Otemachi Building, 6-1, Otemachi 1-chome, Chiyoda-ku, Tokyo 100-8133, Japan
http://www.mec.co.jp/index_e.html

Annual Report 2017
MITSUBISHI ESTATE CO., LTD.
Annual Report 2017

This report is printed using paper that contains
raw materials certified by the Forest
Stewardship Council (FSC)®. FSC® certification
ensures that materials have been harvested
from properly managed forests.

This report has been prepared using
100% vegetable ink. Every effort is madeto contain the incidence of volatileorganic compounds (VOCs) and topreserve petroleum resources.

In Motion for
Tomorrow’s
Opportunities
Printed in Japan

CONTENTS

2
About the Mitsubishi Estate Group4
To Our Stakeholders
The mission of the Mitsubishi Estate Group is “to contribute tosociety through urban development.” In line with that mission,
we are embracing innovation with an eye to the future from global
and long-term perspectives. We are seeking to achieve sustainablevalue creation by sharpening our competitive edge and venturing
wider and deeper with our management capital.

15
Business Review

16
20
22
24
26

Office Building Business1

Office Building Business2

47

Corporate Governance

Financial Section

36

48	Eleven-Year Summary of Selected Financial Data
50	Fiscal 2017 Business Environment
51	Financial Review
56	Consolidated Balance Sheets
58	Consolidated Statements of Income

Message from the Chairman of the Board

Lifestyle Property BusinessResidential Business
International Business

28
Summary of Management& Services Business Group

28 Investment Management Business
29	Architectural Design & Engineering Business
30 Hotel Business
31 Real Estate Services Business
32 Business Creation Department
33

35

Business Development, Consulting& Solutions Group34	Financial Highlights by Segment

37	Overview of Corporate Governance System
38 Directors
40

Outside Directors /Overview of Activities in Fiscal 2017

42

Remuneration / Evaluation of
the Effectiveness of the Board of Directors

43

Corporate Executive Officers, Executive
Officers, and Group Executive Officers

58

Consolidated Statements ofComprehensive Income
Consolidated Statements of

59 Changes in Net Assets
61 Consolidated Statements of Cash Flows
62	Notes to Consolidated Financial Statements
85 Independent Auditor’s Report

8644

Corporate Data

Risk Management

46
Human Resource Management

86	Principal Mitsubishi Estate Group Companies
88 Corporate History
89 Organization
90 Corporate Information
A Word about Annual Report 2017
In addition to discussions on management direction and the business environment, this annual report includes
extensive non-financial information to explain the Mitsubishi Estate Group’s business and corporate activities.
We hope this helps shareholders, investors, and all other stakeholders gain a good understanding of the positionand direction of the Group as a whole.
Definition of Term
“Fiscal 2017” refers to the Group’s fiscal year ended March 31, 2017, and other fiscal years are referred to in acorresponding manner.

Asset Book

CSR Report

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Annual Report 2017 

Caution Concerning Forward-Looking Statements
This annual report contains forward-looking statements concerning Mitsubishi Estate Co., Ltd., and its future
strategies and earnings outlook, including forecasts, planning, and decisions based on information available
at the time of publication. As with any forecast, plan, or decision, forward-looking statements are inherently
susceptible to potential risks, uncertainties, and assumptions. The Company’s actual results may vary materiallyfrom those expressed or implied in its forward-looking statements.

1

ABOUT THE MITSUBISHI ESTATE GROUP

The Mitsubishi Estate Group is a leading creator of urban change through the development ofreal estate including office buildings, residential properties, and retail properties.

Office Building BusinessAs part of our ongoing commitment to achieve sustainable growth, we strive to create newvalue in Japan and overseas under the brand slogan “A Love for People, a Love for the City.”

Lifestyle Property BusinessThis is Mitsubishi Estate’s core business,

The Mitsubishi Estate Group operates thewhich engages in the development,

PREMIUM OUTLETS®, MARK IS, and otherleasing, and property management ofretail facilities using a comprehensive

office buildings, mainly in Tokyo and othersystem where it remains continuously

major Japanese cities. We promote urban

involved with the retail property from thedevelopment that contributes to increasedplanning stage to ongoing operations.

appeal of cities while maintaining a balance

Under the Logicross brand, Mitsubishi

between management property andEstate is pursuing logistics facility businessproperty for sale in our asset portfolio.

opportunities nationwide. The Company isalso expanding the variety of its properties.

Operating Income¥

192,495 million

Residential Business

U.S.$1,715 million*

We offer services to meet a variety of

The Mitsubishi Estate Group has pursued

needs for condominiums, custom-built

business overseas since the 1970s, under-

housing, purchase and sales, leasing,taking real estate leasing and development

brokerage areas, renovations, and manage-

businesses in the United States and thement. As the circulation of existing homes

United Kingdom. In recent years, we have

expands and people’s lifestyles growalso been actively developing our officeincreasingly diverse, we are strengthening

building, residential, commercial facility,

Total Assets

our remodeling, construction, and renova-

and other real estate businesses in rapidly

5,484,115 million

tion business to seize upon such changes.

expanding Asian markets and advancing

Revenue from Operations¥

1,125,405 million
U.S.$10,031 million*¥

International Business

into continental Europe.

U.S.$48,882 million*

Investment Management Business* The above amounts were translated into U.S. dollars at ¥112.19 = U.S.$1.00, the approximate prevailing exchange rate on March 31, 2017.

Millions of yen
Fiscal year ended March 31, 2017 (consolidated)

Operating
IncomeTotal Assets

Office Building Business

484,238

133,570

3,445,008

Lifestyle Property Business

88,95525,807484,292

Residential Business

407,850

19,253

634,219

International Business

66,55626,313541,888

Investment Management Business

21,323

4,520

106,990

Architectural Design & Engineering Business

19,309445

27,358

Hotel Business

33,512

1,932

28,842

Real Estate Services Business
Other

2

Revenue fromOperations

Architectural Design & Engineering Business

For investors seeking real estate asset

Making use of the knowledge, ability, andmanagement, we provide a wide range ofcutting-edge technologies accumulated

services based on our specialized expertise,over the 120 years since our founding inutilizing collaboration among our operating

the Meiji period, this full-service architec-bases in Japan, the United States, Europe,tural design and engineering businessand Asia ex-Japan. These services include

meets societal needs through construction,

real estate investment trusts (REITs) to meet

civil engineering, and urban and regional

management needs for long-term stability

development planning and consulting.

as well as private placement funds to meetthe specific management needs of institutional investors.

Hotel Business

Real Estate Services BusinessThis business maintains a network of eightThis business provides one-stop real estate

hotels under the Royal Park Hotels brand in

problem-solving solutions for corporations

Sendai, Tokyo (Nihonbashi, Shiodome, andand high net worth individuals to maximize

Haneda), Yokohama, Nagoya, Kyoto, andthe value of real estate and optimize its use.

Fukuoka. We are promoting the expansion

Its services include real estate brokerage,

24,243

2,157

25,702

4,237

289

12,649of business and improved brand value withcondominium and office building leasinga management foundation focused on

management support, parking lot manage-

customer satisfaction.

ment support, and real estate appraisal.

Eliminations or Corporate(24,820)(21,793)

177,163

Total

1,125,405

192,495

5,484,115

MITSUBISHI ESTATE CO., LTD.

Annual Report 2017 

3

TO OUR STAKEHOLDERS

The Future of the Mitsubishi Estate GroupAs a company, we are looking to become a new breed of real estate developer—one offering added value
well beyond just supplying physical spaces. To achieve this, we must draw out the power of our people, ourmost important management capital, in order to keep our finger on the pulse of the changing times and to
pursue new value in the spaces in which people live and work.

Junichi Yoshida

President & Chief Executive Officer
Mitsubishi Estate Co., Ltd.

The mission of the Mitsubishi Estate Group is “to contribute to society throughI assumed the office of president & chief executive officer of
Mitsubishi Estate Co., Ltd., on April 1, 2017. In my roles inhuman resource management over the past 15 years or so,
I have thought constantly about how the Mitsubishi EstateGroup can make best use of its most important management
capital—its people. To begin, I would like to discuss just how
important our people have become to our business today, in
2017, and then to explain why releasing their potential is sovital to attaining our vision of the Group in the future.
Saying that people are management capital may soundvery much like stating the obvious—after all, it is somethingcommon to all companies. Some might well also raise eyebrows at the thought that for us, as a company involved in realestate development, human resources are a more importantresource than land or capital. But today’s real estate businessis about more than providing just floor space when developing properties and selling and leasing them, whether it bewith office buildings, housing, retail properties, or logistics
facilities. What we are being asked to do now is to create
maximum value with a given space, whatever its size. We see
ourselves becoming a real estate developer that provides
value beyond physical spaces. And human resources holdthe key here.
Our real estate development business meets the needs ofa multitude of clients. As we head into the latter half of the 2010s,
customer needs are diversifying and becoming more sophisticated in tandem with technological progress and changing
values in society as a whole. It is only we as individuals—allof us across the Group—who have the power to sense how

customer needs are evolving and to envisage new needs
before they reach the light. Land and buildings cannot dothat for us.
We have been taking various initiatives with a view tofuture growth and I believe that we have come a long way
in preparing the groundwork. But for us to realize further
growth in an era of dramatic change, I feel we must ourselves
embrace change in three vital areas. The first is to set out thepath we need to take in fields where we have made considerable strides in recent years, such as corporate governance,
corporate social responsibility, and global expansion. The
second is to “dig deeper” in such established businesses
as the Office Building Business and the Residential Businessthat we have built into key strengths; that means harnessing
remarkable advances in technological and other areas. The
third is to aim for real value by understanding what valuemeans from the customer’s point of view and having theimagination to see what will lead to such value in the future,even if related needs have yet to emerge.
It goes without saying that only people can envisage how
the times may change and stay ahead of that change. But
there is another reason why human resources are particularly
important for real estate developers such as ourselves, whichis that the offices, homes, shopping malls, and warehouses weprovide are spaces where people live and work. Only humanbeings can comprehend what it means to pursue value in thespaces in which people live and work—to envisage what kindof spaces people find comfortable or stimulating—and putthat insight to work in creating new value.

urban development.” In line with that mission, we are embracing innovation
with an eye to the future from global and long-term perspectives. We are
seeking to achieve sustainable value creation by sharpening our competitiveedge and venturing wider and deeper with our management capital.

