Evolving…Faster

Annual Report 2009 Year ended March 31, 2009

Contents
01

Hard Times will Quicken Our Evolution

02

Consolidated Financial Highlights

03

Segment Information

04

To Our Shareholders

06[Feature] Evolving…Faster10

Interview with the President

14

Business Portfolio

16

Review of Operations
16 Residential Development Business
18 Building Business20 Investment Management & Development Business22 Property Brokerage & Consignment Sales Business23 Other Business

24

Group Companies

26

Group Company Profile Vol.2

28

Corporate Governance

33

Board of Directors and Statutory Auditors

34

Corporate Social Responsibility (CSR)

35

Financial Section

67

History of Nomura Real Estate Group68

Investor Information

69

Corporate Data

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 the Company and are subject to a number of risks
and uncertainties, which include economic trends, intensification of competition in
the real estate industry, the legal system and taxation system, and other regulations.
As such, actual results may differ from those projected.

Hard Times will Quicken Our Evolution
In fiscal 2008, the effects of the credit crunch that was triggered by the international financial
uncertainty spread to the real economy through falling share prices, stagnant consumption,
decreased production output, and a deteriorating employment picture, causing major changes in
the global economic environment. The Nomura Real Estate Group has a track record of morethan 50 years in the real estate business. When we have been faced with major changes in themarket environment, time and time again we have overcome hard times and we have continued
to grow by evolving. When the business environment is changing dramatically, the Nomura Real
Estate Group demonstrates its capability to adapt to changes in the market and grows evenmore quickly.

Nomura Real Estate Holdings, Inc. Annual Report 200901

Consolidated Financial Highlights
Nomura Real Estate Holdings, Inc. and its subsidiaries
Years ended March 31(Millions of yen)(Thousands of
U.S. dollars)(Note 1)

2007

2008

2009

2009

Operating Results:
Operating revenue
Gross profit
Operating income
Net income
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities¥367,237
108,668
54,374
26,297(89,850)(26,787)
100,863¥411,493
130,391
69,82235,255
7,639(13,348)
8,791¥  448,656
100,764
34,013
13,770(108,031)(141,789)
295,508$ 4,567,401
1,025,795
346,256
140,186(1,099,773)(1,443,439)
3,008,323

Per Share Data (yen / dollars):
Net income
Cash dividends¥ 200.47
20.00¥ 236.09
30.00¥    92.21
40.00$      0.94
0.41

Balance Sheet Data (as of March 31):
Total assets
Total net assets
Interest-bearing debt

¥836,303
214,466
394,885¥891,700
235,551
408,016¥1,385,532
281,376
778,074$14,104,977
2,864,458
7,920,932

6.6%
19.2%
14.8%
10.0%
25.5%

7.9%
15.8%
17.0%
12.7%
26.1%

2.5%
5.9%
7.6%
43.4%
17.0%

Ratios:Return on assets (Note 2)
Return on equity
Operating margin
Dividend payout ratio
Equity ratio

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, 2009, which was ¥98.23 = 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 / %)7.9
17.0
400,000

40,00080,000500,000

6.6
19.2

14.8
60,00030,00040,00020,00015.8

300,000

200,000

7.6

0

2.5

20,000100,000

2007

2008

0

2009

■ Operating Revenue
Operating Margin■

02 Nomura Real Estate Holdings, Inc. Annual Report 20092007

■ Operating Income
ROA
■

2008

10,0002009

0■ Net Income
ROE
■

5.9

2007

2008

2009

Segment Information
Nomura Real Estate Holdings, Inc. and its subsidiaries
Years ended March 31(Millions of yen)(Thousands of
U.S. dollars)(Note 1)

2007

2008

2009

2009

Operating Revenue
Residential Development Business
Building Business
Investment Management & Development Business (Note 2)
Property Brokerage & Consignment Sales Business (Note 2)
Other BusinessEliminations or corporate¥205,950
51,342
69,37032,985
15,162(7,572)¥238,802
56,88980,55530,183
16,837(11,773)¥231,629
90,40078,07839,764
19,836(11,051)$2,358,025
920,290794,847
404,807
201,937(112,505)

Operating Income
Residential Development Business
Building Business
Investment Management & Development Business (Note 2)
Property Brokerage & Consignment Sales Business (Note 2)
Other BusinessEliminations or corporate¥ 23,627
8,372
20,0406,962
1,212(5,839)¥ 26,067
9,414
34,7786,392
1,514(8,343)¥ 11,787
15,769
10,1171,554
1,101(6,315)$  119,989
160,535
102,993
15,822
11,204(64,287)

Return on Assets of Each Segment (Note 3)
Residential Development Business
Building Business
Investment Management & Development Business (Note 2)
Property Brokerage & Consignment Sales Business (Note 2)
Other Business

9.2%
4.6%
6.7%
13.9%
5.0%

10.0%
4.6%
10.8%
8.8%
5.6%

3.7%
2.9%
2.8%
2.7%
3.9%

Inventories
Residential Development Business
Building Business
Investment Management & Development Business (Note 2)
Property Brokerage & Consignment Sales Business (Note 2)
Other BusinessEliminations or corporate¥229,863
10,165155,035
26,5066,335(130)¥222,761
11,342
171,819
42,5086,318(128)¥287,410
3,215
138,364
46,3716,132(3)$2,925,886
32,731
1,408,577
472,063
62,430(35)

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, 2009, of ¥98.23 = US$1.00.
2. From the fiscal year ended March 31, 2008, some departments that had been classified in the “Property Brokerage & Consignment Sales Business” segment have been transferred to the “Investment Management & Development Business” segment. Amounts up to the fiscal year ended March 31, 2007 have been reclassified to reflect the current segmentation.
3. 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

80,000400,000

500,000

400,000

60,000300,000

300,000
40,000200,000

200,000
20,000100,000

0

2007

2008

2009

■ Residential Development Business■ Building Business■ Investment Management & Development Business (Note 2)■ Property Brokerage & Consignment Sales Business (Note 2)■ Other Business

0

100,000

2007

2008

2009

0

2007

2008

2009

* “Eliminations or corporate” amounts are not reflected in graphs.

Nomura Real Estate Holdings, Inc. Annual Report 200903

To Our Shareholders

Driving Evolution Using Our Strengths

Changes in the Business Environment

drastic drop in property prices and the fact that we posted a ¥26,994

Fiscal 2008 was an extremely tough year. The effects of the credit crunch

million write-down on inventory property within the operating cost.

that was triggered by the international financial uncertainty spread to the

As a result, consolidated operating revenue was 9.0% higher thanreal economy through falling share prices, decreased production output,

the previous year at ¥448,656 million, but consolidated operating income

and a deteriorating employment picture, aggravating the economic

decreased 51.3% from the previous year to ¥34,013 million, and consoli-

downturn. In the real estate industry, the number of new built condomini-

dated net income fell 60.9% to ¥13,770 million.

ums in the Tokyo metropolitan area, which had hovered at roughly 80,000

more, the number of completed condominium inventory units remained

Formulation of Medium-term Business Plan
(2009–2011): Growth & Development

at a high level because buyers were discouraged by stagnant incomes

Under our previous Medium-Term Business Plan (2007-2009), theand uncertainty about the future. The real estate investment market has

Nomura Real Estate Group followed two basic policies of “establishing a

become increasingly chaotic. J-REIT investment unit prices have fallen

solid earnings base and maintaining profit growth” and “pursuing highsharply as investors have lost their appetite and as financial institutions

investment efficiency and enhancing the soundness of our financial posi-

have adopted stricter lending standards.

tion” in conducting our business activities. During the two years up tounits from 1999 until 2006, declined to 43,733 units in 2008. Further-

Furthermore, over the long term, the market is expected to change

fiscal 2008, we steadily increased business earnings. Furthermore, by

due to structural problems that are unique to Japan, such as its aging

taking NREG TOSHIBA BUILDING Co., Ltd. under our wing as a consoli-

and shrinking population.

dated subsidiary we were also able to sharply increase rental income,which is a source of stable income, while also building an alliance with

Overview of Fiscal 2008 Results

Toshiba Group in the real estate business.

During this correction phase in the property market, the Nomura Real

However, in addition to making this new business foundation, theEstate Group endeavored to strengthen operating companies’ capabili-

business environment also changed more quickly than expected. There-ties to adapt to changes in the market, but profitability was hurt by thefore, although we were still in the midst of executing an existing

04 Nomura Real Estate Holdings, Inc. Annual Report 2009

medium-term business plan, we decided to draw up a new three-year

To Our Shareholders

plan that would start in fiscal 2009. The title of this new plan is Medium-The business environment is expected to remain challenging in the future,

Term Business Plan (2009–2011): Growth & Development.

but the Nomura Real Estate Group will take full advantage of our devel-

This new plan has two basic policies: “restructuring revenues bal-

opment function to tackle business issues head-on by growing profits inance and reviving profit growth” and “enhancing asset efficiency andevery business segment, especially in the Residential Development Busi-financial soundness.” It establishes the quantitative goals of achieving

ness and the Investment Management & Development Business as ouroperating income of ¥60 billion and D/E ratio* of within 2.5 times by thecore businesses. While contributing to society, we will also strive to “befinal year of the plan. To achieve these goals, the company will continue

what a company should be” by continuing to generate stable profits.

to grow its already powerful residential development business and investment management business, further strengthen the expanded leasing

In these endeavors, we look forward to your continued support andencouragement.

business, further evolve our development function, and aggressively
expand the Corporate Real Estate (CRE) business as a business strategy.
In June 2009, the company increased capital by a public offering. The
objectives of this public offering are to restore our financial soundness,

July 2009
Hirohisa Suzuki,
President

which was temporarily negatively affected by acquiring NREG TOSHIBABUILDING as a consolidated subsidiary, and also to bolster the land acquisition for the Residential Development Business, which will be a source of
earnings in the future. We aim to continue to grow the company by increasing our capital and following the new medium-term business plan.
* D/E ratio: (bonds + loans) ÷ (net assets – (subscription rights to shares + minority interests))

Nomura Real Estate Holdings, Inc. Annual Report 200905

[Feature] Evolving…Faster

From 1999 onwards, the number of condominiums sold in the Tokyo metropolitan area had remained steady at around 80,000
units. However, in 2007 the number of units slipped to 61,021, and in 2008 the number fell by 17,288 units (28.3%) to 43,733
units. Furthermore, the number of properties acquired by real estate funds declined as financial institutions adopted stricter lending standards. This slackened growth in the assets under management of private funds and J-REITs. As a result, the size of themarket as of December 31, 2008 was roughly unchanged from six months earlier. In other words, the environment surrounding
the Nomura Real Estate Group’s Residential Development Business and Investment Management & Development Business has
been substantially altered. In this environment, Nomura Real Estate Holdings took NREG TOSHIBA BUILDING under our wing
as a consolidated subsidiary in December 2008, strengthening our business portfolio. The foundation of our business has
evolved thanks to the addition of NREG TOSHIBA BUILDING to the group, and we aim to leverage this for further growth.

Evolving…Faster
Acquiring NREG TOSHIBA BUILDING as a consolidated subsidiary has substantially altered
our business strategy, balance sheet, and profit structure. By strengthening our businessportfolio in these challenging times, we are evolving even faster.

Market Data of Real Estate Industry
Number of Condominium Units Supplied andCondominiums Contracted Rates in Tokyo Metropolitan Area

Market Size of Private Funds and J-REITs(Trillions of yen)

(Units/%)

9.8

69.7%

■

Condominiums contracted rates in Tokyo metropolitan area

Source: Real Estate Economic Institute Co., Ltd.

06 Nomura Real Estate Holdings, Inc. Annual Report 2009

Dec. 2006

June 2007

Dec. 2007■ Assets under management: Private funds■ Assets under management: J-REITs
Source: STB Research Institute Co., Ltd.

June 2008

7.4■ Number of condominium units supplied

2008(Calendar year)

6.8

2007

6.1

2006

5.4

6.1

2005

6.7

62.7%

7.4

43,73361,021

78.3%

79.0%

2004

13.2

13.5

74,46384,14885,42982.5%

Dec. 2008

Acquiring NREG TOSHIBA BUILDING as a Consolidated Subsidiary(Purpose)• Preserving stable earnings source by increasing profitable rental properties• Full-scale promotion of “Main Advisor on CRE” business which is based on the CRE business for Toshiba Group as a representative case

Nomura Real Estate Group
Expanding business opportunities(Joint ventures, consignment business,
properties securitization business, etc.)

Toshiba Group

FinancialsupportKnow-howon real estatebusiness

Properties
information

Enhancing corporate value
by effective use of group’s real estate

NREG TOSHIBA BUILDING
Reinforcing the CRE business for
Toshiba Group(Effective management, development andvalue-adding of real estate owned and usedby Toshiba Group)

Business Strategy Evolution
Capital markets are demanding that companies use the real estate that they own effectively, but the reality is that there are few
companies that are actually efficiently using their real estate. Nomura Real Estate Group will take advantage of the alliance with
Toshiba Group through our acquisition of NREG TOSHIBA BUILDING as a consolidated subsidiary to promote our “Main Advisor
on CRE” business, through which it provides support services for the utilization of corporate-owned real estate (CRE). “The Main
Advisor on CRE” business is comprehensively contracted for every sort of real estate activity by corporations that are pursuinga strategy to make better use of their corporate-owned real estate. The Nomura Real Estate Group is supplying human resources,financial support, and know-how on CRE business to NREG TOSHIBA BUILDING so that it can support the CRE strategy ofToshiba Group. This business for Toshiba Group is a representative case of our “Main Advisor on CRE” business, and we believethat it will lead to further expansion of our CRE business.

Nomura Real Estate Holdings, Inc. Annual Report 200907

Balance Sheet Changes

Profitable rental properties* owned
by NREG TOSHIBA BUILDING wereadded to noncurrent assets.
*A pproximately 150 properties, including
the Toshiba Building, Umeda Sky Building
and Lazona Kawasaki Plaza.

Toshiba Building

Umeda Sky Building

Total assets

Total liabilities¥891,700 million¥656,149 million

Total net assets¥235,551 million
Fiscal 2007 year-end

Total assets

Total liabilities¥1,385,532 million¥1,104,156 million

Total net assets¥281,376 million

Capital increase by public
offering in June 2009
The capital increase enacted bypublic offering increased shareholders’ equity by about ¥65.5
billion. Assuming the scale of total
assets and interest-bearing debt
is unchanged at March 31, 2009,
the equity ratio improved 4.8 points
to 21.8 %, and the debt-to-equity
ratio decreased from 3.3 times to
2.6 times.
*A t March 31, 2009
Equity¥235,940 million
Interest-bearing debt ¥778,074 million

Fiscal 2008 year-end

Balance Sheet Evolution
NREG TOSHIBA BUILDING became a consolidated subsidiary in December 2008, and this drastically changed the Nomura Real
Estate Group’s consolidated balance sheet as of the end of fiscal 2008. The roughly 150 properties owned by NREG TOSHIBABUILDING became consolidated, and this increased property, plant and equipment by ¥380,489 million from a year before andalso increased rental income, which is a source of stable income. At the same time, the acquisition of NREG TOSHIBA BUILDING
increased interest-bearing debt by ¥370,058 million from a year earlier to ¥778,074 million, and shareholders’ equity by ¥3,149
million to ¥235,940 million, causing the D/E ratio to temporarily worsen from 1.8 times a year earlier to 3.3 times. Going forward,
we will restore financial soundness by shrinking interest-bearing debt and accumulating period revenues. In June 2009, we
conducted a capital increase by public offering with the aim of shoring up our financial foundation.

08 Nomura Real Estate Holdings, Inc. Annual Report 2009

By acquiring NREG TOSHIBA BUILDING as a consolidated subsidiary the Nomura Real Estate Group has been able to strengthen
the Building Business. NREG TOSHIBA BUILDING owns approximately 150 properties in mainly metropolitan areas, including
the Toshiba Building (which houses Toshiba’s headquarters), Lazona Kawasaki Plaza, and Umeda Sky Building. These properties
generate steady rental income. NREG TOSHIBA BUILDING will contribute full-year to consolidated earnings results in the year
ending March 2010, and both the sales and operating income from our Building Business are expected to be sharply higher
when compared* with results for the year ended March 2008. Furthermore, EBITDA** is also expected to grow substantially, so
it will also help the Group generate stable cash flow. The Group will further reinforce the Residential Development Business which
has been a long-standing area of strength for the Group, and the Investment Management & Development Business, while also
expanding the Building Business. The Group aims to build an earnings structure that is resilient to market changes, leading tocontinued profit growth.
*    In the year ended March 2009, NREG TOSHIBA BUILDING’s sales and operating income were included in consolidated results for only the fourth quarter. Additionally,irregular property sales affected the Building Business. Therefore the year ended March 2008 has been used as the base of comparison.
** EBITDA = Earnings before interest, taxes, depreciation, and amortization.

Profit Structure Evolution
Operating Income in the Building Business(Millions of yen)

19,500Substantial increase of operating
income in the Building Business
Rental and other income increased dueto the acquisition of NREG TOSHIBABUILDING. As a result, fiscal 2009 operating income is projected to increase
2.07 times compared with fiscal 2007.

15,769

9,414
2007

2008

2009 FY(Projected)

Nomura Real Estate Holdings, Inc. Annual Report 200909

Interview with the President

The real estate industry is in the midst of major changes. Annual Report 2009 explains how Nomura Real Estate Holdings
will overcome the changes that it is confronting and the scenario for growth in the next stage of the company’s
development. It also presents an overview of our Medium-Term Business Plan (2009–2011): Growth & Development,
while looking at the methods that will be used to realize our vision and achieve our goals.

