaining life of the option.

b. MEGALOS CO., LTD. (consolidated subsidiary)
MEGALOS CO., LTD.
1st issue of FY2011 stock options
Expected volatility of theshare price (Note 1)

27.5%

MEGALOS CO., LTD.
2nd issue of FY2011 stock options
29.8%

Expected remaining life of
the option (Note 2)

3.5 years

4.5 years

Expected dividend (Note 3)¥5 ($0.06) per share¥5 ($0.06) per share

0.29%

0.40%

Risk-free interest rate (Note 4)

Notes: 1. Calculated based on the actual stock price for the period from November 9, 2007 to August 22, 2011.
2.	Calculated with an assumption that the stock option is exercised at the middle of the exercise period as the Company does not have sufficient data for a more precise estimation.
3. Based on the expected dividend for the fiscal year ended March 31, 2012.
4. Based on the yield of Japanese government bonds for the period equivalent to the expected remaining life of the option.

65

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Nomura Real Estate Holdings, Inc. Annual Report 2012

Independent Auditors’ Report

67

Annual Report 2012 Nomura Real Estate Holdings, Inc.

Nomura Real Estate Group Profile

Investor Information(As of March 31, 2012)

The Nomura Real Estate Group comprises Nomura Real Estate Development and other Group companies, and operates in the Residential
Development Business, Building Business, Investment Management & Development Business, Property Brokerage & Consignment Sales Business,
and Other Business. Nomura Real Estate Holdings strategically manages the overall Group as its holding company, and works to improve thecorporate value of the overall Group by providing products and services matched to markets in each area in which Group companies operate.

Corporate Data
Corporate Name:

Nomura Real Estate Holdings, Inc.

Date of Establishment:

June 1, 2004

Representative:

Kamezo Nakai(appointment on June 29, 2011)

Number of Employees:

5,399 (on a consolidated basis)

Fiscal Year:

From April 1 to March 31

Head Office:Shinjuku Nomura Building,
1-26-2 Nishi-Shinjuku, Shinjuku-ku,
Tokyo 163-0566, Japan

General Meetingof Shareholders:

June

Residential Development BusinessThis business segment engages in the development and sales of condominiums, detached housing, residential lots and other properties, as well as housing management and maintenance under contract frommanagement associations after the sale of condominiums.
The Residential Development Business supplies condominium and detached housing primarily in the Tokyo
metropolitan area under the core PROUD brand. By leveraging its integration in development and sales,
the Group seeks to further improve its site selection, product planning and sales capabilities, as well as its
management quality. Through these strategic measures, the Group seeks to enhance brand value.

Stock Information

14.38%

13.46%

Common Stock:
Number of Authorized Shares:
Number of Shares Issued:
Market Listing:Minimum Trading Unit:
Number of Shareholders:¥115,625,903,200
450,000,000
190,456,900
First Section of Tokyo Stock Exchange
100 shares
47,9300.51%
Composition by
Number of
Shareholdings(%)

Ten Largest Shareholders■ Nomura Living Support Co., Ltd.

Name of Shareholder

No. of shares

Shareholding (%)

Nomura Land and Building Co., Ltd.

96,817,500

50.83

Japan Trustee Services Bank, Ltd. (Trust account)

8,382,800

4.40

The Master Trust Bank of Japan, Ltd. (Trust account)

5,504,800

2.89

Japan Trustee Services Bank, Ltd. (Trust account 9)3,347,500

1.75■ Government(0.00%)■■■■■

Nomura Real Estate Holdings Employee Shareholding Association

3,284,382

1.72■ Financial Institutions(14.38%)

Nomura Real Estate Development Co., Ltd.

The Bank of NY Treaty JASDEC Account2,654,300

1.39■ Financial Instruments Firms(0.51%)The Chase Manhattan Bank NA London SL Omnibus Account

1,997,867

1.04■ Other Japanese Firms(51.85%)■ Nomura Real Estate Reform Co., Ltd.

■ PRIME X. Co., Ltd.

19.79%

51.85%SSBT OD05 Omnibus Account–Treaty Clients

1,753,500

0.92■ Other Foreign Investors(19.79%)State Street Bank and Trust Company

1,597,264

0.83■ Individuals and Others(13.46%)

BBH LUX Fidelity Funds Japan Advantage

1,427,600

0.74■ Nomura Real Estate Asset Management Co., Ltd.

Stock Price and Trading Volume on the Tokyo Stock Exchange

Stock Price
(Yen)
2,000

Investment Management & Development BusinessThis business segment engages in the development and sales of profit-generating property for the realestate investment market, asset management under consignment from investment corporations, and asset
management for real estate and real estate securitized instruments private funds.

1,500

1,000

In October 2011, three real estate investment management companies in the Nomura Real Estate Groupmerged and became one of the largest investment management companies in Japan with more than ¥1trillion in assets under management.

500
Trading Volume(Thousandsof Shares)

Contents

050,00040,00002

Consolidated Financial Highlights

18

Overview of the Nomura Real Estate Group04

Segment Information

21

Group Company Profile:05

Message from the President

09

Feature22

Corporate Social Responsibility

14

Segments at a Glance

24

Corporate Governance

16

Major Completed or Acquired Properties in Fiscal 201128

Board of Directors and Statutory Auditors

NREG TOSHIBA BUILDING Co., Ltd.

30,00020,00010,000
0
4
5
2009

6

7

8

9

10 11 12

1
2
2010

3

4

5

6

7

8

9

10 11 12

1
2
2011

3

4

5

6

7

8

9

10 11 12

1
2
2012

3

Nomura Real Estate Holdings Annual Report 2012 For the Year Ended March 31, 2012

Nomura Real Estate Holdings, Inc.
Shinjuku Nomura Building, 1-26-2
Nishi-Shinjuku, Shinjuku-ku, Tokyo 163-0566, Japan

URL: http://www.nomura-re-hd.co.jp/english

Bearing Fruit…

Annual Report 2012
For the Year Ended March 31, 2012
Printed in Japan