4

MITSUBISHI ESTATE CO., LTD.

Annual Report 2017 

5

TO OUR STAKEHOLDERS

Achievements under the Previous
Medium-Term Management Plan

Quantitative Target Achievements
Original target was successfully achieved through increased rent revenue
and timely disposition of assets by effectively tapping into brisk real estate market

Growth Potential

Over the three years of the Medium-Term Management Plan covering fiscal 2015 to fiscal 2017,
we achieved better-than-expected earnings in terms of quantitative targets and value creation. In
qualitative terms, too, we made good progress in building solid foundations for future profit growth.

In May 2017, the Mitsubishi Estate Group announced its new
Medium-Term Management Plan. Before discussing its contents, I would first like to review our attainments under theprevious Medium-Term Management Plan.
Under the three years of the previous Medium-Term
Management Plan, we achieved more than we had anticipated. We made better-than-expected headway in leasing
new office buildings and in raising rents on existing prop­
erties. We also effectively tapped into a brisk real estatemarket to generate higher gains on property sales than we
had envisaged.
The underlying theme of the previous plan was enhancing
corporate value over its three-year period. To this end, we
reinforced future cash flows by strengthening earnings foundations. We initially took a downbeat view on prospects forearnings over the plan’s duration as we expected a limited
contribution to profits from new office buildings owing to theperiod being a quiet one for development completions in the
Marunouchi area. As it turned out, we did more than achieve
the plan’s targets. Most notably, we hit the goal for operating
income of ¥165 billion or above one year ahead of schedule,with operating income in fiscal 2017—the last year of theplan—reaching ¥192.5 billion and exceeding that target bymore than 16%. We also realized sustained growth in unrealized gain on rental properties supported by declines in thecap rate and the fruits of our own progress in redevelopments
and improving cash flows. Over the three years, unrealized
gain on rental properties increased about ¥867 billion.
In qualitative terms, we also made considerable headway
in the three key areas of strengthening development expertise, enhancing Groupwide value chain platforms, and reorganizing the Company’s structure. We look to build on thoseresults to drive earnings higher in our Medium-Term
Management Plan starting in fiscal 2018.

6

Regarding strengthening development expertise, we saw
through multiple large-scale development projects centeredin the Marunouchi area. We also further diversified the urban
functions of the Marunouchi area from a multifaceted perspective with a view to creating a valuable area with a horizon
stretching 100 years into the future. Specifically, we attracted
venture companies to the area by providing office spaces
geared toward start-ups and offering business support services for them and adding hospitality functions. We also
continued to diversify development asset types beyond officebuildings in such areas as logistics facilities, hotels, investment-purposed micro-unit condominiums, and residential
developments in emerging markets.
As for enhancing Groupwide value chain platforms, we
expanded our business portfolio in the U.S. through the acquisition of TA Realty LLC while in Asia we set the stage for futurebusiness expansion by such means as collaborating with local
business partners. In Japan, too, we broadened our solutions
menu with the addition of such services as building renovation.
With regard to reorganizing the Company’s structure,
we enhanced governance effectiveness by shifting to a“Company with Nominating Committee, etc.,” structure.
This shift further strengthened the management supervisory
function of the Board of Directors while clarifying authority
and responsibilities pertaining to business execution. It also
better structured the Board of Directors to channel discussionof management direction into paying closer attention toshareholder interests. In addition, we made various organi­zational changes with a view to optimizing the value in theintangible assets—the knowledge and experience—of ourpeople. These included reinforcing the Business Development,
Consulting & Solutions Group, making the Lifestyle Property
Business into an independent segment, and launching theBusiness Creation Department.

MITSUBISHI ESTATE CO., LTD.

FY2017 Target

FY2017 Actual

EBITDA¥250 billion or above¥279.7 billion

Operating Income¥165 billion or above¥192.5 billion

Performance

EBITDA/Total Assets

Stability

Net Debt/EBITDA

5.0% or above

5.2%

Approx. 8.0–8.9 times

7.7 times

Operating Income Performance during
Previous Medium-Term Management Plan Period

Unrealized Gain on Rental Properties

Billions of yen

Billions of yen

250

3,000

2,964
2,569

192.5

200
156.3

150

166.2

FY2017 target

2,000

2,097

2,181

165

100
1,000
50

0

0
FY2015FY2016FY2017FY2014FY2015FY2016FY2017

Market Changes and the Mitsubishi Estate Group’s
Competitive Leadership
Amid accelerating changes in the environment surrounding our business, it is clear that we cannot
expect to achieve sustainable growth simply by staying with a business-as-usual approach to established operations. We must make every effort to create additional value by penetrating deeper andmore broadly with our core strengths in terms of the experience we have accumulated across a vast
range of real estate assets and our relationships with clients, partners, and communities.

With the Japanese economy already functioning within an
aging society, we can expect no or slow growth over the longterm if we take the “steady-as-she-goes” course. We cannot
hope for sustainable growth by merely sticking to our established businesses. With society as a whole evolving amid
rapid technological progress spurred by shifting values inwhat has come to be called a “Fourth Industrial Revolution,”needs related to real estate and thinking about real estate
have also been changing greatly. For instance, work stylereforms are resulting in varying approaches to work and waysof communicating. Needs are also diversifying with respect tothe places in which we live, as evidenced in the growth of therenovation market and the market for buying and selling

Annual Report 2017 

existing homes. With competition with other major cities in
Asian countries bound to intensify—bearing in mind that thoseeconomies look set fair for ongoing economic expansion—companies across various industries in Japan, ourselves
included, must come together to raise the appeal of Tokyo
as a global city. I believe that we as a Group have a hugerole to play here as an expert in urban development.
We announced a new Medium-Term Management Plan
in May 2017. In drafting the new plan, we were determined
to venture wider and deeper with the management capitalof the Group to ensure sustainable growth in corporate value.
The core strengths of the Group—our credible and reputablebrand, a wealth of information derived from providing a wide7

TO OUR STAKEHOLDERS

variety of services, and strong financial foundations—havebeen acquired through relationships with clients, partners,
and other stakeholders in society and thanks to our experience across a vast spectrum of real estate assets. By making
optimal use of these resources, we will create added value
and share the benefits with customers, partners, shareholders,and other stakeholders. That, in turn, will win further trust, so
setting up a virtuous cycle in which the Group’s strengths
propagate themselves on an ever-expanding scale.
In addition, faced with the accelerating changes noted
previously, I believe that the Group must, if it is to demonstrate its competitive edge, acquire new capabilities byinitiating new businesses and pursue innovation in existing

2business lines. As part of these efforts, we must look to build
appropriate partnerships capable of maximizing mutual
benefits, thereby expanding the reach of our strengths.
To promote these endeavors as an organization, wemust make optimal use of the Group’s management
resources: its human capital, business and asset portfolio,
and capital. We must also augment the effectiveness ofgovernance and enhance the quality and speed of decision
making by delegating authority as appropriate.
Our challenge now is to bolster the competitiveness ofGroup companies and to stay one step ahead of changes
in the market.

Basic Concept

Business model innovation
Evolution of existing businesses
Entrance to new fields of businessNew
services
New
processes

Our New Medium-Term Management Plan

New
targetsAccumment ulated involve
in a vasof ass t numberets

We are promoting business model innovation to achieve further growth in the 2020s with a focus on
capturing changes in the business environment in three key areas while realizing profits as the resultof reinforced income streams during the previous Medium-Term Management Plan.

Business Model Innovation 
The key points of the new plan are, first, to realize profits
deriving from measures to reinforce income streams during
the previous plan and, second, to capture the momentum ofbusiness environment changes and promote business model
innovation to seize new opportunities for further growth in
the 2020s. Doing so will create new businesses that help add
genuine value for society.
Our use of the term “business model innovation” is simply
a declaration that we are going to tackle the challenges
ahead vigorously, without being shackled by establishedAcceleration ofenvironmental change

In-house expertiseLong
relatio cultivatedvario nships w
us staitkeho hlders“Entering thenext stage of value
creation by staying
ahead of ever-changing
social needs”
New
incomesourcesAdvancement oftechnology that
incites a change
in values
Globalizationand growth of
emerging marketsCredreput ible and
able
brand

Surge inventurebusinesses

Increased speedof access toand distributionof information

Social anddemographic
changesA wealtderiv h of inforema wid d from pr atione variety o oviding
f services

norms. It does not mean that we are intending to change
the way we do business from the ground up. The Mitsubishi
Estate Group has set out its fundamental mission as “contri­
buting to society through urban development” and urban
development remains our core business. However, I firmly
believe that we cannot expect to create sustainable value
by taking a carry-on-as-usual approach to established businesses in the face of said changes in the environment inwhich we operate.