Accelerating Evolution, Driving Growth
Question 1
In Annual Report 2008, you explained that one of Nomura Real Estate Holdings’ features is that unlike other companies
in the industry, which generate a substantial portion of their operating income from owning and leasing buildings,
Nomura Real Estate Holdings has a business portfolio consisting of the Residential Development Business and theInvestment Management & Development Business as two core businesses. How should we look at the acquisition of
NREG TOSHIBA BUILDING as a consolidated subsidiary in fiscal 2008?

By taking in NREG TOSHIBA BUILDING as a consolidated subsidiary, we have been able to increase the amount of profitablerental properties and bolster the earnings-generating capabilities of the Building Business.
Nevertheless, our strength lies in our development function, so we will continue to grow in the future by seeking to build abalanced business portfolio that takes full advantage of these capabilities in our core Residential Development Business andInvestment Management & Development Business, alongside the Building Business that has been strengthened by having
NREG TOSHIBA BUILDING become part of the Nomura Real Estate Group.
Furthermore, the alliance with Toshiba Group in real estate business will be used as the representative case of our “Main
Advisor on CRE” business. The Nomura Real Estate Group will make an all-out effort in this area as a new approach, to closely
seek the real problems that companies are having with real estate and the ways to resolve these problems. Going forward, wewould like to expand this as a good model for using our expertise to help Japan’s leading companies.

10 Nomura Real Estate Holdings, Inc. Annual Report 2009

Question 2
You have drawn up the new Medium-Term Business Plan (2009–2011): Growth & Development. Can you give us someof the background behind the formulation of this new plan?

Under the previous Medium-Term Business Plan (2007–2009), we were able to steadily increase business earnings while also
expanding rental income and building a pipeline with Toshiba Group by taking NREG TOSHIBA BUILDING under our wing as aconsolidated subsidiary. In doing so, we were able to build a foundation for our next leap ahead. Not only did we need to draw
up a business strategy based on this new business foundation, but the business environment had also undergone unforeseenchanges since the previous medium-term business plan was drawn up two years earlier. Therefore, we decided to formulate a
new medium-term business plan.

Nomura Real Estate Holdings, Inc. Annual Report 200911

Question 3
Can you tell us about the goals of the Medium-Term Business Plan (2009–2011): Growth & Development?

The Medium-Term Business Plan (2009–2011): Growth & Development spells out two basic policies: “restructuring revenues
balance and reviving profit growth” and “enhancing asset efficiency and financial soundness.”
This means that we will strive for continuous profit growth by further strengthening the residential development business andthe investment management business, along with the leasing business which was expanded, we will improve business speed
and boost asset efficiency by reallocating business resources, and we will seek to accumulate period revenues and enhanceshareholders’ equity.
In terms of quantitative targets, our aim is to increase operating income by roughly 76% over three years to ¥60 billion andto improve our D/E ratio to 2.5 times or better.

Quantitative Targets
Operating Income

D/E Ratio*(Millions of yen)(Times)60,0004

60,0003.3
340,0002.5

34,0132

20,0001

020082011 FY(Target)02008

Fiscal 2008 results comparison.........Operating income up approx. 76%
Fiscal 2008 results.............................Operating income ¥34.0 billion* D/E ratio = (bonds + loans) ÷ (net assets – (subscription rights to shares + minority interests))

12 Nomura Real Estate Holdings, Inc. Annual Report 20092011 End of FY(Target)Question 4
What sorts of business strategies will you use to achieve these objectives?

We will pursue five strategies that are based on the advantages of the Nomura Real Estate Group.
First, we will strengthen the residential development business’ growth model. Now that the worsened economic climate
has helped to weed out condominium developers, there are new opportunities to acquire prime properties. Therefore we will beef
up our efforts to buy new lands and thereby maintain business turnover. We also aim to take advantage of our “Development, Sales
and Management” business model in which we handle everything from development to marketing and management to win evenfurther trust for our “PROUD” brand.
Second, we aim for stable growth in the investment management business. We aim to boost assets under managementto ¥1,500 billion as a foundation for steady earnings. We also aim to achieve steady growth in the investment management business by creating funds that address the needs of investors such as pension funds.
Third, we aim to further strengthen the expanded leasing business. We aim to improve cash flow by polishing up our
properties and strengthening our leasing capabilities. We will also steadily increase rental income by promoting developments
and strategically holding prime assets in important areas.
Fourth, we will further evolve our development function. By taking advantage of the collective strength of the Nomura Real
Estate Group, we will proactively promote large-scale complex development and condo rebuilding projects. The Nomura Real
Estate Group is also seriously focusing on building a pipeline between the development business and the investment managementbusiness. Our REITs acquire value-added properties by Nomura Real Estate Development, and our REITs polish up the properties
using the operating skill. This will contribute to the Group’s growth.
Fifth, we will proactively expand the CRE Business. As I have already discussed, the alliance with Toshiba Group in realestate business will be used as the prime representative case of the “Main Advisor on CRE” business, and we will proactively
develop the CRE business using this initiative as a model.

Question 5
You recently decided to raise fresh capital. Can you tell us your objectives and how you intend to use the funds?

There are two objectives behind this offering.
By taking NREG TOSHIBA BUILDING under our wing as a consolidated subsidiary in December 2008, we have been able
to expand our rental income and build a pipeline to Toshiba Group, laying a new business foundation for the company. At thesame time, financial soundness was temporarily negatively affected by this upfront investment, so one objective was to strengthen
our financial foundation by using some of the funds for our growth from the offering.
Another objective is to proactively acquire new lands for the Residential Development Business, which will be a source of
future earnings. Even in this tough market environment, we have an extremely low level of completed inventory. Therefore, we
can begin developing properties to use as fresh supply. We think that the current situation in which there are few competitorspresents a major opportunity to acquire prime lands. In the Residential Development Business, it takes about two to three years
from the acquisition of lands through construction and sale, so by acquiring prime lands now we will be able to ensure earnings
two or three years from now.
Raising this capital has increased our shareholders’ equity by approximately ¥65.5 billion. Going forward, we will actively
develop our business based on this strengthened financial foundation.

Nomura Real Estate Holdings, Inc. Annual Report 200913

Business Portfolio

Main businessResidential Development
Business

Composition ofrevenues*■ Sales of housing■ Management of condominiums

50.4%

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

Investment Management &Development Business

19.7%■ Property development■ Investment management

17.0%

Property Brokerage &Consignment Sales
Business■ Property brokerage■ Consignment sales■ Real property sales
8.6%

Other Business■ Fitness club operation■ Architectural planning andmanagement■ Planning of commercial facilities
4.3%*Revenues in each segment havebeen calculated including intersegment sales and transfers.

14 Nomura Real Estate Holdings, Inc. Annual Report 2009Composition ofoperating income

Major subsidiaries

Fiscal 2008 topics■ Nomura Real Estate Development Co., Ltd.

The Residential Development Business provides a diverse lineup of products under the■ Nomura Living Support Co., Ltd.

PROUD brand, including large-scale condominiums, skyscraper condominiums, large-■ PRIME X Co., Ltd.
■ ZEPHYR Community Co., Ltd.
29.2%

scale detached housing and urban detached housing. PROUD Yokohama Yamate, aproperty that we developed, won a Good Design Award in fiscal 2008, which wassponsored by the Japan Industrial Design Promotion Organization, and an Outstanding
Performance Award in the 53rd Kanagawa Architecture Competition. In addition,
Nomura Living Support Co., Ltd., which supports residential property management,
acquired all the shares of ZEPHYR Community with the aim of expanding its earning
power by increasing the number of condominiums under management.

■ Nomura Real Estate Development Co., Ltd.

In the Building Business, NREG TOSHIBA BUILDING Co., Ltd. joined the Group in■ Nomura Building Management Co., Ltd.

December 2008 and helped to increase earnings. In September 2008, we also com-

■ NREG TOSHIBA BUILDING Co., Ltd.
■ YBP Heating and Cooling Supply Co., Ltd.
39.1%

■ NREG TOSHIBA FUDOSAN FACILITYSERVICE Co., Ltd.

menced construction of Nihonbashi-Muromachi Nomura Building, a building complex
comprising mainly of an office zone, a commercial zone, and a services zone. It isslated for completion in September 2010. As a tenant for the office zone, Shinsei
Bank is scheduled to locate its head office in this building. The vacancy rate in offices
and commercial facilities was 2.6% as of the end of fiscal 2008.

■ Nomura Amenity Service Co., Ltd.

25.1%

■ Nomura Real Estate Development Co., Ltd.

In the Investment Management & Development Business, we posted revenues from■ Nomura Real Estate Investment
Management Co., Ltd.

PMO Nihonbashi-honcho, the first project in the premium mid-size office (PMO) series.

■ Nomura Real Estate AssetManagement Co., Ltd.

ized office building development project. These new categories of office building devel-■ Nomura Real Estate CapitalManagement Co., Ltd.

development operations. In the investment management operations, by effectively uti-

We also posted revenues from the Chuo Labour Bank Operating Center as a customopment business are supplying products tailored to market needs in the property
lizing the Group’s pipeline, we managed to steadily expand assets under managementin each fund and increase asset management fees.

■ Nomura Real Estate Development Co., Ltd.

With the aim of reinforcing Corporate Real Estate (CRE) strategy support ser-■ Nomura Real Estate Urban Net Co., Ltd.

vices, the property brokerage operations of the Property Brokerage & Consignment Sales Business endeavored to enhance the holding of lectures forcorporations and the strategic use of the Internet while actively promoting
proposal-based marketing. In the area of real property sales, we worked to

3.9%

develop and increase the value of products while undertaking sales promotion,
and we posted revenues of Urban First Shinyurigaoka, Urban First Ryogoku, andUrban First Kinshicho.

■ Nomura Real Estate Development Co., Ltd.

In the fitness club business, our aim was to open new clubs based on various■ MEGALOS CO., LTD.

concepts that suit local characteristics. In fiscal 2008, we opened four clubs:■ Geo-Akamatsu Co., Ltd.
2.7%

MEGALOS Ichigao Orchid, Bivio Ebisu, MEGALOS Garden Hamamatsu, andMEGALOS Saginuma. In addition, Geo-Akamatsu, which plans and designs commercial facilities and provides property management services, set up an office inSeoul as a base aimed at expanding business operations in South Korea.

Nomura Real Estate Holdings, Inc. Annual Report 200915

Review of Operations

Residential Development Business
The Residential Development Business supplies approximately 4,000 housing units a year, primarily
in the Tokyo metropolitan area. The Group offers a diverse product lineup under the PROUD brandthat includes: PROUD CITY (large-scale condominiums), PROUD TOWER (skyscraper condominiums),
PROUD TOWN (large-scale detached housing), and PROUD SEASON (urban detached housing).
The PROUD brand embodies our desire to supply properties that create a proud feeling amongpeople who live in them, people who build them, and people who live in the area. We havesucceeded at establishing an image that PROUD brand is for Nomura Real Estate Development’s
high-quality condominiums.

Overview of Fiscal 2008

integrated development, sales and management operations. Efforts wereIn fiscal 2008, the housing market saw an overall decline in contract rates

also made to raise management quality and boost the value of theon rising sales prices caused by higher land and construction costs as

PROUD brand from a management perspective. Moreover, we also

well as deterioration in employment conditions associated with the eco-

aggressively undertook management consignment orders from compa-

nomic downturn, which led to a decline in buying motivation amongnies outside the Group, and attempted to increase the number of man-consumers. Faced with such an increasingly tough operating environ-aged units and expand orders for repair work. In January 2009, with thement, the Residential Development Business segment promoted a strat-

aim of expanding the scale of operations in the condominium manage-

egy designed to increase recognition of the PROUD brand and raise

ment business, Nomura Living Support acquired all the shares ofbrand value. We also worked to further strengthen site selection, productZEPHYR Community and turned it into a wholly-owned subsidiary. How-

planning and sales capabilities by leveraging our integration of develop-

ever, due to the impact of reduced housing sales units resulting from thement and sales. In the area of housing management operations, we rein-

deteriorating business environment and of inventory write-downs,

forced collaboration with housing sales operations and strove to build

operating revenue in the Residential Development Business segment

Operating Revenue

Operating Income*Number of Housing Sales(Millions of yen)

(Millions of yen)

(Units)300,000

30,0006,000

200,000

20,0004,000

100,000

10,000

2,000

0

2006

2007

2008 FY■ Sales of Housing■ Management of Housing■ Other

16 Nomura Real Estate Holdings, Inc. Annual Report 2009

0

2006

2007

2008 FY* Operating income figures are total amounts ofResidential Development Business.

0

2006

■ Housing for Household■ Rental Housing

2007

2008 FYPROUD TOWER Musashi Urawa(Saitama-city, Saitama)

PROUD TOWER Nerima(Nerima-ku, Tokyo)

PROUD TOWER Musashi Koganei(Koganei-city, Tokyo)

PROUD TOWER Kameido(Koto-ku, Tokyo)

decreased ¥7,173 million, or 3.0% year-on-year, to ¥231,629 million andwe will differentiate our products by leveraging our “Development, Sales

operating income declined ¥14,280 million, or 54.8% year-on-year, toand Management” Business Model; and third, we will win even further¥11,787 million.

trust for the PROUD brand.
While regarding the dramatic changes in the business environment

Basic Policy in Medium-term Business Plan and
Future Expansion

as a new opportunity, the Group will revive the Residential Development

In our medium-term business plan, the Group advocates the businessraise profit margins. Furthermore, while leveraging the strengths of ourstrategy of strengthening the growth model for the residential develop-“Development, Sales and Management” Business Model and attempting

ment business. This means that we regard the changes in the market

to differentiate our products by directly ascertaining reactions in theenvironment as a new business opportunity and will undertake the fol-market, we will cultivate the PROUD brand, which is backed by reliable

lowing three measures on a priority basis. First, we will step up the acqui-manufacturing, into the No. 1 residential brand.

Business as a solid earnings base in order to expand market share andsition of new high-quality lands and maintain business turnover; second,

Business Results(Millions of yen)

FYOperating Revenue
Operating Income
AssetsROA* (%)
Inventories

2006

2007

2008

¥205,950
23,627257,184
9.2%¥229,863¥238,802
26,067259,78110.0%¥222,761¥231,629
11,787
318,8453.7%¥287,410* ROA by segment = Segment operating income / Segment assets at end of fiscal year

Nomura Real Estate Holdings, Inc. Annual Report 200917

Building Business
The Group owns trophy office buildings such as Shinjuku Nomura Building, Yokohama Business
Park, Toshiba Building, and Otemachi Nomura Building as well as commercial facilities such as
Lazona Kawasaki Plaza. Besides leasing the buildings we own, we are also operating subleasing
and property management businesses, which enables us to gain a better understanding of theneeds of tenants that are specific to the area as well as market trends in a timely manner. In suchways, we respond in a comprehensive manner to customers’ needs, and we have developed anorganization that is able to increase customer satisfaction.

Overview of Fiscal 2008

December 2008. In addition, after carrying out a review of assets owned

In the Building Business, we strove to expand marketing activities closely

by the Group, we sold the NRE Nishi-Umeda Building and other proper-

tailored to tenant needs as well as to maintain and enhance utilization

ties. As a result, operating revenue in the Building Business segment rose

rates. We also continued to work to raise commission income from prop-¥33,511 million, or 58.9% year-on-year, to ¥90,400 million. Operating

erty management and facility management operations and increase

income grew ¥6,355 million, or 67.5% year-on-year, to ¥15,769 million.

orders from tenants for interior renovations. In fiscal 2008, earnings

Building, which we acquired in March 2008, as well as earnings contribu-

Basic Policy in Medium-term Business Plan and
Future Expansion

tions from office buildings and commercial facilities such as Toshiba

Our medium-term business plan states that the Group will adopt the

Building and Lazona Kawasaki Plaza, which are owned by NREG TOSHIBA

strategy of positioning the Building Business, which was expanded by

BUILDING. We turned this company into a consolidated subsidiary inmaking NREG TOSHIBA BUILDING a consolidated subsidiary, as a newincreased on the back of the full-term operation of the Daini Edobashi

Operating Revenue

Operating Income*Vacancy Rate at Year-end(Millions of yen)

(Millions of yen)(%)

100,000

20,00075,00015,0006

450,0002.6

10,0001.9

2.2

225,000

0

5,000

2006

2007

2008 FY■ Building Leasing (Company-owned)■ Building Leasing (Subleased)*■ Commercial facility■ Property Management and Facility Management■ Other* The presentation has been changed from the end of
fiscal 2008 due to making NREG TOSHIBA BUILDING
a consolidated subsidiary. Some residential projects
have been included in the earlier figures for “Offices(Subleased)” and “Vacancy Rate at Year-end.”