Stron
g fi
found nancial
ation
s

2

Promoting business model
innovation

Two Major Points
1

2

8

Realization of profits deriving from reinforced
income streams during previous Medium-Term
Management Plan
Capturing the momentum of businessenvironment changes and promoting businessmodel innovation to seize new opportunities
for further growth in the 2020s

Further growth1

Reinforcement ofincome streams

Realization of profits

Previous Medium-Term
Management Plan
FY2015–FY2017

New Medium-Term
Management Plan
FY2018–FY2020

MITSUBISHI ESTATE CO., LTD.

Annual Report 2017 

2020s

9

TO OUR STAKEHOLDERSThe Direction of Business Model Innovation 
How are we supposed to create value by grasping business
opportunities created by change? In the course of discussions
within the Group when we were preparing the new MediumTerm Management Plan, we settled on three vectors thatdefine where we want to go: improving productivity in businessactivities, making effective use of existing social resources, andenriching the quality of life. In driving forward Groupwide
business model innovation, it is important that we do not lose
sight of these three vectors from a long-term perspective.
Improving productivity in business activities involves
endeavoring to transform office space from its previous costcenter guise for companies to a new role as a profit center. By
offering environments that support efficient ways of working
and stimulate open innovation, we aim to lend backing to our
corporate clients who are looking to raise productivity.
Making effective use of existing housing stock and othersocial resources is a critical challenge in a Japan that hasembarked on an era of population decline. In the country
today, the total number of existing homes already exceeds
the total number of households, and problems related tovacant homes have now spread from rural areas to city centers. In these circumstances, revitalizing urban landscapes byadding value to existing buildings and houses has become
central to fulfilling our urban development mission.
The same is true when it comes to enriching the qualityof life. We all vary greatly in where and how we live, eat, play,
shop, and relax. Needs associated with all of the different

aspects of what we do have also become more diversified andsophisticated in tandem with technological progress andchanges in social environments and values. With homes, forexample, which form the nucleus of our lives, there have beensigns of a shift away from the traditional view that new construction and ownership are best. We must work to enhance
the quality of life by responding to these evolving needs.
To position ourselves to create new value by stepping up
the pace of business model innovation, we have set a budgetof ¥100 billion over the three years of the plan for Groupwide
business model innovation. That is on top of the budget allocations for each business line. Organizationally, meanwhile, weplaced the Business Creation Department in April 2017 under
the direct supervision of the president to speed up decision
making concerning new business opportunities. The aim here isto spur accelerated business innovation across the entire Group.
Along the same lines, we have created the Open Innovation
Promotion Office within the Office Building Group to stimulate
business creation centered on the Marunouchi area.
I believe that it is vital for all employees across the Groupto make determined efforts to transform our business bytaking full advantage of the opportunities afforded by theseorganizational measures and the appropriate delegation of
authority. This will, I hope, unleash a unified effort that goesbeyond the bounds of our Group structure thus far. And thatwill, I hope, take us beyond simply extending out from where
we are and help us discover new avenues to explore together.

Quantitative Targets – To realize profits from strengthened earnings foundations 
While setting out priorities for business model innovation to achieve
GRAND CUBE, in April 2016, and the Otemachi Park Building,further growth in the 2020s, we also aim over the next three years
in January 2017. In addition, we aim to expand earnings in our
to steadily expand profits on the back of the reinforced earnings
International Business with support from a major renovation project
foundations built up during the previous plan. Within theat our flagship office building in Manhattan, 1271 Avenue of the
Marunouchi area alone, we are set to reap full contributions to
Americas, as well as investments through our hybrid investment
profits from the completion of the OTEMACHI FINANCIAL CITYmodel*1 and progress with a range of development projects. In

development projects outside the Marunouchi area, we are looking
to increase fee-based businesses through intensified efforts under
our capital recycling model*2 while also building out an effective
value chain model for the logistics facility business. One option
may be to establish a logistics REIT that aims to go public.
Premised on such initiatives, we have set a target for fiscal
2020 operating income of ¥220 billion. Regarding the outlook
for the real estate market, we assume no major change overthe period of the Medium-Term Management Plan, although
we note that some have voiced concerns over the upcoming

large supply of office buildings and the impact of rising homeprices and construction costs. I expect maximizing to the full
the advantages of the Marunouchi area and the Group’s
strengths and expertise across its different business lines toenable us to steadily expand profits.
*1 Hybrid investment model: Funds structured by Group companies that combine
Mitsubishi Estate’s and third-party equity. They support diversification and increased
investment scale while concurrently earning management fees from investors forproviding services to them.
*2 Capital recycling model: Under this model, capital gains are attained throughproperty sales and developed assets are assigned to funds managed by Group
companies in order to earn asset management and property management feesfrom investors.

Quantitative Targets
FY2017 Actual

FY2020 Target¥192.5 billion¥220 billion

Overseas Operating Income

Approx. ¥27 billion

Approx. ¥35 billion

Capital Gains

Approx. ¥42 billion

Approx. ¥38 billion

3.6%

Around 3.5%

7.7 times(7.1 times)

Around 8.5 times(around 8 times)

Operating Income
Growth Potential

Performance

Operating Income/Total Assets (ROA)

Stability

Net Debt/EBITDA(Hybrid finance reflected)

From this Medium-Term Management Plan onward, we have also decided to provide figures for the overseas operating income and capital gains included
within operating income. Overseas operating income is the total of operating income generated overseas, and is designed to give a clear picture of thescale of overseas income since segments besides the International Business segment now undertake business overseas. Capital gains are the sum of gains
on the sale of assets other than residential condominiums and other non-recurring profit.

Operating Income

Overseas Operating Income

Billions of yen

Billions of yen

250

220
193

200
156

150

195

Overseas
operating income
27

Overseas
operating income
35166

FY2017

FY2020Total operating income
192.5

Total operating income
220

100

50

0
FY2015FY2016FY2017FY2018(Forecast)

FY2020(Target)1Completion of landmark projects (concentrated in the Marunouchi area) will contribute to operating cash flow.
Full utilization of brand and development/management capabilities to achieve f inancial performance targets
2016

OTEMACHIFINANCIAL CITY
GRAND CUBE

10 

Office Building Business2017

Otemachi Park Building

Lifestyle Property BusinessResidential Business2018

Tokyo Ryutsu Center
Distribution B Building

The Parkhouse
Nishi Shinjuku Tower 60

MITSUBISHI ESTATE CO., LTD.

The Parkhouse
Shirokane 2-chome Tower

Annual Report 2017 

msb Tamachi(Tamachi Station Tower S)

MARK IS Fukuoka Momochi

Marunouchi
3-2 Project11

TO OUR STAKEHOLDERS

Capital Policy Regarding our capital policy, we intend to continue toenhance corporate value from a longer-term perspective
through growth-oriented investments to expand earnings
by making the most of the Group’s strengths.
Maintaining financial soundness is also an importantmanagement priority. We intend to make business investments for growth based on an optimal capital structure thatis dependent on maintaining high credit ratings. Making themost of our high credit standing, we undertook an issue ofsuper long-term corporate bonds maturing in 40 years in June
2016. Since the beginning of 2017, we have also issued a totalof ¥20 billion corporate bonds, making the average interest
rate of the corporate bonds issued to date just 0.95%. The
ability to raise funds at low cost and over the very long term
also contributes to raising corporate value and reduces
downside risk if the financial environment were to deteriorate.
At the same time, it offers us the flexibility to ensure we donot miss procurement opportunities in the market.
Regarding initiatives to enhance shareholder value, in
addition to raising corporate value by promoting investments
for growth, we have brought management into closer alignment with shareholder interests through such means as
introducing a stock compensation plan and implementing
governance reforms. We also intend to improve capitalefficiency through the sale of shares held as crossholdingsthat we have carried out for the past few years and the appropriate restructuring of operating assets.
With respect to enhancing shareholder returns, we aim to
maintain a stable 25–30% consolidated payout ratio for profits
we intend to continuously expand. We also see the flexible
execution of share buybacks as one option to be adopted
when we judge appropriate taking into account such considerations as the prevailing economic conditions and theCompany’s share price level.

Drawing Out the Potential in Our Human Resources
My mission is to transform the Company by maximizing the value of our human capital, our most important
asset. We are striving to create an environment in which employees feel inspired to take up the challengeof creating new value.

I see the cohesive power of our employees as one of theGroup’s great strengths. That cohesive power can be animmense force driving forward the Group’s promotion ofcross-divisional projects. By the same token, however, it canalso be a recipe for collective thinking, or groupthink. That
I was nominated president after spending many years helping mold Mitsubishi Estate’s corporate culture through myinvolvement in human resources in such areas as recruitment
and training was, I believe, a call for me to lead the Group’stransformation by reappraising and maximizing the potentialof our people, our prime asset.
To draw out the full potential of our employees, we must
cut back the time spent on routine work and create anenvironment offering the time and mental latitude to consider
essential things. Clearly, we cannot escape from routine work
altogether. But it is important particularly for mid-level andyounger employees to be given the time and opportunity
to reflect and try to come up with new ideas that will lead tothe creation of added value. To consider, for example, what
services are truly valuable from the client’s perspective andhow we can best meet diverse customer needs, we have beenworking to provide such a thought-provoking environment
through work style reforms and are in the process of relocating our headquarters.

Work Style Reforms and Headquarters Relocation
I hope our work style reforms and our planned headquarters relocation encourage our employees to enjoya full and varied life, and to bring the discoveries and insights they have gained to bear on their work. I ask
them to think thoroughly about their own work and where they see the future of the Company. With therelocation of our headquarters, we have also been putting our commitment to creating spaces to breed
innovation to the test within the Company.

In April 2017, we established the “Work Style Reform
Promotion Committee” under the direct supervision of thepresident. The term “work style reform” has become something of a buzzword in Japan, and some may well take it tomean reappraising long working hours in order to secure
more time for activities other than work. I have no quarrel at
all with the need to get rid of long working hours and to put
time aside to lead more fulfilling lives. I am afraid, however,that it is too early to talk of being freed from work. To
address the problem of long working hours, we should put
the tasks we have been doing unquestioningly under the
microscope and ask whether those tasks really need to bedone and whether there are not more efficient ways to realize
the same added value.
Moreover, as a manager, I hope that time freed up by
making work more efficient and the bonds created throughinterchanges with various people can be looped back intovalue creation through new business ideas and collaboration
with external parties. In a sense, that means placing evengreater demands on employees.
Since becoming president, I have constantly encouraged
our people to enjoy life. A rich life opens us up to a varietyof perspectives. Some of those perspectives may grab ourattention and change our sense of values. In Japan, theMitsubishi Estate Group competes fiercely with its competitors. Even if at a superficial level you come up with a new idea,
competitors can do likewise so it ceases to be a differentiating factor. What is needed in creating new models today is tocome up with solutions based on thinking deeply and comprehensively about what customers genuinely desire and what
people will look for in the cities of the future, while visualizing
what developments may occur 100 years down the road. I
hope people will come into contact with different modes ofthinking from a young age and learn to build that experience
into their visions of the future of our business.
We have taken the decision to relocate our head office
to the Otemachi Park Building in fiscal 2018. This relocation
will be something of an in-house experiment in providing an
office system where employees are free to change desks
and various shared spaces designed to promote exchanges
between people both inside and outside the Company andcreate an environment to foster innovation. Mindful that theperformance of employees requires nourishment for the bodyas well as the mind, we also plan to provide an attractive
cafeteria. I very much look forward to seeing the benefits thisenvironment brings for our productivity and creativity. I hope
to see our work style approach become a showcase for theoffices we can offer other companies.

Artistic Rendition of the new headquarters

12 

MITSUBISHI ESTATE CO., LTD.

Annual Report 2017 

13

TO OUR STAKEHOLDERS

Corporate Governance and Shared Value with Stakeholders
Helped by discussions with outside directors, we intend to meet the expectations of shareholders while
ensuring prompt decision making, execution, and the timely monitoring of management policies. We aim
to ensure long-term corporate value enhancement by taking environment, social, and governance (ESG)
into consideration and working with stakeholders to establish shared value across a broad front.

Our new Medium-Term Management Plan also sets out ouraim to achieve long-term corporate value enhancement andmutually profitable relationships with stakeholders by establishing a position as a front-running ESG-conscious corporation.
With respect to corporate governance, I believe that, as the
top executive under the supervisory spotlight, my task is toconduct management appropriately taking into accountthe opinions of outside directors representing the interestsof shareholders. As a result of governance reforms carried out
in fiscal 2017, the Company’s Board of Directors now consistsof eight internal directors, including Chairman of the Board
Hirotaka Sugiyama, and seven independent outside directors.
This arrangement has enabled outside directors to participate
in discussions more actively and helped reflect their voices inmanagement decisions.
At the same time as launching a Board of Directors withenhanced supervision capabilities, we have delegated considerable authority for business execution to corporate executive
officers and introduced a Group executive officer system toclarify responsibilities. The aim is to speed up business execution. As president with ultimate responsibility for businessexecution, I am constantly looking to raise corporate value
through quicker decision making, execution, and the timely
monitoring of progress as we implement the management
policies decided by the Board of Directors.
I also believe that the environment and society are vitalconsiderations when companies chart their way. Real estatedevelopment, in particular, depends on using the social
capital of land, and our mission to contribute to society
through urban development feeds directly to social capital.
For instance, the development of highly energy-efficientbuildings and buildings with advanced disaster-management
functions feeds into environmentally sensitive urban areas andurban development with strong disaster-management capabilities. The development of high-value-added properties also
contributes to the improvement of urban functions throughout the city. In the case of Tokyo, that by extension means
enhancing the international competitiveness of the city. Insuch ways, we are collaborating with a broad range of stakeholders as we aim for shared value.

14 

The value-creation chain represented by urban development in the Marunouchi area is one of the prime reasons thatstakeholders—especially business partners in Asian countries—
hold Mitsubishi Estate in such high regard. Partnerships arebuilt on the bedrock of appreciation of our track record inurban development. If we can expand opportunities to apply
our expertise to urban development in emerging economies,
that will in turn feed through to business growth.
Considering the processes involved in raising our corporate
value, it is clear just how important open communication is to
our corporate management. Communicating with clients suchas our office building tenants and the residents of the houses
we build gives us clues to new business opportunities, whilesincerely sharing thoughts with partners on urban development into the future will bring global business opportunities.
In our pursuit of sustained improvement in corporate
value, it is vital that we hold constructive dialogues and widely
exchange ideas with shareholders on subjects ranging frominvestment strategies and returns right through to the role ofreal estate developers in society. I hope you share with me myhigh expectations of the future of the Company and I urge
you to let us hear your frank opinions.

BUSINESS REVIEWThe Mitsubishi Estate Group is promoting its new MediumTerm Management Plan for the three years beginning fiscal
2018 with the overriding theme of “entering the next stageof value creation by staying ahead of ever-changing social
needs.” We aim to achieve sustainable growth through the2020s onward by applying the Mitsubishi Estate Group’s
unique power to create value by using its strengths to seize
opportunities in these changing times.

August 2017

Building
16	OfficeBusiness

Property
22	LifestyleBusiness

Building
20	OfficeBusiness

24 Residential
Business

1

2

26	International
Business
President & Chief Executive Officer
Mitsubishi Estate Co., Ltd.

MITSUBISHI ESTATE CO., LTD.

Annual Report 2017 

15

BUSINESS REVIEW

Tetsuo Yuasa
Senior Executive Officer
Mitsubishi Estate Co., Ltd.

With long-term projects such as theTokiwabashi District Redevelopment
Project, versatility is vital. We need toincorporate into plans the leeway torespond to developments over several
decades on from completion, acceptingthat there are many ways in whichsociety’s needs may evolve.

OFFICE BUILDING BUSINESS 1

Laying the Groundwork for theConcentration of Leading Companies
to Open Doors for Innovation, with
Innovation in Turn Creating Growth

Otemachi Building

Leveraging the Marunouchi Area’s Competitivenessto Overcome Upcoming Large-Scale Supply Problem
The growth strategy for the Office Building Business set out
in the Medium-Term Management Plan focuses on three key
measures: (1) increasing rental revenues as leases commencewith project completions as the development pipeline constantly moves forward, (2) further strengthening the functionsof the Marunouchi area through the “Open Innovation Field”
initiative, and (3) expanding the long-range development
pipeline outside the Marunouchi area.
Maximizing rental revenues from completed buildings liesat the heart of our business. The Mitsubishi Estate Group has
been steadily accumulating expertise in this field over many
years. With regard to rental revenues, let me say a few words
about the problems associated with the increase in the supplyof large office buildings coming onto the market between
2018 and 2020. We believe that there is little possibility of a
sharp rise in vacancy rates in the Marunouchi area and asubsequent significant decline in rents. This is partly because,16 

on average, there will not be a steep increase in floor area
over the five years including the 2018–2020 period. But it isalso because of the competitiveness of the Marunouchi area.
A distinguishing feature of this upcoming influx is that the
new construction is concentrated in large, state-of-the-art officebuildings. When it comes to competition between such buildings,
differentiation on the basis of hardware specifications is difficult.
Accordingly, winners are likely to be determined on the basisof location, of the appeal of the area. And we are absolutely
confident of the competitive appeal of the Marunouchi area.
This area’s competitiveness lies in the fact that it hosts a
concentration of companies that is dense to an extent unseen
in any other area of Tokyo, or in any other major world city forthat matter. The area has about 4,300 offices, and among
listed companies alone, it is home to the headquarters of 97.
Considering companies’ needs for convenient offices and thegrowing trend toward intercompany collaboration, we believethat the area’s advantages as a corporate gathering point will
become even more pronounced.

MITSUBISHI ESTATE CO., LTD.