18 Nomura Real Estate Holdings, Inc. Annual Report 2009

0

2006

2007

2008 FY* Operating income figures are total amounts of
Building Business

0

2006

2007

2008 FYToshiba Building (Minato-ku, Tokyo)

Umeda Sky Building(Kita-ku, Osaka)

Nihonbashi-Muromachi Nomura Building(Chuo-ku, Tokyo)

pillar of continued profit growth and further reinforce this business. Thisin major areas, own them, and steadily expand leasing income. One

signifies that we will put priority on undertaking two measures: first, welarge project under way is the Nihonbashi-Muromachi Nomura Building.

will improve cash flow by polishing up our properties and strengthening

Construction commenced in September 2008 and it is scheduled forour leasing capability; second, we will steadily expand rental income bycompletion in September 2010.

promoting developments and strategically holding high-quality assets.
The leasing market, which tends to lag behind economic trends, is forecast to face even more tough conditions. To maintain our competitiveness in such a market, we need to refine the assets we hold and makethem more attractive. With that aim, we intend to further strengthen ourleasing capability to conduct direct marketing based on our own efforts.
As regards our rental properties, we will develop high-quality properties

Business Results(Millions of yen)

FYOperating Revenue
Operating Income
AssetsROA* (%)
Inventories

2006

2007

2008

¥ 51,342
8,372
180,587
4.6%¥ 10,165¥ 56,889
9,414
203,563
4.6%¥ 11,342¥ 90,400
15,769543,880
2.9%¥   3,215* ROA by segment = Segment operating income / Segment assets at end of fiscal year

Nomura Real Estate Holdings, Inc. Annual Report 200919

Investment Management & Development Business
The Investment Management & Development Business is the Group’s second core business andhas expanded its scope of operations. This segment comprises two types of activities. In the caseof property development operations, we carry out investment and development by using our own
funds, and then generate income by selling these developed properties. In the case of investment
management operations, we manage investors’ funds. Our great strengths in this business havebeen established by the provision of investment opportunities and the accumulation of operational
expertise that are able to fulfill a variety of investors’ needs, as well as customer confidence built
up by our impressive past achievements.

Overview of Fiscal 2008

manages. As we made effective use of the Group’s pipeline, assets

In property development operations, we promoted development projects

under management at the end of fiscal 2008 stood at ¥1,230 billion, andand undertook sales promotion activities for our products. In fiscal 2008,

asset management fees increased concomitantly.

we recorded the sale of PMO Nihonbashi-honcho, the first project in the

However, while we realized high income in fiscal 2007 through thenew premium mid-size office (PMO) category of office building develop-

sale of the AEON Yachiyo-Midorigaoka Shopping Center, a large-scale

ment business, in which properties are endowed with the high quality ofcommercial facility, in fiscal 2008, we posted inventory write-downs,

large office buildings even though they are of smaller size. We also fin-which had a large impact on income. As a result, operating revenues inished construction and recorded the sale of the Chuo Labour Bank

this segment declined ¥2,477 million, or 3.1% year-on-year, to ¥78,078

Operating Center, a customized office building development project inmillion. Operating income also decreased ¥24,661 million, or 70.9%

which the Group planned the product in line with the specific needs ofyear-on-year, to ¥10,117 million.

the tenant company.
In the area of investment management operations, we promoted the
expansion of assets under management in various funds that the GroupOperating Revenue

Operating Income*

Assets Under Management(Millions of yen)

(Millions of yen)(Billions of yen)

1,500

40,00090,00030,0001,000

60,00020,000500

30,00010,000

0

2006

2007

2008 FY■ Property Development Operations■ Investment Management Operations

20 Nomura Real Estate Holdings, Inc. Annual Report 2009

0

2006

2007

2008 FY* Operating income figures are total amounts of Investment
Management & Development Business.

0

2006

■ Listed REITs■ Private Funds, etc.

20072008 FYPMO Nihonbashi-honcho(Chuo-ku, Tokyo)

Chuo Labour Bank Operating Center(Yokohama-city, Kanagawa)

NRE Sapporo Building(Sapporo-city, Hokkaido)

Basic Policy in Medium-term Business Plan and
Future Expansion

low utilization and diverting those funds to investments in new high-qual-

Our medium-term business plan advocates the business strategy ofmeet market needs.

ity properties. We will focus on promoting development projects that

promoting stable growth in investment management operations, andthese operations aim to increase assets under management to ¥1.5
trillion by the end of fiscal 2009 mainly by establishing new funds that
fulfill investor needs. The expertise that we have accumulated so far
and the trust of investors based on our past track record have become
the Group’s major strengths. We will therefore continue to thoroughly
implement our “investor-oriented” management philosophy with theaim of becoming the industry leader.
In property development operations, we aim to enhance asset efficiency by hastening the recovery of funds through the sale of assets with

Business Results(Millions of yen)

FYOperating Revenue
Operating Income
AssetsROA* (%)
Inventories

2006

2007

2008

¥ 69,370
20,040297,632
6.7%¥155,035¥ 80,555
34,778322,937
10.8%¥171,819¥ 78,078
10,117366,7882.8%¥138,364* ROA by segment = Segment operating income / Segment assets at end of fiscal year

Nomura Real Estate Holdings, Inc. Annual Report 200921

Property Brokerage & Consignment Sales Business
The Group’s Property Brokerage & Consignment Sales Business in its individual brokerage
operations performs highly efficient management by promoting office networks primarily in theTokyo metropolitan area and Internet strategies with a comprehensive property information website,“nomu.com.” The main feature of our corporate real estate brokerage operations is the fact that we
make effective use of direct networking channels to more than 3,000 companies that we havecultivated over a long period of time. This leads to exploring the seeds of projects and the conclusionof contracts.

Urban First Shinyurigaoka(Kawasaki-city, Kanagawa)

Overview of Fiscal 2008

revenue in the Property Brokerage & Consignment Sales Business seg-With the aim of reinforcing CRE strategy support services, the property

ment rose ¥9,581 million, or 31.7%, to ¥39,764 million, and operating

brokerage operations of the Property Brokerage & Consignment Sales

income declined ¥4,838 million, or 75.7%, to ¥1,554 million.

Business endeavored to enhance the holding of lectures for corporations
and the strategic use of the Internet while actively promoting customer-

Future Expansion

driven marketing.

In the Property Brokerage & Consignment Sales Business, we will stepIn the area of consignment sales operations, we endeavored to formup the promotion of the Internet strategy by enhancing the contents ofsales tie-ups with high-quality developers and worked to promote prod-

nomu.com®, a website managed by Nomura Real Estate Urban Net. In

uct supply, contracts, delivery, and settlement.

addition, we will promote the development of human resources andIn the area of real property sales operations, we promoted smaller-

expansion of the branch network. In the area of real property sales, we

scale development projects through the use of wide-ranging brokerage

will focus on selling properties that we currently own. We will also con-information. We worked to develop and increase the value of products

tinue to provide services and consulting that are trusted and appreciatedwhile also undertaking sales promotion, and we recorded the sale ofover the long term by listening carefully to customers’ opinions.

Urban First Shinyurigaoka and other properties. As a result, operating

Operating Revenue

Operating Income*Property Brokerage(Millions of yen)

(Millions of yen)

(Millions of yen/number of transactions)

40,00010,00020,00030,0007,500

15,00020,0005,000

10,00010,000

2,500

5,000

0

2006

2007

2008 FY■ Property Brokerage Operations■ Consignment Sales Operations■ Real Property Sales Operations■ Other

22 Nomura Real Estate Holdings, Inc. Annual Report 2009

0

2006

2007

2008 FY* Operating income figures are total amounts of Property
Brokerage & Consignment Sales Business.

0

3,949

4,047

2006

2007

■ Total Commission Fee■

Number of Transactions

4,184

2008 FY

Other Business
The fitness club business entails the management of 23 facilities mainly in the Tokyo metropolitan
area by MEGALOS. We expect to realize synergies with the Nomura Real Estate Group through theacquisition of land information when opening facilities and the maintenance and management offacilities. We regard this as a sector where we will continue to achieve steady growth through the
expansion of the facility network. Geo-Akamatsu, which became a member of the Group in 2007,
provides a wide range of services related to commercial facilities, including their planning, operationand management.

MEGALOS Garden Hamamatsu(Hamamatsu-city, Shizuoka)

Overview of Fiscal 2008

from April 2008. However, in response to a decline in wages and rapid

In the fitness club business, our aim was to open new clubs based ondeterioration in economic conditions, we believe that the management

various concepts while reinforcing the earning power of existing clubs.

environment will remain tough, including the worsening of consumer

By enhancing the competitiveness of clubs, we strove to acquire newsentiment. In such an environment, MEGALOS aims to continue tomembers and raise retention rates for existing members. Owing to therestore the earning power of existing clubs and rapidly establish an earn-

opening of new clubs, the number of members grew but club opening

ings base for new clubs. Specifically, by improving services and facilities

expenses also increased. As a result, operating revenue in the Otherand stepping up marketing targeted at rising corporate demand, weBusiness segment rose ¥2,999 million, or 17.8%, to ¥19,836 million.

intend to acquire new members and raise member retention rates. In

Operating income, however, decreased ¥413 million, or 27.3%, toaddition, we will continue to open new clubs with the aim of expanding¥1,101 million.

the scale of operations.
Moreover, Geo-Akamatsu, a company involved in property manage-

Future Expansion

ment for commercial facilities, will further promote collaboration within

In the fitness industry, the social role of sports clubs has been growing. For

the Group to advance initiatives for the development of commercial facili-

example, health checkups and healthcare advice became compulsory

ties throughout the entire Group.

Operating Revenue

Operating Income*(Millions of yen)

(Millions of yen)

20,0002,000

15,0001,500

Number of MEGALOS Members

150,000

100,000

10,000

1,000

5,000

500

50,0000

2006■ Fitness Clubs Business■ Other

2007

2008 FY

0

2006

2007

2008 FY

0

2006

2007

2008 FY* Operating income figures are total amounts of
Other Business

Nomura Real Estate Holdings, Inc. Annual Report 200923

Group Companies

A Group Framework Linking New Value With “Bringing Tomorrow Today”
In 2004 the Nomura Real Estate Group established a holding company system, the first comprehensive real estate company in the industry
to do so. Nomura Real Estate Holdings, Inc., the holding company, provides strategic management for the entire Group, and the subsidiaries
rigorously develop customer-oriented businesses. As a result, the corporate value of the entire Group is raised and new value is provided toall shareholders, other stakeholders and society at large.

Nomura Real Estate Development Co., Ltd.

Nomura Living Support Co., Ltd.

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

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

nnnnn

n

Nomura Real Estate Development is active in three distinct
business fields. These are: the residential development
business, which operates condominium and detachedhousing development and sales under the PROUD brand;
the corporate real estate business, which offers real property development and brokerage services for corporateclients; and the investment management business which
conducts high-profit investment management services.

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

Nomura Real Estate Urban Net Co., Ltd.
http://www.nomura-un.co.jp/ (Only in Japanese)

Nomura Real Estate Investment
Management Co., Ltd.

n

http://www.nreim.co.jp/english/

Nomura Real Estate Urban Net aims to be the No.1 brandfor services and consulting such as residential property
brokerage for helping customers in changing their placeof residence; corporate brokerage for corporate clients; acondominium and detached housing sales agency; andprofit-generating property development.

nNomura Building Management Co., Ltd.
http://www.nomura-bm.co.jp/ (Only in Japanese)

Nomura Real Estate Asset Management
Co., Ltd.

n

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

Nomura Building Management offers building management, including facility maintenance, and efficient property
management as well as the renewal of building interiors.
The company also provides expertise regarding all aspectsof management related to buildings.

n24 Nomura Real Estate Holdings, Inc. Annual Report 2009

Nomura Real Estate Investment Management sets up andmanages private funds with a wide range of risk-returnarrangements. These funds precisely meet the varying
needs of investors regarding real estate investment, withinvestment goals including commercial facilities and logistics facilities.

In line with its basic policy of pursuing stable mid- andlong-term asset management, Nomura Real Estate AssetManagement manages two listed REITs: Nomura Real
Estate Office Fund, which invests in office buildings, andNomura Real Estate Residential Fund, which invests inresidential facilities

n Residential Development Businessn Building Businessn Investment Management & Development Businessn Property Brokerage & Consignment Sales Businessn Other Business

Nomura Real Estate Capital Management
Co., Ltd.
http://www.nrecm.com/english

Yokohama Business Park Heating andCooling Supply Co., Ltd.
n

Nomura Real Estate Capital Management specializes inmanaging securitized real estate funds varying from fundof-funds to Commercial Mortgage-Backed Securities(CMBS). It is also entrusted with the investments of pension
funds and other institutional investors.

Responsible for the supply of heating and cooling services
to Yokohama Business Park, a large-scale business district,through its local heating and cooling system. Using a ‘best
mix’ system based on both gas and electricity, the company
uses energy efficiently to help keep costs down and reduce
environmental effects.

NREG TOSHIBA BUILDING Co., Ltd.

Geo-Akamatsu Co., Ltd.

http://www.toshiba-building.co.jp/ (Only in Japanese)

http://www.geo-akamatsu.co.jp/foreign/nn

NREG TOSHIBA BUILDING comprehensively operates
development, leasing and management of office buildings,
commercial facilities, warehouses and condominiums etc.
as well as property brokerage and consulting related to
CRE (Corporate Real Estate) utilization support services.

Geo-Akamatsu provides a full range of property consulting
and other services that make the most of 40 years ofexperience and accumulated expertise. These services
include surveys concerning commercial facilities, projectplanning, tenant leasing, commercial space design andproperty management.

MEGALOS CO., LTD.

PRIME X Co., Ltd.

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

http://www.prime-x.co.jp/ (Only in Japanese)nnWith its business philosophy slogan of “transforming customer satisfaction into happiness,” MEGALOS plans,
develops and manages fitness facilities with top-level service
and equipment, housed in the best facilities in the region.

Based on its expertise accumulated in the course of realestate activities, Prime X develops Internet advertisingbusinesses that specialize in the real estate and residential
business fields. Prime X offers proposals that maximize
customer benefits, ranging from the creation of corporatewebsites and project homepages to building up andmanaging membership organizations, and conducting
sales promotions for projects.

nNomura Real Estate Holdings, Inc. Annual Report 200925

Group Company Profile Vol. 2

Nomura Living Support Co., Ltd.
Based on a corporate philosophy of “providing secure and comfortable living environments”
as “a company that wins customer trust,” Nomura Living Support is responsible for the
management and maintenance aspect of the Nomura Real Estate Group’s development,
July 2009
President

Toshiaki Sekisales and management operations for the residential development business. The environment
surrounding the condominium management business is rapidly changing. The enforcementof a law that promotes higher standards of condominium management has given rise to
demands for even better quality management. Furthermore, new competitors are entering
the business from outside the industry and existing companies are merging and otherwise

Corporate Profile
Head office:Business activities
Chofu Shinjuku Building, 5-14-6 Shinjuku,
Shinjuku-ku, Tokyo 160-8351

Representative:

Toshiaki Seki, President

Business activities:

Comprehensive management services forcondominiums and buildings

Capital:¥127.5 million yen

Sales:¥22,191 million (Fiscal 2008)

Number of employees: 2,562 (As of March 31, 2009)
Established:“Smile” supporters activities (care takers) Building and facilities management

February 8, 1991

Corporate Philosophy
We aim to be a company that wins customer trust by providing secure andcomfortable living environments.
Emergency desk/monitoring activities

Proposing large-scale repair projects

Presenting interior design proposals

Consulting for renovation

Code of Conduct
We will faithfully comply with the law.
We will act from the customer’s point of view.
We will respond to customers with hospitality.
We will respect each other’s personality and individuality.

26 Nomura Real Estate Holdings, Inc. Annual Report 2009

realigning themselves. In this environment, in January 2009 Nomura Living Support acquired
all the shares of condominium management company ZEPHYR Community from its parent
company, ZEPHYR Co., Ltd., with the aim of making the scale of the business larger andenhancing earning power by increasing the number of units under management. Goingforward, Nomura Living Support will take on the challenge of even further growth as it seeks
to become the number one brand in the condominium management industry by improving
the quality of its management services and embracing the concept of hospitality throughout
the organization.

Condominium Management Support

Building Repair

Living Business· Business management (condominium
managers)· Proposing survey testing for buildings· Presenting interior design proposals· Proposing large-scale repair projects· Consulting for renovation· “Smile” supporters activities (care takers)· Proposing long-term repair plans· Presenting proposals for “living services”· Cleaning activities (clean supporters)· Emergency desk/monitoring activities (Nomura“Smile” Center)· Providing property management services forrental condominiums· Building and facilities management (technicalstaff)· Two-way communication with customers (providing event support, information throughbrochures and surveys)

Strength of Nomura Living Support: Ability to Make Proposals that Realize Comfortable Living“We provide steadfast support for day-to-day living.”“We present proposals for more comfortable living.”

Nomura Living Support provides a condominium lifestyle that is filled with

Nomura Living Support offers various kinds of assistance so that we cansmiles by offering various kinds of support that help our customers togive people comfortable places to live. We present remodeling proposals,pass each and every day in comfort.

and house-cleaning and other lifestyle-oriented services, that maintain thelivability, enjoyment, and value of homes, and interior designs that satisfy“We aim to be the leading company in management quality.”

homeowners’ desires. And then, we provide property management ser-To keep a condominium comfortable indefinitely and maintain and improvevices that maximize the income from rental condominiums.

asset value, it is necessary to conduct periodic building inspections andexecute planned maintenance projects depending on the property’s condition. Nomura Living Support presents the best proposals with day-to-day
management conducted from the customer’s point of view.

Nomura Real Estate Holdings, Inc. Annual Report 200927

Corporate Governance

Profile of Nomura Real Estate Group
Group Philosophy
The Group Philosophy is a commitment to both ourselves and to our customers and society. By showing this commitment andcontinuously delivering a level of customer satisfaction at least commensurate with it, we are determined to be a Group thatpeople can count on even more than in the past.