Exploring New Value and Opportunities
from the Dense Concentration of Companies
The second key measure of the Medium-Term Management
Plan—strengthening the functions of the Marunouchi area
through the “Open Innovation Field” initiative—aims to bringthis growth scenario to realization. With Open Innovation Field,
we plan to offer abundant opportunities for interaction acrossdiverse organizations and spanning diverse perspectives andareas of expertise as we seek to create an environment thatwelcomes new challenges unbound by established frameworks.
Technological and business model transformation is
becoming a life-and-death matter for many companies, which
are desperately seeking to nurture new growth by bringing
together diverse people, information, technologies, andideas. What is needed are opportunities for the intersectionof people and people, technologies and ideas, and companies and companies. Clearly, the dense concentration ofcompanies is a powerful incentive for encouraging such

Annual Report 2017 

encounters and stimulating creativity and collaboration.
What is now required of us is to release the true power ofthe strategies we have being pursuing over the past decade.
This hinges on attracting to the Marunouchi area venturecompanies that develop creative and innovative businesses
by taking initiatives to reshape the nature of the aggregationof companies and highlighting the opportunities it provides.
The Mitsubishi Estate Group has steadily been expanding
its services aimed at leading-edge Japanese venture companies while seeking to attract overseas growth companies toJapan. We began by launching EGG JAPAN in 2007, which
offered small offices for start-ups, coinciding with the completion of the Shin-Marunouchi Building, which was followed byfacilities such as The Premier Floor Marunouchi, the Global
Business Hub Tokyo, and the FINOLAB, Japan’s first base forfinancial technology (FinTech) companies.

17

BUSINESS REVIEWOFFICE BUILDING BUSINESS 1

FINOLAB: A Hub for FinTech Interaction

Creating a Positive Cycle of Business Concentration
and Innovation
For Mitsubishi Estate, attracting a cluster of start-ups is significant not only for the opportunity to provide office spaces for
growth companies in the Marunouchi area. Rather, we arefocusing on the drawing power of start-ups with innovativeideas and technologies to attract other companies seeking
opportunities to collaborate with them. The goal is to establish
a positive cycle whereby the concentration of companies
nurtures innovation, and that innovation in turn draws companies more densely together. Collaboration between large
enterprises and start-ups is indeed moving forward in the officespaces provided by Mitsubishi Estate, and the interchanges
and the co-creation that represent the true value of the con­centration of businesses have been gathering momentum.
Many companies are starting to “invest” in office spaces as
an essential aspect of promoting productivity improvements andinnovation through work style reforms. Values have changed
dramatically since providing an office environment was viewed
simply as a cost. In our Medium-Term Management Plan, we aim
to capture this change and create new value by leveraging thebenefits resulting from the concentration of leading companies
to realize growth in the Office Building Business.

Sustained Investment Looking 10 or 100 Years Ahead
Regarding the third key measure for the Office Building
Business in the Medium-Term Management Plan—expanding

FINOLAB opened in February 2016 asJapan’s first base for financial technology(FinTech) companies in Tokyo’s Otemachi
area, which hosts the headquarters ofJapan’s leading banks and the offices ofmany other financial institutions. Mitsubishi
Estate, Dentsu Inc, and Information Services
International-Dentsu, Ltd., joined together
to establish FINOLAB. The underlying concept
is to build an ecosystem for world-leading
financial innovation in Tokyo by bringing
together FinTech start-ups and experts,
leveraging the Otemachi area’s dense
concentration of companies and the
support they can offer.

the long-range development pipeline outside the Marunouchi
area—we are moving ahead with a variety of redevelopment
projects that are due to come on stream through the 2020s.
These projects are focused primarily on locations with convenient transportation access in downtown areas other than
Marunouchi. We are expanding the development pipeline tooffer a broader range of solutions to meet diverse customer
needs with respect to location and building specifications.
The Tokiwabashi District Redevelopment Project is, I think,worth spotlighting in terms of long-term developments. This
is town planning for the super long term, with the last block
due to be completed in the fiscal 2028. It is also a flagshipproject from the perspective of the site area and the size ofthe buildings.
There is no denying that long-term projects entail considerable uncertainty, and the difficulty of seeing far into the
future involves risks. By the same token, however, the flexibility and possibilities afforded only by long-term planningallow risks to be controlled.
We are using the time made available precisely becauseof the ultra-long-term nature of this project to hold extensive
discussions with people within and outside the Company,
with a view to maximizing the benefits from such tangible
aspects as building structures and construction materials
and from such intangible aspects as how buildings are used
and managed. Through long-term development that makes
use of our unique attributes, we are looking to maximize thevalue of the project and the area as a whole with a 100-yeartime horizon.

FINOLAB originally had about 900 m of shared offices andevent spaces that housed 35 start-ups, including overseas companies. It also gathered together a team of mentors to support FinTech
development in Japan. Known as “Finovators,” these mentors
comprise experts in a range of fields, including entrepreneurship,
management strategy, and law. Collaborations between large
companies and start-ups have already sprung up, and FINOLAB has
been officially recognized by the government as a networking hub.
Networking event
Tenant companies and supporters have given high marks to
FINOLAB for its wide array of office functions and convenienttransportation access as well as for its location at the heart of Japan’s leading business and financial
center. Responding to strong tenancy demand, in February 2017 FINOLAB relocated to the Otemachi
Building, where it occupies 2,150 m2 of space, about 2.4 times the size of its first premises.

Construction Begins on Shinjuku Station South Gate Project
To enhance its property pipeline,
Mitsubishi Estate is working on large-scale
multipurpose development projects withlong-term time horizons in areas otherthan Marunouchi. The Shinjuku Station
South Gate Project, of which construction
began in June 2017, is one example.
This project located near the new southgate of JR Shinjuku Station, which handles
more passengers per day than any othertrain station in Japan, involves the construction of a 16-story multipurpose building. It
will also extend the existing deck from thestation and provide plazas and other open
Computer graphic rendition of completed building exterior
spaces in conjunction with adjoining areas aspart of a planned vision of a town to be shared by the people and enterprises based in the area. The aim
is to create a pleasant network of pedestrian pathways as well as bustling spaces where people can get
together. The area around the south gate of the station has attracted growing numbers of visitors in recent
years spurred by the opening of a bus terminal and a new building. Progress is also being made in developing infrastructure for the future.
We expect the continuous development of major business districts in Tokyo to attract new customers
through properties outside the Marunouchi area. That, in turn, will bring expanding business opportunities for
the Mitsubishi Estate Group. Through a combination of small-scale and medium-scale development projects
with short time frames and major projects with longer time spans, such as the Shinjuku Station South Gate
Project, we are aiming to establish a framework for sustainable earnings growth. By doing so, we intend torealize growth for the Office Building Business through urban development outside the Marunouchi area.

Mitsubishi Estate-Owned Buildings in the Marunouchi Aream2

Tokiwabashi District Redevelopment Project(Planned completion of the last block in FY2028)

Vertical axis: Leasable area
Horizontal axis: Building age
Circle size: Total floor area

150,000

OTEMACHI FINANCIAL CITY GRAND CUBE
Marunouchi 1-3 Project*(Planned completion in
September 2020)

Marunouchi Park Building

100,000

Marunouchi 3-2 Project*(Planned completion in
October 2018)
Otemachi Park Building

OTEMACHI FINANCIAL CITY
North Tower / South Tower

50,000Marunouchi Eiraku Building

Otemon Tower •JX Building

Entrance area

2

0
0

10

20

30

40

50

60

Years

* Leasable area calculated as total floor area multiplied by effective ratio

18 

MITSUBISHI ESTATE CO., LTD.

Annual Report 2017 

19

BUSINESS REVIEWOFFICE BUILDING BUSINESS 2

Yurie Yamamoto
Manager
Marunouchi Development Department
Mitsubishi Estate Co., Ltd.

The Otemachi Park Building wasconceived around the theme ofproviding a pleasant working environment in harmony with the greenery of
the Imperial Palace. Outside, we haveprovided a “community plaza” ofapproximately 3,000 m2 where people
can gather amid vibrant foliage. In thelobby on the ground floor, we havecreated a comfortable space thatsoothes and stimulates all five senses,
from the natural, forest-scented aroma
through to calming vertical gardens.
Exterior view of the
Otemachi Park Building

OTEMACHI PARK BUILDING

Blending a Unique Location andCreative Space to Promote Innovation
Park Lounge
Otemachi Park Building

Providing a Space to Stimulate Intellectual Productivity
The Otemachi Park Building was completed in January 2017as a multifunctional property designed to meet the needs ofdiverse work styles. As options for where and how people
work have expanded, the nature of office buildings and thevalue they present have been changing. At Mitsubishi Estate,
we are not just providing office floors but rather spaces thatraise the intellectual productivity of the people who gather
there and help them create new value.
The tenant support facility on the second floor gives anidea of what we are trying to do. The tenant-exclusive Park
Lounge offers views of the greenery and waterscape of theImperial Palace as well as facilities in which to work, exercise,relax, and even get a little sleep. The goal is to contribute toenhanced concentration and creativity by providing a rangeof choices for spending time at the office and allowing
people to use the space freely according to the nature of
their work and their mood. With this space supporting

20 

diverse work styles for tenant companies, we expect it tohelp raise the value of the building and the surrounding area.
We at Mitsubishi Estate, too, are looking to find inspiration
for fresh ways of working to raise intellectual productivity
with the building as our own new headquarters.
The Premier Floor Otemachi on the seventh floor provides
small offices with a package of services as part of our mission
to provide a varied office lineup tailored to the needs ofcompanies at various growth stages. The approximately
3,400 m2 of floor space is divided into offices of 90 m2 andover that come with a special service package including ashared reception and meeting rooms. The Premier Floor
Otemachi offers a range of options to satisfy the needs ofcompanies looking to expand out from their offices in our
EGG JAPAN and Global Business Hub Tokyo business support facilities as well as of small domestic and overseas
companies looking to move into the latest large state-ofthe-art office buildings in the future.

MITSUBISHI ESTATE CO., LTD.

Reinforcing Otemachi’s Functions
as a Global Business Hub
In another distinctive feature, and in response to growing
demand for medium-term business stays, the Otemachi Park
Building also houses the Ascott Marunouchi Tokyo serviced
apartments, Otemachi’s first residential space. We believethat serviced apartments combining hotel-like services withthe at-home comfort and functionality of condominiums will
enhance the value of Otemachi as a global business center
over the medium-to-long term.
One of the core strengths of the Mitsubishi Estate Group
is to be able to access the broad insights gained from its
long-standing relationships with customers who value the
Marunouchi area as one of the world’s leading business
districts. Based on an awareness of what is required of abuilding in terms of universal values, and of functions neededfrom a longer-term perspective, new needs, and the next key
themes, we have been holding wide-ranging discussions with

Annual Report 2017 

staff at Mitsubishi Estate and its Group companies across thewhole spectrum of our sales, building operation and management, design, and other activities to lead the way in newbuilding development. The Otemachi Park Building is one
example of what we can achieve through cross-sectional
discussions and by bringing together diverse views frompeople with deep knowledge in their fields. As the times
change, so does the way we approach and present buildings.
That remains one constant in our commitment to creating
attractive urban environments.
We believe that the Marunouchi area is the leadingbusiness district in Japan, and it is up to us to ensure thatpeople continue to want to work here. To that end, we needto strive to guarantee that the area becomes the greatest
source of new value creation in the world. Innovation arises
from bringing together and combining the knowledge andideas of various people. We are pushing forward with suchinnovative approaches to office buildings and town planning
to provide attractive spaces throughout the district.

21

BUSINESS REVIEWLIFESTYLE PROPERTY BUSINESS
Hiroaki Yukawa
Manager
New Building Construction Office
Administration Dept.
Tokyo Ryutsu Center Inc.

Over the nearly 50 years since the Tokyo
Ryutsu Center was established, we havealways taken care when undertaking
construction work to protect the cherry
blossom trees that have become oursymbol. We have planted new saplings
to celebrate the completion of newbuildings. When the old and young cherry
blossom trees come into full bloom withthe arrival of spring, I think they tell thestory of our long history of achievements
and our taking on new challenges.

Seizing New Business Opportunities
by Giving Full Playto Group Synergies
External pedestrians-only corridor

The Lifestyle Property Business is looking to expand the retailproperty and logistics facility business as it develops
all asset types, excluding domestic office and residential
properties, in order to acquire new revenue sources.
The retail property portfolio spans integrated urban
facilities in the Marunouchi area and elsewhere, independent shopping centers such as MARK IS, and PREMIUM
OUTLETS®, a shopping mall chain with top drawing powerin Japan. The hotel development business works with
operators inside and outside the Group to provide optimal
property options to meet rapidly expanding demand.

In our logistics facility business, we are continuing todevelop cutting-edge facilities centering on the Logicrossbrand. We are working to accelerate business expansion
by utilizing our accumulated know-how and synergies with
Tokyo Ryutsu Center Inc. (TRC), a logistics facility management company, which we turned into a consolidated
subsidiary in August 2016. While broadening businessscale through logistics facility development, we are also
supplying development projects to REITs as part of ourefforts to maximize Group profits by generating development profits and REIT-related fees.

Expanding theGOTEMBA PREMIUM OUTLETS® Mall
Creating a Major Tourist Resort with a Mall as Its Hub
The fourth-stage expansion project is now under way at
GOTEMBA PREMIUM OUTLETS®, the flagship PREMIUM
OUTLETS® mall. The project, which is due for completion in 2020,
will add about 16,000 m2 and about 100 stores. When it opens,
the mall will have a total area of about 60,000 m2 and about 300
stores. Odakyu Electric Railway Co., Ltd., also plans in 2019 toopen a hotel and a day-trip hot spring facility in the area, making
full use of its location near Mount Fuji, a popular sightseeing
destination. These are all part of efforts to develop the mall as a
shopping resort that offers visitors a one-of-a-kind experience.
A shopping resort with a view of Mount Fuji

22 

MITSUBISHI ESTATE CO., LTD.

Distribution B Building

State-of-the-Art Functions in a Traditional Occupation
TRC has operated distribution facilities in Heiwajima, Ota-ku,
Tokyo, since 1971. In June 2017, we opened Distribution B
Building after two years of development work, making a fresh
start with one of the two logistics facilities completed soonafter TRC’s establishment.
Heiwajima is located about 2.6 km as the crow flies fromHaneda Airport, a vital doorway to the Tokyo metropolitan
area only 10 km from the center of the city. That gives it outstanding competitiveness as a logistics base within the country.
While making full use of this geographic advantage, we haveemphasized three features of multi-tenant logistics facilities
that make Distribution Building B ideally suited to customer
needs and set it apart from large suburban-type warehouses.
First, we have made the leasing space—among the largest
in the Tokyo Bay area—highly adaptable. To respond flexibly
to customers’ needs for a wide range of scales, the standard
size of the leasing space is about 1,400 m2—unusually small
for a distribution center—and even smaller spaces are provided. By contrast, the maximum size is 22,200 m2, a size notoften seen in city-center logistics facilities.
Second, we have ensured Distribution B Building offers
the highest level of safety and efficiency. We expect around2,000 workers will work in the building when it is fully occupied.
In order to ensure safety of pedestrians and make logistics
work as efficiently as possible, we have installed exterior corridors exclusively for pedestrians with a total length of 3 km andcompletely isolated warehouse access for people and vehicles.
Third, we have done our utmost to make processes within
the leasing spaces as easy as possible. Ample electric power
Annual Report 2017 

and the provision of balconies for outdoor air conditioning
units give optimal flexibility for handling processes such as
air conditioning, refrigeration and freezing, and operating
material handling equipment.

Development Process Harnessing All-Around
Strengths of the Mitsubishi Estate GroupThe rebuilding of Distribution B Building was the first large redevelopment project TRC has undertaken in almost 20 years. From
the outset, a central theme with the project was to draw fully on
the development expertise of the Mitsubishi Estate Group.
That the project went so smoothly was the result ofcombining TRC’s understanding of customer needs andfacility management expertise, Mitsubishi Estate’s development experience, as well as its relationships with construction
companies, and Mitsubishi Jisho Sekkei Inc.’s specialist
expertise with regard to planning, design, and construction
cost management. Looking ahead, the Lifestyle Property
Business as a whole aims to help identify business opportunities by sharing within the Group the latest information it isplaced to access in its position in the front lines of the logistics industry.
I believe that through the development process, we havereaffirmed that the meaning of our existence as a company
lies not just in the competitiveness of the site but also increating new value. I think we have also motivated staff tomake full use of the development know-how gained in the
project. The completion of Distribution B Building marks an
exciting new start to phase two of our business. I hope thisgives us the momentum to support sustained growth.

23

BUSINESS REVIEW(Left) Investment-purposed
micro-unit condominiums
The ParkOne’s Shinawawa Togoshi(Right) RHYTHM Asoke II
in Bangkok, Thailand

RESIDENTIAL BUSINESS

Renovated condominium building
The ParkRemore Shirokanedai
3-chomeShinji Karasawa
Executive Officer
General Manager,
Corporate Planning Department
Mitsubishi Jisho Residence Co., Ltd.

Enhancing services such as hosting
events that encourage people tointeract and holding disaster drills
promotes communications amongresidents. It also presents outstanding
opportunities for our staff to understandthe value of their work and to recognize
their own responsibility to society.

Earning the Trust of Customers and Business Partners
by Developing Homes with Real Value
Community space at The Parkhouse Nishi Shinjuku Tower 60

Diversifying Development Projects with an Eyeon the Changing Composition of Households
Under the Medium-Term Management Plan, the company
aims to reinforce its earnings base in the domestic condominium business while meeting diversifying needs in thehome redevelopment and renovation field. It also envisages
a scenario of overseas projects making a full-scale contribution to driving earnings growth.
The condominium business in Japan now operates in amarket in which single-person households account for around
35% of all households and the number of family homes, whichused to form the cornerstone of home purchases, is gradually
declining. It may no longer be possible to adequately satisfy
new needs with family homes alone—until now the mainstay of
the Residential Business. In addition, with large, prime development sites in city centers becoming increasingly rare, securing
sites while averting risks associated with accumulating inventories of land purchased at high prices is becoming a key issue.

24 

We are seeking to meet the challenges and grasp theopportunities resulting from such changes on three fronts.
First, we are expanding our lineup of properties. In
response to the evolving composition of households anddiversifying lifestyles, we are strengthening and broadening
our lineup of property types in such areas as investmentpurposed micro-unit condominiums. We are also focusing on
the renovation of aged buildings and pre-owned condominiums and their subsequent sale and rental.
Second, we are looking to contribute to society throughnew urban development. For instance, in districts in urban
centers with dense concentrations of aged housing, we areconsidering projects on the basis of building consensus withlocal residents and the local authorities. In regional hub cities,
one idea is to focus on development that reorganizes housing
scattered over a wide area into compact centers with good
main-line railway access.
Third, we are aiming to boost added value by enhancing
our lineup of services, thereby further strengthening the

MITSUBISHI ESTATE CO., LTD.

trustworthy reputation of the Mitsubishi Estate Group. In
recent years, we have been actively working to support thecreation of real communities of residents. Experience showsthat these efforts encourage people to place emphasis on
product quality, safety, and reliability when it comes to choosing a home—areas that are among our key strengths. Suchservices also deepen customers’ attachment to the community they choose to live in upon taking up residency.