Group Message

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 has born. 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 Group everlastingly works.

Group Symbol, United N
United N is symbolic of our fervent desire to create a better tomorrow by valuing every interaction andforming relationships with many people. This symbol also expresses the important relationships we havewith many groups such as customers, shareholders and trading partners, as well as our commitment tobeing a pacesetter in the creation of a new real estate business paradigm—regardless of convention. At
the same time, the symbol represents the new value we will create by combining the passion and skills of
every person and company in the Nomura Real Estate Group and their diverse values.

28 Nomura Real Estate Holdings, Inc. Annual Report 2009

Business Activities and Group Companies

Residential
Development Business
Development and sales of condominiums, detached housing
and residential lots, etc., andhousing management and maintenance under contract withmanagement associations after
sale of condominiums

Building Business

Investment Management& Development Business

Development, construction, leasing, operation and managementof office buildings, houses andcommercial facilities, etc. And
consulting related to CRE utilization support services.

Development and sales of profitgenerating property for the realestate investment market, andmanagement of J-REITs andprivate funds, consulting services
for securities investment, etc.

Property Brokerage &Consignment Sales
Business
Brokerage of real estate, sales ofcondominiums and detachedhousing for individual households
consigned from outside theGroup, etc.

Other Business
Operation of fitness clubs, designand supervision of architecturalwork, planning and managementof commercial facilities, etc.

Nomura Real Estate Development
Residential Development
Company

Corporate Real Estate Service Company

Investment Management& Advisory Company

Nomura Living Support

Nomura Building
Management

Nomura Real Estate
Investment Management

PRIME X

NREG TOSHIBABUILDING

Nomura Real Estate
Asset Management

ZEPHYR Community

YBP Heating andCooling Supply*

Nomura Real Estate
Capital Management

Nomura Real Estate
Urban NetMEGALOS
Geo-Akamatsu

NREG TOSHIBAFUDOSAN FACILITY SERVICE
Nomura Amenity
Service* YBP = Yokohama Business Park

Basic Viewpoints Regarding
Corporate Governance

Company Organizations andEstablishment of Internal Control Systems

The Company believes that the company must be gov-

The Company’s Board of Directors comprises eight direc-

erned in a way that continuously maximizes corporate

tors. It decides important corporate matters and super-value over the long term, while consideration is given to thevises the execution of business operations by directors.

interest of shareholders and all other stakeholders related

Statutory auditors attend meetings of the Board of Direc-

to the Nomura Real Estate Group. Furthermore, we aim totors and provide their opinions as the need arises.

enhance the earning power of the entire Group, and while

The Company has adopted a statutory auditor system.

acting as a holding company in managing and supervising

The Board of Statutory Auditors comprises five statutory

the business activities of our subsidiaries, we will strive toauditors, three of whom are external auditors. The Board

build a highly transparent management organization.

formulates such matters as audit policies and operational

Nomura Real Estate Holdings, Inc. Annual Report 200929

roles, and receives reports and conducts discussions

Internal Audit System

regarding important matters relating to audits carried out

The Nomura Real Estate Group has established an internalon the basis of those policies and roles.

audit department at each Group company, with the excep-

Moreover, the Company holds the Group Managementtion of some small companies. Each department is super-

Meeting whose members include the Company’s directors

vised under the direct jurisdiction of the Group company

and the presidents of major subsidiaries. The purpose ofpresident or an officer who does not hold an additional

these meetings is to unify intentions to promote Group

office in a business operations division, which allows the

management and to verify the progress of the budgets ofdepartment to maintain organizational independence. In

each operating company and execution status of otheraddition, we have established the Internal Audit Department

business operations.

in the Company that supervises the internal audit functionsof the entire Group and performs monitoring, evaluation andRisk Management andCompliance Framework

auditing in each division within the Company.

Risk Management System

Statutory Auditor Audit System

The Company has established a Risk Management Commit-

The Company has appointed full-time staff in the Corporate

tee whose members include officers in charge of administra-

Planning Department to support statutory auditor audits.

tive operations at the Company and Group companies, forEach statutory auditor attends meetings of the Board of

the purpose of promoting risk management activities within

Directors and other important meetings and audits the exe-

the Group. The Committee deliberates matters relating to

cution of the duties of directors while cooperating with therisk management, compliance, and information security forInternal Audit Department and the auditing firm as needed.

the entire Group, and also cooperates and provides guidance with regard to countermeasures when risks occur.

Accounting Audits
The Company has concluded an auditing contract with

Compliance Systems

Ernst & Young ShinNihon LLC. In addition to performing

The Nomura Real Estate Group regards compliance, includ-

regular audits, Ernst & Young ShinNihon LLC discusses

ing the observance of laws and regulations and corporate

and verifies accounting issues as needed and conducts

ethics, as one of the most important management issues.

appropriate accounting practices.

As a set of relevant guidelines, it has formulated the Nomura
Real Estate Group Code of Action.

All of the certified public accountants that carry out
work have no more than seven years of continued experi-

To promote continuous educational and awarenessence in auditing the Company, and the auditing firm has

activities for executives and employees, we have estab-

adopted autonomous measures to ensure that its employ-lished a Compliance Department in the Company. It pro-ees who carry out work do not participate for longer than avides advice, guidance, and support to Group companies.

designated period in the Company’s account auditing.

Furthermore, based on our priority of collecting infor-

Assistants associated with audit operations comprisemation regarding risks, we have set up the Nomura Realseven certified public accountants and thirteen assistant

Estate Group Risk Hotline as a point of contact for internal

certified public accountants and staff.

reporting by Group employees.

30 Nomura Real Estate Holdings, Inc. Annual Report 2009

Corporate Governance System
General Meeting of Shareholders
Nomura Real Estate Holdings, Inc.
Appointment/
dismissal

Board of Directors (8 directors)

Appointment/
dismissal

Appointment

Audit

Board of Statutory Auditors(5 statutory auditors)

Appointment/dismissal

Representative Director

Audit

Group Management Meeting

Certified Public
Accountant(Auditing Firm)

Risk Management Committee
Corporate Planning Department

Compliance Department

Management guidanceTraining & guidanceInternal Audit Department
Monitoring

Operating Companies

Compensation of Directors andStatutory Auditors

Stock Option Compensation for Directors

At the second annual general meeting of shareholders on

sation system for directors and statutory auditors so that it

June 26, 2006, it was resolved that the maximum annual

contributes to the further enhancement of the businesscompensation limit for directors and statutory auditors

performance and corporate value of the Nomura Real

would be ¥650 million and ¥120 million, respectively.

Estate Group. During this period, we abolished our system

The Company has been engaged in revising the compen-

The Company paid the following compensation forfiscal 2008 to directors and statutory auditors.

of retirement benefits for directors and statutory auditors,
that tended to be inflexible and based on seniority, on
March 31, 2006.

Five directors¥266 million

At the general meeting of shareholders on June 28,

Seven statutory auditors¥ 70 million

2007, approval was provided to grant stock options based(Four are external auditors)¥ (11 million)on the exercise of stock acquisition rights to Company

Total: Twelve persons¥336 million

directors in each fiscal year. These stock options, with* As of March 31, 2009 there were five statutory auditors (three were external
auditors). The number of auditors given above is different because the figure
includes two statutory auditors (one was an external auditor) who retired onJune 27, 2008.

transfer restrictions attached, are to be within the range ofthe amount of ¥650 million per annum, as approved at theannual general meeting of shareholders on June 26, 2006.
The purpose of providing these stock options is to endeavor
to share interests with all shareholders and to further
increase corporate value.

Nomura Real Estate Holdings, Inc. Annual Report 200931

Auditor Compensation

2) Business transaction relationships

Compensation paid to the Company’s certified public

In fiscal 2008, business transactions between NLB and com-accountants (auditing firm) for fiscal 2008 was as follows.

panies in the Nomura Real Estate Group amounted to ¥11
million in the Building Business segment and other areas.

Compensation
paid for audit certification activities

Compensation
paid for non-audit
activities

The Company¥ 65 million¥11 million

Consolidated
subsidiaries¥139 million¥22 million

Toshio Miura, an executive managing director of NLB, andTotal¥204 million¥33 million

Mitsuru Nakajima, a director of NLB. Hirohisa Suzuki, the3) Personal relationships
To strengthen audit operations, the Company has accepted
two non-full-time corporate auditors from NLB. They are

Company’s President, is the former President of NLB, but

Matters Concerning Parent Company
The Company’s parent company is Nomura Land andBuilding Co., Ltd. (NLB).
1) Capital relationship with Nomura Land and Building
Co., Ltd.
The former Nomura Real Estate Development Co., Ltd.,the predecessor of both Nomura Real Estate Development
Co., Ltd., which is currently a subsidiary of Nomura Real
Estate Holdings, and NLB, the Company’s parent company, was established on April 15, 1957. Subsequently, inJanuary 1970, it was divided into NLB, which is engaged
mainly in the management of real estate associated with
Nomura Securities Co., Ltd., and Nomura Real Estate
Development which conducts other real estate operations.
In October 2004, it was decided that the Company would
become the holding company of the Nomura Real EstateGroup. Accordingly, NLB assigned all the outstanding
shares of Nomura Real Estate Development to the Company as an in-kind contribution, and became the Company’s parent company. Owing to the issuance of new sharesassociated with the listing of the Company in October 2006
and sale of shares by NLB; NLB held a 64.8% shareholdingin Nomura Real Estate Holdings at the end of fiscal 2008.

32 Nomura Real Estate Holdings, Inc. Annual Report 2009

apart from the statutory auditors mentioned above, no
executives or employees of the Company are concurrently
serving at NLB or on secondment from that company. The
relationship between the Nomura Real Estate Group and
NLB is as described above, but it does not exert any influence on the Nomura Real Estate Group’s free marketing
activities or management decisions. The current main business activities of NLB are shareholdings of investment
securities, including those of the Nomura Real Estate Holdings, and the leasing of three office buildings, but they do
not compete with the Group’s business operations. In addition, NLB has subsidiaries outside the Nomura Real EstateGroup that are engaged in an overseas hotel managementbusiness and other areas, but they also 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.

Board of Directors and Statutory Auditors (As of June 26, 2009)

President

Director

Director

Director

Hirohisa Suzuki

Mototsugu Takai

Tsukasa Takahashi

Seiji Matsumoto

Director

Director

Director

Director

Yoji Kurihara

Takao Orihara

Hiroyuki Kimura

Yukoh Yoshida

Statutory Auditor

Statutory Auditor

Statutory Auditor

Statutory Auditor

Statutory Auditor

Toshio Miura

Shigeaki Yoshioka

Mitsuharu Sato

Shigeru Matsushima

Mitsuru Nakajima

Message From an External Statutory Auditor

economy. In such a severe operating environment, the Company has

Shigeru Matsushima, External Statutory Auditor

been actively developing business, including making NREG TOSHIBABUILDING Co., Ltd. into a subsidiary. In May 2009, the Company formu-

The Board of Statutory Auditors comprises five statutory auditors, three oflated Medium-term Business Plan (2009–2011): Growth & Develop-

whom are external statutory auditors. I have been an external statutory

ment. With this medium- and long-term perspective, the Company willauditor for the Company since June 2008. Looking back at the year undermove steadily forward, leading to long-term enhancements of share-

review, the collapse of Lehman Brothers in September 2008 triggered aholder value which will also result in winning the trust from shareholders

global economic slowdown, which is still impacting on the Japaneseand investors.

Nomura Real Estate Holdings, Inc. Annual Report 200933

Corporate Social Responsibility (CSR)

Group Philosophy of the Nomura Real Estate GroupThe Group Philosophy of the Nomura Real Estate Group is expressed in the words “Bringing Tomorrow
Today.” The word “Tomorrow” does not give the idea of complacency or contentment with the current situation; rather, it is imbued with the spirit of challenge focused on the future. The word “Bringing” describes
the relationship among customers, society, and Group companies and the high goals they share, and it
expresses the will to accomplish things. Moreover, it is imbued with the sense that the products and services of the Nomura Real Estate Group will help people realize their dreams of the future, while linking
together the good relationships and connections among customers, society, and the Nomura Real EstateGroup. As such, “Bringing Tomorrow Today” is the fundamental concept in all the Group’s various corporate activities, and it includes endeavors to achieve socially sustainable development.

Nomura Real Estate Group’s Environmental Conservation andSocial Contribution Activities
Environmental Conservation Activities
In its business activities, the Nomura Real Estate Group always takes account of the impact on the environment. It strives to keep to minimum the burden that products and services or business activities impose on
the environment as far as it is possible. An enormous amount of energy is consumed in the construction andusage period of buildings. Consequently, when developing and operating housing and other buildings, theGroup endeavors to pay sufficient consideration to the impact on the environment, including the appropriate
use of resources and the alleviation of environmental load, from the design stage to the operating stage.

Consideration for the Environment
Midosuji Noumura Building, of which construction was completed in February
2009, is equipped with rooftop greenery and a built-in dry-mist system. The
building has been rated A by CASBEE Osaka (Comprehensive Assessment
System for Built Environment Efficiency for Osaka City).

Social Contribution Activities
The Nomura Real Estate Group not only provides high-quality products and services to customers, but also
contributes to regional culture and communities. This leads to deeper communication between society and
the Group and an improvement in service, as well as the creation of community activities and a rich culture.
We believe we can create truly comfortable living spaces for everyone, including our customers.
Provision of High-quality Products
PROUD TOWER Chiyoda Fujimi, whose construction was completed in March
2009, has been built with high-strength concrete and three types of vibrationcontrol systems against earthquakes. Moreover, the skeleton-infill construction method was used, enabling the building to be flexibly modified to reflectchanges in people’s lifestyles. In the future, the building can be renovated invarious different ways because the permanent construction frame (the skeleton) is separate from the residential units which can be remodeled (the infill).
Its design provides residents with thorough comfort and peace of mind.

34 Nomura Real Estate Holdings, Inc. Annual Report 2009

Financial Section

Contents
36

Five-Year Financial Summary

37

Management’s Discussion and Analysis

42

Consolidated Balance Sheets

44

Consolidated Statements of Income

45

Consolidated Statements of Changes in Net Assets

47

Consolidated Statements of Cash Flows48

Notes to Consolidated Financial Statements

66

Report of Independent Auditors

Nomura Real Estate Holdings, Inc. Annual Report 200935

Five-Year Financial Summary
Nomura Real Estate Holdings, Inc.
The fiscal years ended March 31, 2005, 2006, 2007, 2008 and 2009

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

2005

2006

2007

2008

2009

2009

¥345,894¥350,319¥367,237¥411,493¥448,656$4,567,401

87,531

97,551

108,668

130,391

100,764

1,025,795

Fiscal Year
Operating revenue
Gross profit
Gross margin ratio
Selling, general and administrative expenses
SG&A ratio to revenues
Operating income
Operating margin

25.3%

27.8%

29.6%

31.7%

22.5%

51,78953,28354,29460,56966,751

15.0%

15.2%

14.8%

14.7%

14.9%

35,74244,26854,374

69,82234,013

10.3%

12.6%

14.8%

17.0%

7.6%

679,539346,256

Income before income taxes and minority interests

16,35919,72147,86861,26023,530239,543

Net income

6,474

12,717

26,29735,255

13,770140,186

Cash flows from operating activities(24,630)(99,830)(89,850)

7,639(108,031)(1,099,773)

Cash flows from investing activities(20,462)(17,995)(26,787)(13,348)(141,789)(1,443,439)

Cash flows from financing activities

63,444

113,818

100,8638,791

295,508

3,008,323

Cash and cash equivalents at fiscal year end

48,22344,21628,43731,51178,473

798,875

Total assets

580,130

689,287

836,303891,700

1,385,532

14,104,977

Interest-bearing debt

300,247

413,039

394,885

408,016

778,074

7,920,932

Equity46,64560,732

213,207

232,791

235,940

2,401,909

8.0%

8.8%

25.5%

26.1%

17.0%

6.4

6.8

1.9

1.8

3.3

(Yen)

(U.S. dollars)

2005

2006

2007

2008

2009

2009

¥203,859.93¥267,956.93¥1,427.81¥1,558.96¥1,579.56$16.0844,367.78

56,109.84

200.47236.09

92.21

0.94

–

2,000.00

20.00

30.00

40.00

0.41

Fiscal Year End

Equity ratio
Debt-to-equity ratio (times)

Per Share Data (Note)
EquityNet income
Cash dividends
Note: The Company carried out a 500-for-1 stock split on April 1, 2006.