Tapping into Dynamic Growth in Overseas Markets
as a Vital Pillar of Earnings
We have made great strides in the international business overthe past four or five years in securing excellent local companies as business partners in major Asian nations and expanding
our property pipeline. Our Medium-Term Management Plan
positions overseas operations as a sure driver of revenue andprofit growth. With the Mitsubishi Jisho Residence Group, weare aiming to expand the contribution of overseas operations

Annual Report 2017 

to operating income to more than 20% in fiscal 2021.
The Mitsubishi Estate Group’s brand and knowledge baseare also vital from the perspective of securing the business
partners that hold the key to the success of our international
business. Our residential developments and “Check Eyes,”
our quality management and performance indication system,
have received high praise from existing and potential business partners. Such trust in our brand and in the scope anddepth of our knowledge gives us a powerful competitive
advantage in securing outstanding business partners andbuilding our overseas business. It is also indispensable forestablishing long-term relationships on the basis of sharedvalues. I am confident that the continuing pursuit of thehighest quality and new value in residential developments,
whether in Japan or overseas, will strengthen the Mitsubishi
Estate Group brand and lead to future growth.

25

BUSINESS REVIEWINTERNATIONAL BUSINESS

Daniel Bower
Vice President
Rockefeller Group International, Inc.

Yoko Yamada

Fresh Identity Going Forward
Created through Extensive
Renovation of Flagship Building

Manager
Rockefeller Group International, Inc.

Precise schedule management supported
by quick and accurate decisions is crucial
in terms of risk management. We arerenovating 1271 Avenue of the Americas
while it continues to function as an officebuilding. As such, it is important tomaintain communication and close
coordination with tenants to minimize
the degree to which they are impacted.
Computer graphic rendition of the renovated1271 Avenue of the Americas

Plans for the International Business include acceleration of
investments through the extensive renovation of a flagshipbuilding in the United States, the hybrid investment modelutilizing the business’ global investment platform, and development projects conducted together with local partners inemerging countries.
The hybrid investment model is a scheme for combining
proprietary and third-party equity to expand our portfolio
while conducting joint investments with outside investors.
Using this scheme, we are pursuing effective dispersed
investment and asset growth by utilizing the global

investment management platform created through capital
participation in Europa Capital LLP and TA Realty LLC andthrough the establishment of Pan Asia Realty Advisors(Singapore) Pte. Ltd. in 2017.
At the same time, we are advancing partnership development in Asian countries to apply our community development
experience through local partners. We aim to realize innovative development projects that contribute to reduced environmental impact and harmony with local communities.

Office Building Development Project in Jakarta
In November 2016, the Mitsubishi Estate Group reached an agreement to participate in its first office building development project in Indonesia. Located in Jakarta,
the Daswin Project will be a joint project by The Gesit Companies Ltd., head of amajor Indonesian corporate group; Santini Group Ltd.; and the Group. This massive
project will be 46 floors aboveground with a total floor space of 130,000 m2 throughan investment of more than ¥27.0 billion. In addition to Mitsubishi Estate, participation is also planned by Mitsubishi Jisho Sekkei which will draft basic designs, andMitsubishi Jisho Property Management Co., Ltd., which will provide advisory
services on property management.

Computer graphic rendition ofcompleted building exterior

26 

MITSUBISHI ESTATE CO., LTD.

1271 Avenue of the Americas

Enhancing Competitiveness through Extensive
Renovation of Flagship Building
The Mitsubishi Estate Group’s operations in the United States
are advanced by Rockefeller Group International, Inc. (RGII).
The robust track record of this company in the U.S. market
gives us an advantage over Japanese companies looking togrow in this market. RGII is undertaking the extensive renovation of 1271 Avenue of the Americas, one of its flagship officebuildings. This project represents one of our core overseas
initiatives under the Medium-Term Management Plan.
Completed in 1959, 1271 Avenue of the Americas islocated in Rockefeller Center in Midtown Manhattan, New
York. This large-scale office building is an iconic fixture in thisarea, boasting 48 aboveground floors and three undergroundfloors with approximately 195,000 m2 of leasable area. In 2016,
we commenced the extensive renovation project that willentail devoting approximately US$600 million (approximately¥60 billion) to construction expenses and tenant-related costs
as we overhaul the entire building. This project is currently
underway with a scheduled completion date of 2019.
The renovation project will transform entrance spaces, thelobby, outdoor plazas, and other shared areas to create a morerefined and modernized atmosphere. In addition, all of thebuilding’s 6,832 exterior curtain wall panels will be replaced andwindow areas will be increased by roughly 60% to make theoffice space feel substantially more open, while the exterior
will receive a new, more modern design. The building’s facilities,
Annual Report 2017 

including air-conditioning equipment and elevators, will
also be replaced to achieve even higher levels of desirebility
and competitiveness.

Reinvented Identity Solicited to Innovative Companies
Through the renovation project, we will evolve 1271 Avenueof the Americas into a building that can be solicited to a wider
range of tenant companies by making it more comfortableand endowing it with a fresh exterior design while respecting
its existing history and identity.
The area surrounding 1271 Avenue of the Americas has
traditionally housed the offices of numerous leading institutions. This identity is intact today as the area remains home tonumerous financial institutions and law firms. However, we havewitnessed a change in the types of tenants that have been taking
an interest in 1271 Avenue of the Americas in light of the renovation project. One major tenant has already decided to leasea portion of the building after its renovation: Major League
Baseball and MLB Advanced Media, L.P. This tenant develops
an innovative business merging sports, IT, and media. The
decision of the tenant to enter the building has recently sparked
interest among other innovative companies, adding to existing
interest from conventional tenant types, thereby helping
substantiate the reinvented identity of the renovated building.
Going forward, we will move ahead with the recruitmentof tenants in conjunction with the progress of renovations toensure that this extensive project results in success.

27

SUMMARY OF MANAGEMENT & SERVICES BUSINESS GROUPINVESTMENT MANAGEMENT BUSINESS

Competitive
Advantages

ARCHITECTURAL DESIGN & ENGINEERING BUSINESS	Through the execution and implementation of both organic and inorganic growth strategies (M&As
and joint ventures), we have established a strategic global investment management platform, enabling
us to provide global asset management services to clients, leveraging the expertise and successful trackrecords fostered in Japan, the United States, Europe, and Asia ex-Japan.

Competitive
Advantages

	In the domestic market, Mitsubishi Jisho Investment Advisors, Inc. provides asset management services
across a wide range of investment products, including the country’s largest private REIT, while Japan
Real Estate Asset Management Co., Ltd. manages the first publicly listed and one of the nation’s largest
office REIT.

	As a full-service architectural design and engineering firm, Mitsubishi Jisho Sekkei has extensive experience in urban planning covering such areas as the design and management of buildings for various
applications, proposal-based consulting, large-scale complex developments in the Marunouchi area,and designing underground spaces that take into account traffic conditions.
	We are positioned to undertake design and management with an in-depth understanding of postconstruction operation, maintenance, and management from the perspectives of the business operator
and client based on experience cultivated as a developer’s in-house design office.
	We have access to a wealth of information on China and Southeast Asian countries through a network
centered on local subsidiaries established in Shanghai and Singapore.

	Globally, we have combined assets under management of circa ¥3 trillion.** As of March 31, 2017 for Japan, December 31, 2016, for overseas

Business Strategy

	By utilizing our hybrid investment model strategy, through which we co-invest our principal investment
capital alongside our clients in funds that our Group companies manage, we seek to provide and capture the steadily growing demand for cross-border property investments. Through this approach, we are
simultaneously pursuing the expansion of our overseas portfolio, while benefiting from enhanced
investment diversification, as well as expanding and strengthening our investment managementbusinesses.

Business Strategy	In addition to handling design projects from within the Group, the company is working closely with
the Business Development, Consulting & Solutions Group to win orders for architectural design andengineering work.
	Besides construction management (CM) work involving the comprehensive management of projects
including construction schedule, budgets, and quality control, we are focusing on winning orders inrenovation and other growth fields in order to expand our earnings base.

	We established Pan Asia Realty Advisors at the end of March 2017 as part of our efforts to extend
our global investment management platform in Asia. The company will undertake asset managementbusiness in Asia and Oceania.

	We aim to expand overseas business by making full use of the Mitsubishi Estate Group’s brand.
	We are seeking to raise the Group’s corporate value by providing technological support to Group companies.

Topics

TopicsIn fiscal 2017, we ramped up our investments in the U.S. market
against a backdrop of low interest rates and steady economic
expansion. Utilizing the hybrid investment model, we actively
invested in prime real estate in major gateway cities including
Boston, Dallas, Los Angeles, and Washington D.C. by leveraging
the sourcing network and various asset management capabilities
of TA Realty, a company acquired in 2015 through Rockefeller
Group International (RGII). As a result, the portfolio grew andexceeded $1 billion as of October 2016. Meanwhile in Europe,
Europa Capital, acquired in 2010 via RGII, has provided its capabilities and cooperated with Mitsubishi Estate London in theacquisition of a German office building in June 2017. In Asia andOceania, with the establishment of Pan Asia Realty Advisors, weseek to establish various networks with the region’s institutional
investors, and source investment opportunities in the region.
In Japan, an unlisted open-ended private REIT managed
by Mitsubishi Jisho Investment Advisors continues to grow, andbecame the first private REIT in Japan to surpass ¥300 billion in
assets. Meanwhile, assets under management at Japan Real Estate
Investment Corporation, which is managed by Japan Real Estate
Asset Management, had reached ¥944.7 billion at the end of
fiscal 2017.