36 Nomura Real Estate Holdings, Inc. Annual Report 2009

Management’s Discussion and Analysis

Trends in the Real Estate Industry

office building rental market, demand for office space contracted as cor-

In fiscal 2008, the year ended March 31, 2009, the housing sales market

porate profits were battered. As a result, rising vacancy rates and declin-

was characterized by declines in sales and supply of condominiums.

ing rental levels became obvious throughout the country. The real estate

Against the previous year, the supply of condominiums fell by 35,633

investment market was in a state of turmoil, as evidenced by declining

units, or 26.7%, to 98,037 units, while the number of units supplied in theinterest in making real estate investments on the part of investors, bank-

Tokyo metropolitan area decreased by 17,288 units, or 28.3%, to 43,733

ruptcies of J-REITs as financial institutions reigned in credit, and sharp

units. This marked the first time that the number of units put on the

declines in prices of J-REIT units.

market fell below the 100,000 unit mark in 16 years, since 1992, when

As a result of these factors, fiscal 2008 was a difficult year for the real

only 75,173 units were put on the market. The primary reason behind theestate market. However, the Nomura Real Estate Group is committed to

decline was an increasing reluctance to buy on the part of consumers,

pushing ahead with business strategies that pay careful attention to

mainly because of the recent upswing in condominium prices and afuture market trends.

darkening employment picture amid an economic slowdown. In the

Average prices and contract rates
for condominiums
in the Tokyo metropolitan area

Vacancy rates in Tokyo’s 23 wards

J-REIT market’s total valuation

As of December 31(%)

As of March 31(Trillions of yen)

For the calendar years(Millions of yen / %)
50

79.0

82.5

8.0

78.3
69.7

40

8.0
6.3

6.0
62.7

6.0

6.0

30

4.0

4.1

4.0
20

3.4

2.6

2004

2005

2006

2007

2008

■ Average priceContract rate
Source: Real Estate Economic Institute Co., Ltd.

0

2.5
1.8

2.0

10

0

4.0

3.3

2004

2005

2006

2.0

2007

0

2008

Source: CB Richard Ellis Research

1.9

2004

2005

2006

2007

2008

Source: Tokyo Stock Exchange, Inc.

■

Analysis of Operating Results

Operating income declined ¥35,809 million, or 51.3%, to ¥34,013

In the face of growing uncertainty in the real estate market, the compa-

million. This drop in earnings was largely due to the sharp fall in thenies in the NRE Group sought to strengthen market responsiveness.

number of condominium and detached housing units sold, a decline in

However, drastic market changes caused profitability to fall across all

turnover in the property brokerage business, and the booking of valua-business segments. Results were also impacted by a loss on inventorytion losses on inventories.

write-downs at the end of fiscal year, and the NRE Group posted a yearon-year decline in income, despite higher revenue.

After payment of income taxes, net income for the year amounted to¥13,770 million, down ¥21,485 million, or 60.9%, from the previous year.

In fiscal 2008, operating revenue amounted to ¥448,656 million, up

The following discussion covers earnings by business segment. It¥37,163 million, or 9.0%, from fiscal 2007. This increase stemmed fromshould be noted that operating revenue in each segment includes interseg-

a number of factors, among them the leasing income of office buildings

ment sales and transfers.

and commercial properties, including the Toshiba Building and Lazona
Kawasaki Plaza owned by NREG TOSHIBA BUILDING Co., Ltd., in addition to actively marketing real estate held for sale.

Nomura Real Estate Holdings, Inc. Annual Report 200937

Segment earnings(Millions of yen)
Years ended March 31

2005

2006

2007

2008

2009

Operating revenue¥251,925¥222,518¥205,950¥238,802¥231,629

Operating income

23,903

21,952

23,627

26,067

11,787

Operating revenue

45,82648,28851,342

56,88990,400Operating income

6,459

7,158

8,372

9,414

15,769Residential Development Business:

Building Business:

Investment Management & Development Business (Note):
Operating revenue

7,719

37,272

65,86780,55578,078Operating income

4,606

14,224

18,613

34,778

10,117

Operating revenue

19,641

22,87436,48830,18339,764

Operating income

5,010

5,592

8,389

6,392

1,554

Operating revenue

27,716

27,05815,162

16,837

19,836

Operating income

(203)

324

1,212

1,514

1,101

Property Brokerage & Consignment Sales Business (Note):

Other Business:

Note: Since the fiscal year ended March 31, 2008, some departments in “Property Brokerage & Consignment Sales Business” segment have been transferred into “Investment
Management & Development Business” segment. Prior to then, the amounts have not been reclassified to conform to the current segmentation.

The pie chart below shows the percentage of operating income generated by each segment.

Breakdown of operating income in fiscal 2008
(Millions of yen / %)¥1,101(2.7%)¥1,554(3.9%)¥10,117(25.1%)¥11,787(29.2%)

Total¥34,013
million■ Residential Development Business■ Building Business■ Investment Management & Development Business■ Property Brokerage & Consignment Sales Business■ Other Business¥15,769(39.1%)

38 Nomura Real Estate Holdings, Inc. Annual Report 2009

Note: Since operating income for each business does not include“eliminations or corporate” in segment information, the sumof operating income of the businesses presented in the pie
chart differs from the total amount shown in the center of suchpie chart. The shares of consolidated operating income bybusiness have been calculated based on operating income
for each segment.

Major operating-related indices for each business are shown in the table below:

Years ended March 31

2005

2006

2007

2008

2009

3,135

Residential Development Business:
Condominium sales (units)

4,629

3,656

3,245

3,463

Detached housing sales (units)

374

448

507

347

255

Gross margin ratio of housing sales (%)

19.2

20.5

22.2

22.7

21.8

Completed housing units held in inventories (units)

68

64

6

275

265

Rental condominium sales for investors (units)

0

36

248

747

621

86,38592,75897,847103,102110,365

3.5

3.5

1.9

2.2

2.6

319,713460,320

771,211

1,031,528

1,235,611

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)

3,698

3,923

3,949

4,047

4,184

323,389

347,990

388,479

406,635

293,047

94,966113,973

115,457

120,543

129,944

Other Business:
Members of MEGALOS* Figures shown for fiscal 2008 and earlier were calculated by including the leased floor area of residential projects.

Analysis of Financial Position

fiscal year, stemming from falling prices and sluggish securities markets.

As of March 31, 2009, current assets stood at ¥740,267 million, up

At fiscal year end, therefore, the Group had total assets of ¥1,385,532¥109,350 million, or 17.3%, from a year earlier. This increase stemmed

million, up ¥493,832 million, or 55.4%, from a year earlier.

from a number of factors. Inventories rose, stemming from the proac-

Current liabilities rose ¥102,756 million, or 38.9%, to ¥366,729

tive land acquisition for the Residential Development Business, andmillion. Current liabilities increased because of a ¥122,162 million

sponsor equity increased as the Group expanded the scale of private

increase in short-term loans payable for the acquisition of shares infunds. A further boost to current assets came in the form of a ¥16,203

NREG TOSHIBA BUILDING Co., Ltd. This increase more than offset themillion increase in equity investments, due to the broadened scale ofdecline in deposits for consignment sales from customers outside theprivate funds. Since the Group invests in equity from the viewpoint ofGroup and JV partners.

being “in the same boat” as investors when undertaking management

Noncurrent liabilities increased ¥345,251 million, or 88.0%, com-of funds, the balance of equity investments increases in tandem withpared with the end of the previous fiscal year, to ¥737,427 million. This

assets under management.

was due mainly to a ¥247,895 million increase in long-term loans pay-

Among fixed assets, net property and equipment grew ¥380,489

able and for accounting for NREG TOSHIBA BUILDING assets at bookmillion. This was due to an increase in property, plant and equipment ofvalue and then including the amount obtained by multiplying the differ-¥105,929 million and an increase of ¥270,498 million in land following

ence between the market value and the book value by the statutory tax

the acquisition of NREG TOSHIBA BUILDING Co., Ltd. as a consoli-

rate as a deferred tax liability, which increased ¥81,014 million from thedated subsidiary.

end of the previous fiscal year. Total interest-bearing debt rose ¥370,058

By contrast, investment securities declined. This was due to falling
prices for two REITS (a REIT investing in office buildings and a REIT
investing in residential facilities) held by the Company as sponsor.

million to ¥778,074 million. As a result, total liabilities increased ¥448,007
million, or 68.3%, to ¥1,104,156 million.
Net assets increased ¥45,825 million, or 19.5%, compared with theInvestments and other assets declined ¥1,164 million, or 1.9%, to

end of the previous fiscal year, to ¥281,376 million. This was mainly due to¥60,077 million. This reflected a ¥4,269 million decline in the market

an increase of ¥42,525 million in minority interests. Accordingly, the debt-

value of investment securities compared with the end of the previous

to-equity ratio was 3.3 times, and the equity ratio 17.0%.

Nomura Real Estate Holdings, Inc. Annual Report 200939

Cash Flows

1) Trends in the real estate market

Cash flows from operating activities

In the fiscal year under review, the Group’s performance was negatively

Net cash used in operating activities amounted to ¥108,031 million, com-

impacted by the rapid worsening of the real estate market, and earnings

pared with net cash provided by such activities of ¥7,639 million in the

declined significantly compared with the previous fiscal year. Looking

previous fiscal year. Major factors affecting the cash flows were a decline

ahead, it seems the economic slowdown may be prolonged. Going for-in deposits and an increase in inventories, including real estate for sale.

ward, certain events could cause a decline in purchasing sentimentamong customers of the Residential Development Business and theCash flows from investing activities

Property Brokerage & Consignment Sales Business, our core businesses.

Net cash used in investing activities amounted to ¥141,789 million,

These events include the current economic slowdown, an associated¥128,441 million more than in the previous fiscal year. Major factors

deterioration in corporate earnings, a decline in consumer spending, aincluded the purchase of NREG TOSHIBA BUILDING shares, property,rise in interest rates, or an excess supply in the real estate market. Thereplant and equipment, and intangible assets.

may also be falls in selling prices or increases in inventories due to thedecline in purchasing sentiment, or losses on valuation of inventories. For

Cash flows from financing activities

the Building Business and the Investment Management & Development

Net cash provided by financing activities totaled ¥295,508 million, anBusiness, moreover, such events could also spark declines in office rents,

increase of ¥286,717 million from the previous fiscal year. This was mainly

increases in vacancy rates, falls in asset values, or drops in profit ratios.

because the Company raised funds through long-term and short-term bor-

In addition, softness in the REIT market and dwindling demand in invest-

rowings to meet funding demands from operating and investing activities.

ment funds may be prolonged. Such events could have an adverse

As a result, cash and cash equivalents at fiscal year end stood at

impact on the Group’s business performance.

¥78,473 million, up ¥46,962 million from the previous fiscal year.

2) C hanges to real estate-related legislation or

Basic Policy Concerning Profit Distribution

the tax system

The Company’s basic policy regarding the distribution of profits to share-

A number of laws and regulations apply to the various businesses of theholders requires that decisions take into account a balance with retained

Nomura Real Estate Group, which will be subject to new regulations as it

earnings, after comprehensively considering such factors as businessexpands its operational scope in the future. Going forward, the Group

performance in the applicable fiscal year, the operating environment going

may face new obligations and expense burdens if the Building Standards

forward, and capital investment plans. Our plan is to utilize retained earn-Law, the Building Lots and Buildings Transaction Business Law, theings for proactive business investments, including inventory purchases

Financial Instruments and Exchange Law, or other real estate-related

and equity investments, with the aim of generating earnings in the future.

laws are revised, or if new legislation is implemented. Such events could

In accordance with this basic policy, the Company declared a year-

adversely affect the Group’s business performance.

end cash dividend of ¥20.00 per share. Combined with the ¥20.00

Furthermore, if the tax system related to real estate is revised, thisinterim dividend already paid, this brought annual dividends for the year

could lead to an increase in expenses for holding, acquisition, and sales

to ¥40.00 per share. For fiscal 2009, the Company intends to continueof assets, or a decline in the purchasing sentiment of customers. It could

to pay interim and year-end dividends of ¥20.00 each, for a total of

also prompt a change in the facility strategies of companies and revisions¥40.00 per share.

of their investment plans. Such events could have an adverse impact on
the Group’s business performance.

Risks Affecting the Business of
Nomura Real Estate Group3) Licenses and permits for major businesses

We believe that the following major risks have the potential to significantly

The Group obtains the licenses and permits, such as real estate broker-

impact the operating results and financial condition of the Group, as well as

age and construction licenses, when carrying out business activities.

the decisions of investors. Being properly aware of the potential for such

Currently, there are no reasons for any of these licenses or permits torisks to materialize, the Group is establishing and strengthening its inter-be cancelled or subject to penalties. However, in the future, if suchnal control systems to ensure ongoing improvements, while at the same

licenses or permits are cancelled or subject to penalties for whatevertime performing comprehensive risk management. It should be noted thatreason, this could adversely affect the Group’s business performance.

matters concerning the future in this document have been determinedbased on information available to the Group at the end of fiscal 2008.

40 Nomura Real Estate Holdings, Inc. Annual Report 20094) Impact of interest-bearing debt

ways, the Group strives to train and educate employees and protect the

The Group aims to increase earnings by aggressively advancing its vari-interests of customers.

ous businesses. In the fiscal year under review, NREG TOSHIBA BUILD-

In the event of external leakage of personal information due to

ING was acquired as a consolidated subsidiary, and in the Residential

unforeseen circumstances, however, confidence in the Group could be

Development Business we increased real estate for sale and other inven-

lost, leading to a decrease in sales and the incurrence of expenses to pay

tories. To meet such demand for capital, the Group raises funds throughcompensation for damages. This could have an adverse impact on the

borrowings from financial institutions and the issuance of corporate

Group’s business performance.

bonds. At the end of fiscal 2008, the balance of interest-bearing debt
stood at ¥778,074 million, up ¥370,058 million from a year earlier. (This8) Soil pollution

was equivalent to 56.2% of total assets, up 10.4 points from the end of

Under the Soil Contamination Countermeasures Law, owners of land are

the previous year.) When raising funds by borrowing, the Group attempts

obliged to evaluate and report on the soil pollution status of their proper-

to deal with the risk of a short-term rise in interest rates mainly by taking

ties with respect to the presence of specific harmful substances, andout long-term, fixed-rate loans. However, an increase in borrowing costs

also to take measures to remove such polluting substances.

due to a rise in market interest rates could have a negative impact on theGroup’s business performance and financial condition.

When considering purchases of land for business use, the Group
conducts historical and pollution assessments in advance. If the presence of pollution is confirmed, the Group either cancels the acquisition or5) M&A

engages specialists to remove such pollution. However, it is possible that

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

the aforementioned assessments fail to confirm the full extent of soil pol-term growth, as it helps to make the most of the advantages offered bylution, or that the seller is unable to fulfill his or her guarantee against

the holding company system. The Company aims to maximize the value

defects even if soil pollution is detected. Detection of soil pollution onof the NRE Group by focusing on M&A opportunities that yield synergy

land purchased by the Group, therefore, could lead to changes in thewith NRE Group’s business. In fiscal 2008, the Company acquired NREG

Group’s original business schedules or to the incurrence of the additional

TOSHIBA BUILDING as a consolidated subsidiary. The acquisition will

expenses, which could have a negative impact on its business perfor-

significantly expand rental revenue, a source of stable income, while atmance or financial condition.

the same time creating a pipeline to the Toshiba Group. However, in theevent of changes in the operating environment, the expected growth of9) Asbestos

the acquired company, or the synergy expected from the acquisition,

Some of the buildings owned by the Group have been sprayed withmay not be realized. This could have an adverse impact on the Group’smaterials that include asbestos. The Group has engaged third-party

business performance.

organizations to assess such buildings. According to the results of
those assessments, the said materials are showing no signs of age-6) Natural disasters

related degradation and are in stable condition. In the future, however, it

Natural disasters, such as earthquakes and wind and flood damage,is possible that asbestos may be scattered if age-related degradation

as well as sudden accidents, could lead to damage or destruction of

occurs. Such an event could require removal or containment of thereal estate owned or managed by the Group. Such incidents could

asbestos in question, resulting in the incurrence of additional costs thathave a negative impact on the Group’s business performance andcould have an adverse effect on the Group’s business performance or

financial condition.

financial condition.

7) Personal information

10) Concentration of revenues in fourth quarterIn the course of carrying out its operations, the various businesses of the

In the Residential Development Business, which accounts for more thanGroup handle large quantities of personal information. The Group

50% of the Group’s revenues, housing sales are registered as sales whenendeavors to comply with various laws and regulations pertaining to per-properties are handed over to the customers. In many cases, however,sonal information, such as the Law Concerning Protection of Personal

the completion and handover occur in February or March of each year, inInformation, and also handle information in the proper manner. Moreover,accordance with the requirements of customers taking up residence. For

Group companies have produced various documents, such as “Informa-

this reason, a large proportion of the Group’s revenues is concentrated intion Security Provisions,” “Rules for Handling Personal Information” andthe fourth quarter of each fiscal year.

“Guidelines for Entrusting the Handling of Personal Information.” In these

Nomura Real Estate Holdings, Inc. Annual Report 200941

Consolidated Balance Sheets
Nomura Real Estate Holdings, Inc.
March 31, 2008 and 2009ASSETS(Millions of yen)(Thousands of
U.S. dollars)(Note 1)

2008

2009

2009

¥ 31,513¥   39,475$   401,868

9,041

31,385319,502

Current Assets:
Cash and deposits (Note 2 (3))
Notes and accounts receivable–trade
Short-term investment securities (Note 4)–

39,000397,028

Real estate for sale (Notes 6, 8 and 9)

200,533

227,505

2,316,039

Real estate for sale in process (Notes 6, 8 and 9)

139,794

150,443

1,531,535

Land held for development (Notes 6, 8 and 9)

114,082

102,924

1,047,786

Equity investments (Note 4)

92,873109,076

1,110,418

Deferred tax assets (Note 10)

10,391

21,348217,326

Other

32,763

19,269196,162

(73)

(158)

(1,610)630,917740,267

7,536,054

Investment securities (Note 4)

19,585

15,316

155,921

Lease and guarantee deposits

27,634

26,797

272,795

Deferred tax assets (Note 10)

12,336

14,337

145,953

Other

1,804

3,645

37,109Allowance for doubtful accounts

(118)

(18)

(183)

   Total investments and other assets

61,24160,077

611,595

Land (Notes 6 and 8)

110,094

380,592

3,874,494

Buildings and structures (Note 8)

141,279

251,632

2,561,666

Allowance for doubtful accounts   Total current assets

Investments and Other Assets:

Property, Plant and Equipment:

Construction in progress (Note 6)

1,924

4,286

43,629Machinery and equipment (Note 6)

5,832

7,557

76,928Other
Accumulated depreciation   Property, plant and equipment, net

Intangible Assets
Total Assets

42 Nomura Real Estate Holdings, Inc. Annual Report 2009

–

335

3,413

259,129

644,4026,560,130(63,857)(68,641)(698,774)

195,272

575,761

5,861,356

4,270

9,427

95,972¥891,700¥1,385,532$14,104,977

LIABILITIES AND NET ASSETS(Millions of yen)(Thousands of
U.S. dollars)(Note 1)

2008

2009

2009

¥ 63,377¥   69,523$   707,759

73,185

195,347

1,988,665

Current Liabilities:
Notes and accounts payable–trade
Short-term loans payable (Notes 5 and 6)
Current portion of bonds

–

300

3,054

Income taxes payable (Note 10)

14,827

14,791

150,579

Deposits received

57,07531,858324,321

165

707

7,200

4,104

4,465

45,453

Provision for directors’ bonuses

591

238

2,426

Provision for loss on business liquidation

280

215

2,183

Accrued interest

987

1,914

19,483

Deferred tax liabilities (Note 10)
Provision for bonuses

Accrued consumption taxes

584

685

6,975

Accounts payable–other

5,131

7,421

75,547

Advanced received

30,91728,048285,537

Other (Note 8)

12,75011,217

114,192

263,973366,729

3,733,374   Total current liabilities
Noncurrent Liabilities:
Bonds payable

20,30020,000203,604

Long-term loans payable (Notes 5 and 6)

314,532

562,427

5,725,609

Lease and guarantees deposits received

30,12747,425

482,795

Deferred tax liabilities (Note 10)

3,855

84,869863,985

Deferred tax liabilities for land revaluation (Note 10)

3,905

4,996

50,865

Provision for retirement benefits (Note 7)

12,144

14,283

145,408
18,441

Provision for loss on subleasing business

2,890

1,812

Other

4,423

1,615

16,438   Total noncurrent liabilities

392,176

737,427

7,507,145

Total Liabilities

656,149

1,104,156

11,240,519   Capital stock

82,64682,713842,037   Capital surplus

59,97660,043

611,248   Retained earnings

89,27391,491

931,392

(1)

(1)

(16)
(39,933)

Net Assets:
Shareholders’ equity (Note 11):   Treasury stock
Valuation and translation adjustments:

1,215(3,923)   Deferred gains on hedges   Valuation difference on available-for-sale securities

0

256

2,602

   Revaluation reserve for land

(327)

5,999

61,0739(638)(6,494)

217

368

3,747

   Foreign currency translation adjustments
Subscription rights to shares

2,543

45,068458,802

Total Net Assets

Minority interests

235,551

281,376

2,864,458

Total Liabilities and Net Assets¥891,700¥1,385,532$14,104,977

See notes to consolidated financial statements.

Nomura Real Estate Holdings, Inc. Annual Report 200943

Consolidated Statements of Income
Nomura Real Estate Holdings, Inc.
Years Ended March 31, 2008 and 2009

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

2008

2009

2009

Operating revenue¥411,493¥448,656$4,567,401

Operating Expenses:

341,671414,643

4,221,145

Operating cost

281,102347,892

3,541,606

Selling, general and administrative expenses

60,56966,751

679,539   Operating Income

69,82234,013346,256

Other Income and Expenses:

Operating Revenue:(8,562)(10,483)(106,713)

Interest income

159

153

1,562

Dividends income

58

47

477

Equity in earnings of affiliates

13

–

–

Refunds of fixed asset tax for prior periods

–

67

679

Gain on sales of subsidiaries and affiliates' stocks

474

–

–

Gain on change in equity

138

–

–

Reversal of provision for loss on subleasing business

356

545

5,546

(7,284)(9,602)(97,753)

Interest expenses
Equity in losses of affiliates

(0)

(7)

(66)

Provision of allowance for doubtful accounts

(48)

(14)

(142)

Dividends distributions from silent partnership(1,050)

–

–

–

(717)

(7,296)(1,378)(955)(9,720)61,26023,530239,543

Loss on valuation of investment securities
Other, net   Income before Income Taxes and Minority Interests
Income Taxes (Note 10):
Income taxes–current

25,20320,013203,734

Income taxes–deferred549(11,025)(112,238)

25,752

8,988

91,496   Total income taxes
Minority interests in income   Net Income
See notes to consolidated financial statements.

44 Nomura Real Estate Holdings, Inc. Annual Report 2009

253

772

7,861

¥ 35,255¥ 13,770$  140,186

Consolidated Statements of Changes in Net Assets
Nomura Real Estate Holdings, Inc.
Years Ended March 31, 2008 and 2009

(Millions of yen)

Balance at March 31, 2007

Number ofsharesissuedCapitalstock

CapitalsurplusRetainedearnings

Treasurystock

Valuationdifference on
available-forsale securities

149,325,000¥82,646¥59,976¥59,245¥(0)¥11,429

Dividends from surplus

–

–

–

(5,227)––

Net income

–

–

–

35,255––Purchases of treasury stock

–

–

–

–

(1)

–

Net changes of items other thanshareholders’ equity

–

–

–

–

–

(10,214)

149,325,000¥82,646¥59,976¥89,273¥(1)¥ 1,215Issuance of new shares

46,100

67

67

–

–

–

Dividends from surplus

–

–

–

(5,226)––

Net income

–

–

–

13,770––

Reversal of revaluation reserve for land

–

–

–

(6,326)––

Purchases of treasury stock

–

–

–

–

(0)

–

Balance at March 31, 2008

Net changes of items other thanshareholders’ equity
Balance at March 31, 2009

–

–

–

–

–

(5,138)149,371,100¥82,713¥60,043¥91,491¥(1)¥ (3,923)

Deferred
gains/losses
on hedges

Revaluation
reserve forland

Foreigncurrencytranslation
adjustments

Subscription
rights tosharesMinority
interests

Total net
assets¥214,466(Millions of yen)

¥ (15)¥  (327)

¥ 253

¥   –

¥ 1,259

Dividends from surplus

Balance at March 31, 2007

–

–

–

–

–

(5,227)

Net income

–

–

–

–

–

35,255Purchases of treasury stock

–

–

–

–

–

(1)

Net changes of items other thanshareholders’ equity

15

(0)

(244)

217

1,284

(8,942)¥235,551

Balance at March 31, 2008¥   0¥  (327)

¥   9

¥217

¥ 2,543

Issuance of new shares

–

–

–

–

–

134

Dividends from surplus

–

–

–

–

–

(5,226)

Net income

–

–

–

–

–

13,770

Reversal of revaluation reserve for land

–

–

–

–

–

(6,326)

Purchases of treasury stock

–

–

–

–

–

(0)

Net changes of items other thanshareholders’ equity

256

6,326

(647)

151

42,52543,473

Balance at March 31, 2009

¥256

¥5,999¥(638)¥368¥45,068¥281,376

Nomura Real Estate Holdings, Inc. Annual Report 200945

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

Balance at March 31, 2008

Capitalstock

CapitalsurplusRetainedearnings

Treasurystock

Valuationdifference on
available-forsale securities$841,356$610,567$908,813$  (9)$ 12,372

Issuance of new shares

681

681

–

–

–

Dividends from surplus––(53,205)––

Net income––

140,186––

Reversal of revaluation reserve for land––

(64,402)––

Purchases of treasury stock

–

–

–

(7)

–

Net changes of items other thanshareholders’ equity
Balance at March 31, 2009

–

–

–

–

(52,305)$842,037$611,248$931,392$(16)$(39,933)(Thousands of U.S. dollars)(Note 1)

Balance at March 31, 2008

Deferred
gains/losses
on hedges

Revaluation
reserve forland

Foreigncurrencytranslation
adjustments

Subscription
rights tosharesMinority
interests

Total net
assets$2,397,956$    (4)$ (3,329)$    87$2,211$ 25,892

Issuance of new shares

–

–

–

–

–

1,362

Dividends from surplus

–

–

–

–

–

(53,205)

Net income

–

–

–

–

–

140,186

Reversal of revaluation reserve for land

–

–

–

–

–

(64,402)

Purchases of treasury stock

–

–

–

–

–

(7)

Net changes of items other thanshareholders’ equity

2,606

64,402(6,581)

1,536

432,910442,568

Balance at March 31, 2009

$2,602$61,073$(6,494)$3,747$458,802$2,864,458

See notes to consolidated financial statements.
Note: The number of issued shares outstanding increased by 46,100 shares due to the exercise of stock options.

46 Nomura Real Estate Holdings, Inc. Annual Report 2009

Consolidated Statements of Cash Flows
Nomura Real Estate Holdings, Inc.
Years Ended March 31, 2008 and 2009

Net Cash Provided by (Used in) Operating Activities:
Income before income taxes and minority interests
Depreciation and amortization
Equity in (earnings) losses of affiliates
Increase (decrease) in allowance for doubtful accounts
Increase in provision for retirement benefits
Decrease in provision for loss on business liquidation
Decrease in provision for loss on subleasing business
Interest and dividend income
Interest expenses
Decrease (increase) in notes and accounts receivable–trade
Increase in inventories
Increase in equity investments
Increase in notes and accounts payable–trade
Decrease in deposits received
Other, net   Subtotal
Interest and dividends income received
Interest expenses paid
Income taxes paid   Net cash provided by (used in) operating activities(Millions of yen)(Thousands of
U.S. dollars)(Note 1)

2008

2009

2009

¥ 61,260
4,892
(13)
48
1,445
(348)
(922)
(217)
7,284
467
(35,383)(14,928)
24,257(3,235)(3,099)41,508128(7,076)(26,921)
7,639¥  23,530
7,149
7
(22)
1,381
(65)
(1,079)(200)
9,602(21,333)(36,661)(16,203)
4,739(38,794)(9,844)(77,793)
173(8,762)(21,649)(108,031)$   239,543
72,77666(226)
14,060(664)(10,980)(2,039)97,753(217,172)(373,218)(164,953)
48,247(394,932)(100,211)(791,950)
1,770(89,200)(220,393)(1,099,773)

Net Cash Used in Investment Activities:
Purchase of investment securities
Proceeds from sales and liquidation of investment securities
Purchases of investments in subsidiaries resulting in change   in scope of consolidation (Note 3)
Purchases of property, plant and equipment and intangible assets
Proceeds from sales of property, plant and equipment and intangible assets
Payments of 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 guarantees deposits received
Other, net   Net cash used in investment activities

(8)
178

(1,484)–(15,103)–(997)(18,174)
12
(15)
5,131
(1,162)
1,820(3,668)3,218
317(13,348)(81,588)(56,663)20(20)
29(1,004)
1,987(2,726)
3,944(4,284)(141,789)(830,582)(576,836)
208
(204)
297
(10,224)
20,226(27,757)
40,152(43,616)(1,443,439)

Net Cash Provided by Financing Activities:
Net increase in short-term loans payable
Repayments of finance lease obligations
Proceeds from long-term loans payable
Repayments of long-term loans payable
Proceeds from issuance of bonds
Redemption of bonds
Proceeds from issuance of common stock
Proceeds from stock issuance to minority shareholders
Purchase of treasury stock
Cash dividends paid
Cash dividends paid to minority shareholders   Net cash provided by financing activities

6,350–
54,315(67,989)
20,182
(25)
–
1,192
(1)
(5,226)(7)
8,791

103,700(21)
296,503(97,042)
–
–
0
0
(1)
(5,226)(2,405)295,508

1,055,686(219)
3,018,457(987,911)
–
–
0
4
(7)
(53,205)(24,482)
3,008,323

Net Increase in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of the Fiscal Year
Increase (Decrease) in Cash and Cash Equivalents Resulting from
Change of Scope of Consolidation

3,082
28,43745,68831,511

465,111
320,783

(8)

1,274

12,981

Cash and Cash Equivalents at End of the Fiscal Year (Note 2 (3))¥ 31,511¥  78,473$   798,875

See notes to consolidated financial statements.

Nomura Real Estate Holdings, Inc. Annual Report 200947

Notes to Consolidated Financial Statements
Nomura Real Estate Holdings, Inc.
March 31, 2008 and 2009

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 Law 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 understanding of readers. In addition, thenotes 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 the prevailing exchange rate at March 31, 2009 of ¥98.23 = 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 rateof 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 includedin 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 are translated 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 maturities not exceeding three months at the time of purchase and with an insignificant risk of market value fluctuation are considered to be cash and cash equivalents.
As of March 31, 2009, the balance of “Cash and cash equivalents” differed from the balance of “Cash and deposits” because it
did not include time deposits with deposit terms exceeding three months of ¥2 million ($20 thousand).
As of March 31, 2008, the balance of “Cash and cash equivalents” differed from the balance of “Cash and deposits” because it
did not include time deposits with deposit terms exceeding three months of ¥2 million.

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

48 Nomura Real Estate Holdings, Inc. Annual Report 2009

(5) Inventories
Inventories are mainly stated at cost, determined by the specific identification cost method (the amounts of inventories in the accompanying Consolidated Balance Sheets are computed based on the write-down method reflecting decreased profitability).

(6) Short-term Investment 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 movingaverage method.

(7) Property, Plant 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 by themethod applied to ordinary operating lease transactions.

(10) Amortization of Goodwill
Goodwill is amortized using the straight-line method over a period of five to twenty 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 anestimated 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’
per capital taxes in the Consolidated Statements of Income.
The tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting and income
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.
Actuarial gain or loss is included in the Consolidated Statements of Income from the year following the fiscal year in which the gainor loss is recognized on a straight-line basis over a 10-year period, which is shorter than the average remaining service period of theeligible employees.
Nomura Real Estate Holdings, Inc. Annual Report 200949

(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 theweighted-average number of shares of common stock outstanding during each fiscal year. Diluted net income per share is computedby dividing the net income available for distribution to the shareholders by the weighted-average number of shares of common stock
outstanding during each fiscal year assuming full conversion of convertible bonds and full execution of warrants.
Diluted net income per share for the year ended March 31, 2009 was ¥92.10 ($0.94).
Diluted net income per share for the year ended March 31, 2008 was ¥236.06.

(15) Land Revaluation
Under “The Law Concerning Revaluation Reserve for Land” promulgated on March 31, 1998, the Company revalued its land held forbusiness 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 net of such tax amount is recorded as “Revaluation reserve for land”
in Net Assets.
Method of revaluation:
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
Market value was less than book value after revaluation by ¥4,075 million at March 31, 2008 and ¥3,805 million ($38,733 thousand)at March 31, 2009.

(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 fromthe 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 amount determined by the swaps
and forwards, and no gain or loss is recognized.

(17) Accounting Treatment of Leases
Previously, the Company accounted for finance leases, other than those that transfer ownership, as operating lease transactions.
However, from April 1, 2008 the Company has applied the “Accounting Standard for Lease Transactions” (ASBJ Statement No. 13)
and the “Guidance on Accounting Standard for Lease Transactions” (ASBJ Guidance No. 16) and now accounts for these leases as
ordinary sale and purchase transactions.
However, the Company has continued to treat finance leases, other than those that transfer ownership, that commenced prior to
April 1, 2008 as ordinary operating leases. The impact of this change on profit and loss for the fiscal year under review was minimal.

(18) Reclassification
Certain reclassifications have been made to the prior year amounts presented in the consolidated financial statements to conformthem with the current year presentation. These reclassifications did not affect the net income or equity as previously reported.

50 Nomura Real Estate Holdings, Inc. Annual Report 2009

3. Business Combination
NREG TOSHIBA BUILDING Co., Ltd. and its subsidiary NREG TOSHIBA FUDOSAN FACILITY SERVICE Co., Ltd. were consolidated
by an acquisition of shares. The following shows details of assets and liabilities at the start of the consolidation, the acquisition priceof NREG TOSHIBA BUILDING Co., Ltd. and the net payment for this acquisition.

Current assets
Noncurrent assets(Millions of yen)(Thousands of
U.S. dollars)¥  12,957$   131,910

283,182

2,882,843

Goodwill

4,712

47,967

Current Liabilities(25,694)(261,569)

Noncurrent Liabilities(150,894)(1,536,125)

Minority interests(41,843)(425,971)

Acquisition cost

82,420

839,055

Cash and cash equivalents(1,284)(13,076)¥  81,136$   825,979

Net payment for acquisition of newly consolidated subsidiaries

Note: The net payment above is included in “Purchases of investments in subsidiaries resulting in change in scope of consolidation” in the Consolidated Statements of Cash Flows.

4. Securities
The following tables summarize the acquisition cost, book value and market value of securities which the Company held as of March
31, 2008 and 2009:(1) Held-to-maturity Debt Securities with Market Value(Millions of yen)
Book
value

Marketvalue

Difference

Government and municipal bonds, etc.

¥ 35

¥ 36

¥1

Subtotal
Securities whose market value does notexceed book value:
Government and municipal bonds, etc.

35

36

1

(1)

2008

Securities whose market value exceeds book value:

271

270

Subtotal

271

270

(1)

Total

¥306

¥306

¥0

Book
value

Marketvalue

Government and municipal bonds, etc.

¥295

Subtotal
Securities whose market value does notexceed book value:
Government and municipal bonds, etc.

295

(Millions of yen)
2009

(Thousands of U.S. dollars)

Difference

Book
value

Marketvalue

Difference

¥296

¥1

$3,004$3,016

$12

296

1

3,004

3,016

12

Securities whose market value exceeds book value:

Subtotal
Total

20

20

(0)

208

204

(4)

20

20

(0)

208

204

(4)

¥315

¥316

¥1

$3,212$3,220$ 8

Nomura Real Estate Holdings, Inc. Annual Report 200951

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

Book
value

Difference

Stocks¥ 1,338¥ 2,202¥   864

Other

19,85822,944

3,086

21,19625,146

3,950

2008

Securities whose book value exceeds acquisition cost:

Subtotal
Securities whose book value does notexceed acquisition cost:
Stocks
Other

55

49

(6)

22,156

20,274(1,882)

Subtotal

22,211

20,323(1,888)

Total¥43,407¥45,469¥ 2,062

Acquisition
cost

Book
value

Stocks¥   126

Other

296
422

(Millions of yen)
2009

(Thousands of U.S. dollars)

Difference

Acquisition
cost

Book
value

Difference¥   423¥   297$   1,284$   4,307$  3,023

297

1

3,014

3,027

13

720

298

4,298

7,334

3,036

Securities whose book value exceeds acquisition cost:

Subtotal
Securities whose book value does notexceed acquisition cost:
Stocks

579

561

(18)

5,898

5,709

(189)

Other

39,97933,519(6,460)406,990341,230(65,760)

Subtotal

40,55834,080(6,478)412,888346,939(65,949)

Total¥40,980¥34,800¥(6,180)$417,186$354,273$(62,913)(3) Sales of Available-for-sale Securities
The table below describes sales of available-for-sale securities for the years ended March 31, 2008 and 2009:(Millions of yen)
2008

(Thousands of U.S. dollars)

2009

2009

Sales
amountAggregate
gains

Aggregate
lossesSalesamountAggregate
gains

Aggregate
lossesSalesamountAggregate
gains

Aggregate
losses¥39,332¥292¥1¥2,258¥2¥154$22,988$22$1,563(4) Securities without Market Value
The following table summarizes the book value of securities without market value as of March 31, 2008 and 2009:(Millions of yen)(Thousands of
U.S. dollars)

2008

2009

2009

¥     –

¥ 5,000$ 50,901–

34,000346,126

Available-for-sale securities:
CRF
Negotiable certificates of deposit
Unlisted stocks

560

565

5,751

Preferred investments

4,714

7,522

76,573

Investments in silent partnerships

61,33477,732

791,326

99

94

956

Investment in limited liability partnership

52 Nomura Real Estate Holdings, Inc. Annual Report 2009

(5) Redemption Schedule for Available-for-sale Securities with Maturities and Held-to-maturity Securities
The following tables summarize the redemption schedule for securities classified as available-for-sale securities with maturities andheld-to-maturity securities as of March 31, 2008 and 2009:(Millions of yen)

2008

Due within
1 yearDue after
1 yearand within
5 years

Due after
5 years
and within
10 years

Due after
10 years

¥–

¥295

¥10

¥–

¥–

¥295

¥10

¥–

Due within
1 yearDue after
1 yearand within
5 years

Due after
5 years
and within
10 years

Due after
10 years¥    37

¥268

¥10

¥–

Bonds:
Government and municipal   bonds, etc.
Total

(Millions of yen)

2009

(Thousands of U.S. dollars)

Due within
1 yearDue after
1 yearand within
5 years

Due after
5 years
and within
10 years

Due after
10 years$    377$2,728$102$–

Bonds:
Government and municipal   bonds, etc.
Other

34,000–––346,126

–

–

–

Total

¥34,037

¥268

¥10

¥–

$346,503$2,728$102$–

5. Short-term Loans Payable and Long-term Loans Payable
Short-term loans payable as of March 31, 2008 and 2009 mainly consisted of borrowings from banks with a weighted-average interest rate of 1.1% in 2008 and 1.0% in 2009.
Long-term loans payable and bonds payable as of March 31, 2008 and 2009 are summarized as follows:(Millions of yen)(Thousand of
U.S. dollars)

2008

2009

2009

Unsecured bonds (1.7%), due 2014

¥ 10,000¥ 10,000$  101,802

Unsecured bonds (2.1%), due 2017

10,00010,000101,802

Secured bonds (3.0%), due 2009

300

300

3,054

Loans payable
Secured17,34940,115408,379

Unsecured

338,868

582,458

5,929,534

Lease obligations

–

330

3,361

Subtotal

376,517643,2036,547,931

Less amounts due within one year

(41,685)(60,519)(616,096)¥334,832¥582,684$5,931,835

Long-term loans payable as of March 31, 2008 and 2009 mainly consisted of borrowings from domestic Japanese banks and life
insurance companies with a weighted-average interest rate of 1.5% in 2008 and 1.4% in 2009.
The weighted-average interest rate for lease obligations is not shown because for some consolidated subsidiaries the lease obligations recorded in the consolidated balance sheets are the amounts before deducting the interest equivalents included in the totallease commitments.

Nomura Real Estate Holdings, Inc. Annual Report 200953

The details of maturities of long-term loans payable and bonds payable subsequent to March 31, 2009 were as follows:(Millions of yen)(Thousands of
U.S. dollars)

2011¥ 99,261$1,010,496

2012

93,643

953,3032013

99,6601,014,554

2014

113,076

1,151,135

2015 and thereafter

176,787

1,799,725¥582,427$5,929,213(Millions of yen)(Thousands of
U.S. dollars)

2011

¥ 74

$  752

2012

74

748

2013

74

753

2014

36

369

Year ending March 31

The following shows the maturities of lease obligations as of March 31, 2009 for each year.
Year ending March 31

2015 and thereafter

0

0

¥258

$2,622(Millions of yen)(Thousands of
U.S. dollars)

2008

2009

2009

Buildings and structures¥–¥ 9,305$ 94,722

Land

–

7,455

75,892Other property and equipment

–

67

685

–

16,827

171,299

Short-term loans payable

–

732

7,448

Long-term loans payable

–

2,281

23,226

Lease and guarantee deposits received

–

96

981

Total

¥–

¥ 3,109$ 31,655

6. Pledged Assets and Secured Liabilities
Pledged assets and secured liabilities at March 31, 2008 and 2009 are summarized as follows:(1) Pledged Assets and Secured Liabilities

Pledged assets:

Secured liabilities:

54 Nomura Real Estate Holdings, Inc. Annual Report 2009

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

2008

2009

2009

¥ 5,869¥ 2,355$ 23,977

Pledged assets:
Real estate for sale in process
Buildings and structures
Land

–

4,900

49,883

15,201

46,927477,723

Construction in progress

1,036

1,828

18,607

Total

22,10656,010570,190

Secured liabilities:
Short-term loans payable

2,175

1,602

16,308Long-term loans payable

15,17435,500361,397

Total¥17,349¥37,102$377,705

Pursuant to Article 128 of the Law Concerning Liquidation of Assets (Law No. 105, 1998), Shinjuku Development, an SPC (special
purpose company), has pledged assets as security for ¥300 million in special corporate bonds, with a payment obligation limited tothat amount.

7. Retirement Benefits(1) Outline of Retirement Benefit Plans
The Company does not have a retirement benefit plan. Among its consolidated subsidiaries, one subsidiary has a lump-sum payment
and a tax-qualified pension plan, which are defined benefit pension plans with a retirement benefit trust. Six subsidiaries have adopted
only lump-sum payment plans, and one subsidiary has only a tax-qualified pension plan. Also, one consolidated subsidiary has alump-sum payment plan (defined benefit type) and a pension plan (defined contribution type). In certain cases, additional retirement
benefit payments have been made.

(2) Details of Retirement Benefit Obligation(Millions of yen)

(1) Projected benefit obligation(2) Plan assets at fair value(3) Unfunded retirement benefit obligation (1)+(2)(4) Unrecognized actuarial gain or loss
(5) Provision for retirement benefits (3)+(4)(Thousands of
U.S. dollars)

2008

2009

2009

¥(22,126)¥(23,987)$(244,196)

7,275

5,992

61,006(14,851)(17,995)(183,190)

2,707

3,712

37,782¥(12,144)¥(14,283)$(145,408)

Note: Certain of the consolidated subsidiaries applied a simplified method to calculate their projected benefit obligation.

Nomura Real Estate Holdings, Inc. Annual Report 200955

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

2008

2009

2009

(1) Service cost

¥1,305¥1,448$14,738(2) Interest cost

412

428

4,354

(3) Less: Expected return on plan assets

(176)

(146)

(1,480)(4) Amortization of actuarial gain or loss

390

533

5,428

(5) Additional retirement benefit payments

45

27

274

(6) Other

120

142

1,442

¥2,096¥2,432$24,756

Retirement benefit expenses

Notes:
1. Retirement benefit expenses of consolidated subsidiaries applying a simplified method are included in “(1) Service cost.”
2. “ (6) Other” shows the contributions paid to defined contribution pension plans. Certain of the 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:
2008

2009

Discount rate

2.00%

2.00%

Expected rate of return on plan assets

2.00%

2.00%

8. Unrealized Transaction
The following unrealized transaction was performed during the year ended March 31, 2008:
Kaihin Makuhari Development Co., Ltd., a consolidated subsidiary of the Company, entrusted a block of rental condominiums
developed for sale to a trust bank and assigned its beneficiary rights to Smile Retail Eight, Ltd., an SPC (special purpose company),on March 17, 2008. However, as Nomura Real Estate Development Co., Ltd., also a subsidiary of the Company, has retained equity
holdings in silent partnerships (Tokumei Kumiai) in amounts exceeding 5% of the transfer value to Smile Retail Eight, the risks andeconomic benefits of the assets were consequently not deemed to have been transferred in their entirety to other parties through the
SPC. Therefore, the transaction has been accounted for as a financing transaction in accordance with “Practical Principles Concerning Accounting Treatment of Assignor in Liquidation of Real Estate Property Using Special Purpose Companies” (July 31, 2000) for
the year ended March 31, 2008.
As a result, the related assets were not accounted for as having been sold and, accordingly, were included in the accompanying
Consolidated Balance Sheets at March 31, 2009, while liabilities of ¥8,202 million ($83,494 thousand) were recorded in “Other” inCurrent Liabilities.
The book value of these assets (real estate for sale) as of March 31, 2009 was ¥5,148 million ($52,410 thousand).

9. Reclassification of Assets
As of March 31, 2009, following a reassessment of the purposes for holding assets, real estate for sale amounting to ¥16,646 million($169,459 thousand) were reclassified to property and equipment.

56 Nomura Real Estate Holdings, Inc. Annual Report 2009

10. Income Taxes
The statutory tax rate in Japan was 40.7% for the years ended March 31, 2008 and 2009.
A reconciliation of the statutory and effective tax rates for the year ended March 31, 2008 has been omitted because the difference between these tax rates was less than 5%.
The table below presents an itemized breakdown of factors generating differences between the statutory tax rate and the effective
tax rate of the Company and its domestic subsidiaries for the year ended March 31, 2009:
Significant differences between the statutory tax rate and the effective tax rate
2009

Statutory tax rate

40.7%

Adjustments:   Permanent differences including entertainment expenses

2.0   Retained earnings of affiliates

3.6   Valuation allowance(8.6)   Other

0.5   Effective tax rate

38.2%

The table below presents an itemized breakdown of deferred tax assets and liabilities as of March 31, 2008 and 2009:
Significant components of the Company’s deferred tax assets and liabilities(Millions of yen)(Thousands of
U.S. dollars)

2008

2009

2009

Deferred tax assets:
Unrealized profits¥ 13,148¥ 14,165$  144,201

Inventory write-downs

4,635

15,160154,330

Provision for retirement benefits

4,928

5,817

59,223

Provision for loss on subleasing business

2,435

962

9,794

Provision for bonuses

1,683

1,768

18,004

Accrued enterprise taxes

1,184

1,209

12,304

Excess of depreciation

790

1,124

11,439

Revaluation of assets on consolidation

–

2,979

30,330

Valuation difference on available-for-sale securities

–

2,689

27,373

3,536

5,095

51,869Gross deferred tax assets

32,33950,968518,867

Valuation allowance(3,409)(6,721)(68,427)

Total deferred tax assets

28,93044,247450,440

Other

Deferred tax liabilities:
Revaluation of assets on consolidation–(69,956)(712,169)(8,516)(22,869)(232,804)

Valuation difference on available-for-sale securities

(835)

–

–

Gain on contribution of securities to retirement benefit trust

(437)

–

–

Other

(436)

(1,314)(13,374)

Total deferred tax liabilities(10,224)(94,139)(958,347)

Net deferred tax assets¥ 18,706¥(49,892)$(507,907)

Reserve for deferred income taxes

Nomura Real Estate Holdings, Inc. Annual Report 200957

11. Shareholders’ Equity
Companies in Japan were previously subject to the Commercial Code of Japan (the “Code”); however, the Code was superseded by
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 resolutionof the board of directors, an amount equivalent to less than half of those funds may be appropriated to the capital reserve (a component of additional paid-in capital).
The Act provides that an amount equal to 10% of the amount to be distributed as distributions of capital surplus (other than thecapital 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, 2008 and 2009, the Company’s capital reserve amounted to ¥82,636 million and ¥82,703 million ($841,927
thousand), and no retained earnings reserve was recorded.

12. Derivative Financial Instruments
It is a policy of the Company and its consolidated subsidiaries to utilize derivative financial instruments only for the purposes of hedging interest rate risk and currency risk, and not for speculative purposes.
The purpose of interest rate swap contracts is to hedge the risk of increases in financing costs in the future by fixing interest payments for loans, while the purpose of foreign exchange forward contracts and cross currency swap contracts is to hedge the risk ofcurrency fluctuation in securities denominated in foreign currencies.
Interest rate swap transactions are subject to the risk of changes in interest rate. Foreign exchange forward and currency swap
transactions are subject to the risk of changes in foreign exchange rates. The derivative financial instruments are executed with creditworthy financial institutions, and the Company’s management believes there is little risk of default by the counterparties to its derivatives positions.
The derivative transactions are executed and managed by the Company’s Finance Department in accordance with the established policies and plans of risk management set forth and approved by the officer in charge of the Finance Department based on theapplicable internal regulations. The Finance Department also reports the transaction status to the officer in charge on a regular basis.
Regarding the Company’s consolidated subsidiaries, the derivative transactions are executed and managed in accordance with thedesignated procedures based on their respective internal regulations.
Details of derivative financial instruments used by the Company are summarized as follows:
Hedging instruments

Hedged items

Interest rate swap contracts

Loans

Currency swap and foreign exchange forward contracts

Securities denominated in foreign currencies

Fluctuation in cash flows or total market fluctuation of hedged items is compared with that of the hedging instruments to assess
the effectiveness of the hedges based on the ratio of the fluctuation.

58 Nomura Real Estate Holdings, Inc. Annual Report 2009

13. Leases
Finance lease transactions, other than those which are deemed to transfer ownership of the leased property to the lessee, areaccounted for as ordinary operating lease transactions.
Details of significant lease transactions are as follows.
(1) The following table shows the acquisition cost equivalents, the accumulated depreciation equivalents, the accumulated impairment loss equivalents and term-end balance equivalents of leased assets as of March 31, 2008. Details on lease transactions havebeen omitted for the fiscal year ended March 31, 2009 because their importance was negligible.
(Millions of yen)
2008

Acquisition cost:
Buildings and structures¥    15

Machinery and equipment

1,957

Other

264

Accumulated depreciation(1,112)Net book value¥ 1,124

Note: The above acquisition cost equivalents were calculated using the paid interest method because the termend balances of outstanding lease commitments were only a small percentage of the term-end balances ofproperty and equipment.

(2) The table below presents the future lease payments under finance leases subsequent to March 31, 2008. Details on lease transactions have been omitted for the fiscal year ended March 31, 2009 because their importance was negligible.
(Millions of yen)
Finance leases

2008

Future lease payments:
Due within 1 year
Due over 1 year
Total¥  421703¥1,124(3) The table below presents the future lease payments under operating leases subsequent to March 31, 2008 and 2009.
(Millions of yen)(Thousands of
U.S. dollars)

2008

2009

2009

¥ 7,937¥ 8,158$ 83,046

Due after 1 year

41,22344,961

457,716

Total¥49,160

53,119540,762¥ 5,171

7,331

74,629Operating leases

Future lease payments:
Due within 1 year

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

19,85941,294420,379

Total¥25,030¥48,625$495,008

Note: The term-end balances of the outstanding lease commitments were calculated using the interest paid method because the term-end balances of theoutstanding lease commitments were only a small percentage of the term-end balances of property and equipment.

Nomura Real Estate Holdings, Inc. Annual Report 200959

14. 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 years ended March 31, 2008 and 2009 were as follows:
Results by segment for the fiscal year ended March 31, 2008
(Millions of yen)

Residential
Development

Property
Investment Brokerage &Management & Consignment
Building
Development
Sales

Other

Subtotal

Eliminations
or
corporate

Total¥411,493

Operating revenue andoperating income
Operating revenue:
External customers¥238,289¥ 51,886¥ 78,246¥27,163¥15,909¥411,493¥      –

513

5,003

2,309

3,020

928

11,773(11,773)–

238,80256,88980,55530,183

16,837423,266(11,773)

411,493

Inter-segment
Subtotal
Operating expenses

212,735

47,47545,777

23,791

15,323345,101(3,430)341,671

Operating income¥ 26,067¥   9,414¥ 34,778¥ 6,392¥ 1,514¥ 78,165¥ (8,343)¥ 69,822

Total assets¥259,781¥203,563¥322,937¥72,736¥26,819¥885,836¥   5,864¥891,700

Depreciation

217

3,559

50

122

740

4,688

204

4,892

Capital expenditure

304

28,084

2,776

239

1,459

32,862(14,977)

17,885

Total assets, depreciation,and capital expenditure

Results by segment for the fiscal year ended March 31, 2009
(Millions of yen)

Residential
Development

Property
Investment Brokerage &Management & Consignment
Building
Development
Sales

Other

Subtotal

Eliminations
or
corporate

Total¥  448,656

Operating revenue andoperating income
Operating revenue:
External customers¥ 231,286¥ 84,603¥ 77,442¥ 36,728¥ 18,597¥  448,656¥      –

343

5,797

636

3,036

1,239

11,051(11,051)–

231,629

90,40078,07839,764

19,836

459,707(11,051)448,656

4,736(414,643)

Inter-segment
Subtotal
Operating expenses(219,842)(74,631)(67,961)(38,210)(18,735)(419,379)

Operating income¥  11,787¥ 15,769¥ 10,117¥  1,554¥  1,101¥   40,328¥ (6,315) ¥   34,013

Total assets¥ 318,845¥543,880¥366,788¥ 57,923¥ 28,234¥1,315,670¥ 69,862

Depreciation

234

5,562

71

148

904

6,919

230

7,149

Capital expenditure500

48,046

6,988

305

1,726

57,565379

57,944

Total assets, depreciation,and capital expenditure

60 Nomura Real Estate Holdings, Inc. Annual Report 2009

¥1,385,532

(Thousands of U.S. dollars)

Residential
Development

Property
Investment Brokerage &Management & Consignment
Building
Development
Sales

Other

Eliminations
or
corporate

Subtotal

Total

Operating revenue andoperating income
Operating revenue:
External customers$ 2,354,531 $  861,279 $  788,366 $ 373,903 $ 189,322 $ 4,567,401 $       – $ 4,567,401

Inter-segment

3,494

59,011

6,481

30,904

12,615112,505(112,505)–

2,358,025

920,290794,847

404,807

201,937

4,679,906(112,505)

4,567,401

Operating expenses(2,238,036)(759,755)(691,854) (388,985) (190,733)(4,269,363)

48,218(4,221,145)

Operating income$   119,989 $  160,535 $  102,993 $  15,822 $  11,204 $   410,543 $ (64,287) $   346,256

Subtotal

Total assets, depreciation,and capital expenditure
Total assets$ 3,245,904 $5,536,805 $3,733,966 $ 589,667 $ 287,427 $13,393,769 $ 711,208 $14,104,977

Depreciation

2,386

56,618

719

1,511

9,200

70,434

2,342

72,776

Capital expenditure

5,094

489,114

71,142

3,099

17,574

586,0233,856

589,879

Notes:
1. Business segments are determined according to the business activities of each company in the consolidated group.
2. Principal products and services within each segment
Residential Development Business
Sale of condominiums, detached housing and residential lots, overall management of condominiums
Building BusinessLeasing and overall management of office buildings, district heating and cooling services
Investment Management & Development Business
Development and sale of profit-generating property management of and investment in real estate funds
Property Brokerage & Consignment Sales Business
Real estate brokerage and consulting services, sales representation of condominiums and detached housing, insurance brokerage
Other Business
Fitness club management
3.	Operating expenses for the fiscal years ended March 31, 2008 and 2009 consisted of ¥6,200 million and ¥6,392 million ($65,071 thousand), respectively, ofunallocatable operating expenses which were included in “Eliminations or corporate.” The principal items were expenses related to general administration of theCompany and its consolidated subsidiary, Nomura Real Estate Development Co., Ltd.
4.	Total assets at March 31, 2008 and 2009 consisted of ¥40,987 million and ¥96,732 million ($984,752 thousand), respectively, of assets not allocated to a segment
which were included in “Eliminations or corporate.” The principal items were surplus funds (cash and deposits), long-term investment funds (investment securities),
deferred tax assets, and assets related to general administration of the Company and its consolidated subsidiary, Nomura Real Estate Development Co., Ltd.

15. Contingent Liabilities
Contingent liabilities as of March 31, 2008 and 2009 were as follows:(Millions of yen)

Guarantees for home loans of house purchasers from banks and other
Guarantees for loans to business partners in the business ofcommercial buildings for rent
Guarantees for borrowings by affiliates(Thousands of
U.S. dollars)

2008

2009

2009

¥49,925¥48,214$490,832

1,134

1,078

10,970

298

970

9,879

¥51,357¥50,262$511,681

Nomura Real Estate Holdings, Inc. Annual Report 200961

16. Subsequent Events
Payment of Dividends
At the 5th Annual General Meeting of Shareholders held on June 26, 2009, a resolution for the payment of dividends of ¥20.00 ($0.20)
per share, ¥2,987 million ($30,413 thousand) in total, to shareholders of record as of March 31, 2009 was approved.

Issuance of New Shares
At a meeting of the Board of Directors held on June 1, 2009, the Company resolved to issue new shares, for which the payment wascompleted on June 16, 2009.

1. Offering method

General offering

2. Type and number of shares to be issued

36,000,000 shares of common stock

3. Issue price¥1,601.36 per share

4. Total amount of the issue price¥57,648 million

5. Amount to be paid

¥800.68 per share

6. Total amount to be paid

¥28,824 million

7. Payment dateJune 16, 2009

8. Use of proceeds

The Company plans to use the proceeds for the repayment of short-term loans,for the acquisition of sites for residences, and for construction costs.

At a meeting of the Board of Directors held on June 1, 2009, the Company resolved to conduct a third-party allotment with
Nomura Securities Co., Ltd. as the allottee with regard to the sale of the Company’s shares (the sale of 5,400,000 shares of theCompany’s common stock that Nomura Securities will borrow from the Company’s shareholders) by way of over-allotment by Nomura
Securities, which is the lead managing underwriter of the general offering. The following is an overview of this allotment.

1. Type and number of shares to be issued

5,400,000 shares of common stock

2. Issue price¥1,601.36 per share

3. Total amount of the issue price

Up to ¥8,647 million

4. Total amount to be paid

Up to ¥4,323 million

5. Allottee

Nomura Securities Co., Ltd.

6. Application period (deadline)

July 13, 2009

7. Payment dateJuly 14, 2009

8. Use of proceeds

The Company plans to use the proceeds for the repayment of short-term loans,for the acquisition of sites for residences, and for construction costs.

9. Other

Nomura Securities may conduct syndicate cover transactions, and all or some of theCompany’s common stock purchased by these transactions may be used to return
the Company’s common stock that Nomura Securities has borrowed from the Company’s shareholders. As a result, it may not be possible to implement an application
for all or some of the shares issued in this third-party allotment, and so the final
number of shares issued in the third-party allotment may be reduced due to thisforfeiture of rights, or the issuance itself may not be conducted.

62 Nomura Real Estate Holdings, Inc. Annual Report 2009

17. Stock Options
1. Description

Recipients

Nomura Real Estate Holdings,
Inc.

Nomura Real Estate Holdings,
Inc.

Nomura Real Estate Holdings,
Inc.

FY2007
1st issue of stock options

FY2007
2nd issue of stock options

FY2007
3rd issue of stock options

Directors of the Company(5 persons)

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: 14,800 shares

Common stock: 52,300 shares

Common stock: 180,400 shares

Grant dateNovember 30, 2007

November 30, 2007

November 30, 2007

Vesting conditions

No conditions attached

No conditions attached

No conditions attachedService period

No period specified

No period specified

No period specified

Exercisable period

November 30, 2008 –November 29, 2013

November 30, 2008 –November 29, 2013

November 30, 2009 –November 29, 2014

Nomura Real Estate Holdings,
Inc.

Nomura Real Estate Holdings,
Inc.

Nomura Real Estate Holdings,
Inc.

FY2008
1st issue of stock options

FY2008
2nd issue of stock options

FY2008
3rd issue of stock options

Directors of the Company(5 persons)

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

Directors of the Company(5 persons)

Recipients

Directors and executive officersof the Company’s subsidiaries(52 persons)
Employees of the Company’s
subsidiaries (122 persons)Type/number of shares
reserved (see Note)

Common stock: 14,800 shares

Common stock: 61,300 shares

Common stock: 191,200 shares

Grant dateAugust 11, 2008

August 11, 2008

August 11, 2008

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, 2009 –August 10, 2014

August 11, 2009 –August 10, 2014

August 11, 2010 –August 10, 2015

MEGALOS CO., LTD.

MEGALOS CO., LTD.

FY2008
1st issue of stock options

FY2008
2nd issue of stock options

Directors of the Company(3 persons)

Directors of the Company(3 persons)

Recipients

Employees of the Company(14 persons)Type/number of shares
reserved (see Note)

Common stock: 16,400 shares

Common stock: 32,000 shares

Grant date

December 1, 2008

December 1, 2008

Vesting conditions

No conditions attached

No conditions attachedService period

No period specified

No period specified

Exercisable period

December 1, 2009 –November 30, 2014

December 1, 2009 –November 30, 2015
Nomura Real Estate Holdings, Inc. Annual Report 200963

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

Nomura Real Estate Holdings,
Inc.

Nomura Real Estate Holdings,
Inc.

FY2007
1st issue of stock options

FY2007
2nd issue of stock options

FY2007
3rd issue of stock options

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

179,200

Granted–––Forfeited–––

Vested:

–

–

2,500

End of the year––

176,700

14,80052,300

1,200

–

–

2,500

Exercised

14,80031,300–Forfeited–––

End of the year–

21,0003,700

Nomura Real Estate Holdings,
Inc.

Nomura Real Estate Holdings,
Inc.

Nomura Real Estate Holdings,
Inc.

FY2008
1st issue of stock options

FY2008
2nd issue of stock options

FY2008
3rd issue of stock options

Vested: (shares)
Previous fiscal year end
Vested:Non-vested: (shares)
Previous fiscal year end
Granted

–––14,80061,300191,200–

Forfeited––

Vested:14,80061,300–––191,200–––

End of the year
Vested: (shares)
Previous fiscal year end
Vested:14,80061,300–Exercised–––

Forfeited–––

14,80061,300–End of the year
MEGALOS CO., LTD.

MEGALOS CO., LTD.

FY2008
1st issue of stock options

FY2008
2nd issue of stock options

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

––16,40032,000Forfeited––

Vested:16,400––32,000––16,400–End of the year
Vested: (shares)
Previous fiscal year end
Vested:Exercised––

Forfeited––

16,400–End of the year

64 Nomura Real Estate Holdings, Inc. Annual Report 2009

(2) Unit price data
Nomura Real Estate Holdings,
Inc.

Nomura Real Estate Holdings,
Inc.

Nomura Real Estate Holdings,
Inc.

FY2007
1st issue of stock options

FY2007
2nd issue of stock options

FY2007
3rd issue of stock options

Exercise price (¥)

1

1

Average price upon
exercise (¥)

1,269

1,370

–

Fair value on grant date (¥)

2,903

2,903

714

Nomura Real Estate Holdings,
Inc.

Nomura Real Estate Holdings,
Inc.

Nomura Real Estate Holdings,
Inc.

FY2008
1st issue of stock options

FY2008
2nd issue of stock options

FY2008
3rd issue of stock options

Exercise price (¥)

1

Average price upon
exercise (¥)
Fair value on grant date (¥)

Exercise price (¥)
Average price upon
exercise (¥)
Fair value on grant date (¥)

1

3,380

2,255

–

–

–

2,131

2,131

770

MEGALOS CO., LTD.

MEGALOS CO., LTD.

FY2008
1st issue of stock options

FY2008
2nd issue of stock options
1

740

–

–

606

184

Note: With respect to stock options outstanding at March 31, 2008, the number of stock options is calculated based on the number of shares of common stock
which would be required to be issued if all such stock options were to be exercised.

Nomura Real Estate Holdings, Inc. Annual Report 200965

Report of Independent Auditors

66 Nomura Real Estate Holdings, Inc. Annual Report 2009

History of Nomura Real Estate Group

April 1957

June 2004

Nomura Real Estate Development Co., Ltd. established in Chuo-ku,
Tokyo

Nomura Real Estate Holdings, Inc. established in Shinjuku-ku,
Tokyo

May 1961

October 2004

Started purchasing residential land in
Kajiwarayama, Kamakura, and entered housing development business as a developer

Nomura Real Estate Holdings, Inc. started business activities as aholding company upon assignment of the entirety of outstanding
shares of Nomura Real Estate Development Co., Ltd. from Nomura
Land and Building Co., Ltd. as an in-kind contribution

October 1963
Launched condominium development business with the construction of Co-op Take-no-Maru in Yokohama

December 2004
Holding company system established by implementing a Groupreorganization through corporate separations

May 1978
Headquarters moved to Shinjuku Nomura
Building

October 2006
Nomura Real Estate Holdings, Inc. listed on
First Section of the Tokyo Stock Exchange

March 1988
Started construction of Yokohama Business Park (YBP), the largest businessdevelopment solely in the private sector

February 2007

November 1989

April 2007

Launched the fitness club business with the opening of the
Tsurukawa Midoriyama Club

50th anniversary of foundationof the Group

March 1994

July 2007

Started selling A-City Hills and Towers at Seifu-Shinto residential
and commercial area, in Hiroshima Seibu Kyuryo City, Hiroshima

Geo-Akamatsu Co., Ltd. became a Group member

Nomura Real Estate Residential Fund, Inc.
listed on the Tokyo Stock Exchange

November 2007
April 2000
Launched property information
website nomu.com®

MEGALOS CO., LTD. listed on the Jasdaq
Securities Exchange

December 2008
April 2001

NREG TOSHIBA BUILDING Co., Ltd. became a Group member

Nomura Real Estate Development Co., Ltd. established in-housecompany system (three companies for residential services, corporate services and investment management)

December 2002
Unified brand named PROUD establishedfor residential products and service

December 2003
Nomura Real Estate Office Fund,
Inc. listed on the Tokyo Stock Exchange

Nomura Real Estate Holdings, Inc. Annual Report 200967

Investor Information (As of March, 31, 2009)

Common Stock:¥82,771 million

Number of Authorized Shares: 450,000,000
Number of Shares Issued:

149,371,100

Market Listing:First Section ofComposition by Number of Shareholdings (%):
Individuals and Others
12.1%

Tokyo Stock Exchange
Minimum Trading Unit:

100 shares

Number of Shareholders:

43,139Financial Institutions 14.5%

Financial Instruments Firms
0.4%

Other Foreign
Investors
7.8%

Other Japanese Firms
65.2%

Ten Largest Shareholders:Name of Shareholder

No. of shares

Shareholding (%)

Nomura Land and Building Co., Ltd.

96,817,500

64.82%

Japan Trustee Services Bank, Ltd. (Trust account)

6,784,200

4.54%

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

4,863,300

3.26%

Japan Trustee Services Bank, Ltd. (Trust account 4G)

3,585,200

2.40%

Nomura Real Estate Holdings Employee Shareholding Association

2,367,382

1.58%

The Bank of NY Treaty JASDEC Account

1,015,200

0.68%

National Mutual Insurance Federation of Agricultural Cooperatives

985,000

0.66%

Japan Trustee Services Bank, Ltd. (Trust account 4)

977,000

0.65%

NIPPONVEST

700,000

0.47%

Trust & Custody Services Bank, Ltd. (Trust account B)

610,600

0.41%

Stock Price and Trading Volume on the Tokyo Stock Exchange
Stock price (Yen)
5,000
4,000
3,000
Trading volume (thousand shares)

2,000

120,000
1,000
30,00020,00010,0000Oct. Nov. Dec. Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May
2006
2007
2008
2009

68 Nomura Real Estate Holdings, Inc. Annual Report 2009

Corporate Data (As of March 31, 2009)

Corporate Name:

Nomura Real Estate Holdings, Inc.

Representative:

Hirohisa Suzuki

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

Date of Establishment:

June 1, 2004

Number of Employees:

4,998 (on a consolidated basis)

Fiscal Year:

From April 1 to March 31

General Meeting of Shareholders: June
Management Structure:
Board of Statutory
Auditors

Board of Directors

Statutory Auditors

President

Budget Committee
Group Management
Meeting

Corporate Planning
Department

Risk Management
Committee

Finance Department

Corporate Communications &Investor Relations Department

Compliance Department

Internal Audit Department

Website of Nomura Real Estate Holdings:

Top Page

To Our Shareholders and Investors

IR Library

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

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

Visit this webpage to view various infor-

english/index.html

english/ir/index.html

mative materials, including the prospec-

Visit our website to learn about features

Visit this webpage for links to informa-tus, securities report and other legalof the Nomura Real Estate Group andtion for shareholders and investors.

documents, and the annual report andstrengths of each business.

messages to shareholders.

Nomura Real Estate Holdings, Inc. Annual Report 200969

Nomura Real Estate Holdings, Inc.

Annual Report 2009

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

Printed in Japan

This Annual Report was printed
with vegetablebased ink. Productnames may be trademarks of theirrespective companies.