In the Japan business, we handled new construction designand supervision work for the relocation of Kumamoto Kenmin
Television Corporation (KKT) to a new headquarters. Despite thearea suffering from major earthquakes in April 2016, construction
was completed in November 2016. Kumamoto City is one of themain cities of the Kyushu region and the new facility is installedwith leading-edge equipment to ensure uninterrupted broadcasting as a base for disseminating information throughout the region.
In our efforts to expand overseas business since 2011, we
have been building a solid track record in China and Taiwan led
by a local subsidiary established in Shanghai. In June 2016, wecompleted our first major architectural design project in China,
in Binjiang District in Hangzhou City, Zhejiang Province, part ofwhich opened in September.
We established Mitsubishi Jisho Sekkei Asia Pte. Ltd. in April
2016 as a local subsidiary in Singapore with a view to exploringbusiness opportunities in Southeast Asian markets where sustained
population growth and economic development are expected.
Mitsubishi Jisho Sekkei is seizing the opportunity for Groupsynergy with Mitsubishi Jisho Residence’s building renovation
business, which renovates older small and medium-sized buildings
and subleases them. As part of efforts to expand this business, wehave established the Building Renovation Design Office to handle
work related to renovation and seismic reinforcement design andsupervision work.

Office building in Boston

External view of the Hangzhou
Binjiang Project in China

Office building in Munich

28 

MITSUBISHI ESTATE CO., LTD.

Kumamoto Kenmin Television’s new headquarters

Annual Report 2017 

29

SUMMARY OF MANAGEMENT & SERVICES BUSINESS GROUP

HOTEL BUSINESS

Competitive
Advantages

REAL ESTATE SERVICES BUSINESS	For over 30 years, the Mitsubishi Estate Group’s Hotel Business has been building a chain of hotels
under the Royal Park Hotels brand based on its “Best for the Guest” guiding principle.

Competitive
Advantages

	We satisfy wide-ranging customer needs through our network of upscale, full-service hotels offering
outstanding hospitality and a variety of luxurious facilities and of limited-service hotels that combine
state-of-the-art facilities and convenient locations.

Business Strategy

	Applying specialist expertise long nurtured as real estate service professionals, we provide solutions
throughout Japan using our nationwide branch network.
* Corporate Real Estate (CRE): Real property held or used by a business enterprise or organization for its own operational purposes. In recent years,
there has been growing interest in using CRE strategically to contribute to increased corporate value.

	We are stepping up the pace of new hotel openings to expand the hotel network to tap into the strong
demand for accommodation being fueled by growth in the number of inbound visitors to Japan,
spurred by the Japanese government’s tourism policies.
	We are looking to seize opportunities for growth by bringing together the Mitsubishi Estate Group’s
value chain and the hotel management expertise we have cultivated thus far.

	The Real Estate Services Business provides one-stop real estate solutions by making full use of the
Mitsubishi Estate Group’s comprehensive strengths with a wide-ranging service menu spanning CRE*
strategy support, including utilization of CRE information, real estate brokerage, leasing management,
parking lot management, and real estate appraisal.

Business Strategy

	We are aiming to be the top company in CRE strategy support, real estate consulting, and recreational
land and recreation facilities management, targeting enterprises and high net worth individuals as
customers.
	We are establishing a value chain that combines the Business Development, Consulting & Solutions
Group and the service menus of each of the Group’s businesses while expanding the range of services
we provide to existing customers.

Topics

TopicsIn 2016, the number of overseas visitors to Japan increased 22%
from the previous year, to more than 24 million, the largest
number since records began in 1964. Although the supply of newhotel guest rooms in Japan has been rising, the supply-demand
position remains tight in some cities. The Mitsubishi Estate Groupis accelerating the pace of new hotel openings in its Hotel Business,
which is overseen by Royal Park Hotels and Resorts Co., Ltd.
(Royal Park Hotels).
In July 2016, we began construction of The Royal Park Hotel
Kyoto Shijo, due to open in spring 2018. The hotel is close to
the business center of Kyoto and within walking distance of the
shopping and entertainment district. This project utilizes thevalue chain within the Mitsubishi Estate Group. Mitsubishi Estateis developing the property and Royal Park Hotels will manage
the hotel on a leased basis. In December 2016, Royal Park Hotels
reached an agreement with real estate developer Kenedix, Inc.
for Royal Park Hotels to operate a hotel to be built at a site in
Ginza and due to open in 2019. In February 2017, we took thedecision to build a 352-room hotel in the Midosuji area of
Osaka, the city’s preeminent business district, which will be ourflagship limited-service hotel in the Kansai area.

Mitsubishi Real Estate Services Co., Ltd., offers CRE strategy
planning and execution support through the CRE strategy support
system to optimize the use and maximize the value of real estate
owned by customers.
Amid accelerating changes in the environment in which
companies operate, we need to put structures in place that allow
us to offer more competitive services and so seize business
opportunities born of diversifying real estate needs related to
M&A deals and business reorganizations. With this in mind, in
April 2016 we registered as an investment advisory and agency
business, putting in place a structure that enables us to collect fee
income even when the focus of transactions shifts from physicalreal estate transactions to M&A deals.
In addition, we have been striving to unearth new demand
from existing customers while expanding our range of service
offerings by combining service menus, such as proposing tocustomers both real estate brokerage services and subsequent
management of leased properties.
We have been building the parking lot management business
into a new earnings driver. Specifically, in addition to the management of outdoor parking lots, we have added as a new service themanagement of building parking lots. In the Marunouchi area, wehave received contracts for the management of parking facilities
in the Mitsubishi Building.
We will continue to further develop the Real Estate Services
Business by identifying customer needs in collaboration with theBusiness Development, Consulting & Solutions Group.

Computer graphic illustration of
the completed The Royal Park Hotel
Kyoto Shijo

Computer graphic illustration of
the completed The Royal Park Canvas
Tokyo Ginza

30 Computer graphic illustration of
the completed The Royal Park Hotel
Osaka Midosuji

MITSUBISHI ESTATE CO., LTD.

Annual Report 2017 

Mitsubishi Real Estate Services’ brand logo

Parking facilities in the Mitsubishi Building

31

SUMMARY OF MANAGEMENT & SERVICES BUSINESS GROUP

BUSINESS CREATION DEPARTMENT

Competitive
Advantages

Business Strategy

BUSINESS DEVELOPMENT, CONSULTING & SOLUTIONS GROUP

	Mitsubishi Estate has vast experience and second-to-none specialist expertise in real estate development and management deriving from a long history in urban development that spans the whole spectrum, from finding tenants and facility management to cooperating closely with such stakeholders as
business operators in nearby areas.

Value Drivers

	Strategic sales organization comprising­horizontally integrated segments

	We are making all-out efforts to create sustainable innovation that goes beyond the bounds of established business fields.

Scope of Activities

	In April 2017, we repositioned the New Business Creation Department, which was established in 2014
within the Corporate Group under the direct control of the president. While aiming to expedite decision
making, we have also set a budget of ¥100 billion over the three years covering our new Medium-Term
Management Plan with a view to building new revenue drivers for the 2020s.
	New asset development: One specific example is to participate in airport-related business in responseto the Japanese government’s promotion of private-sector management of airports. We also intend toactively engage in resort development, which has close affinities with the airport business.
	Business development through collaboration and business tie-ups: One concrete example is our investment in a fund set up by 500 Startups, a Silicon Valley-based early-stage venture fund and seed accelerator that has established a worldwide network and a solid track record. We aim to create new businessthrough open innovation centering on collaboration with venture companies.

	Identify problems through consulting
Robust solutions using Groupwide resources

The Business Development, Consulting & Solutions Group offers a wide range of services that make full useof the Mitsubishi Estate Group’s abundant experience and comprehensive capabilities to resolve all typesof challenges facing customers, acting as a business contact point for the entire Mitsubishi Estate Group.
Our main efforts involve making comprehensive assessments of real estate-related issues concerning
customers, whether they are corporations or individuals, and proposing optimal approaches to theirresolution that serve to raise corporate value by making use of wide-ranging businesses and resources. We
are also actively undertaking development projects from a medium-to-long-term perspective and aiming
to create new business opportunities that go beyond the bounds of the real estate field, thereby promoting joint business with customers while maximizing the use of our resources.

Business Flow of Consulting Services
and Solutions

Analyze and hypothesize

Identify issues
ProposalCommunication

Customers

Topics
Decision making

In the field of asset development, the Company in March 2017
entered into a basic agreement on the use of Shimojishima
Airport with the local authorities in Okinawa Prefecture. In addition to developing the passenger terminals, we aim to attractscheduled international and domestic flights and private aircraftin cooperation with the local authorities and to stimulate economic activity in Miyakojima’s resort areas.
In the business development field, we invested in and signed
a comprehensive agreement with Chihou Sousei Network Co.,
Ltd. (CSN), in January 2017. CSN purchases fresh fish directlyfrom fishermen throughout the country, processes, and sorts themat a special facility on the grounds of Tokyo’s Haneda Airport’s
restricted area, and delivers the seafood the same day to restaurants and private homes. In cooperation with Mitsubishi Estate,
CSN has begun a fresh fish delivery service to condominiums
developed by the Mitsubishi Estate Group. The scope of thejointly operated services is being expanded to include wholesale
sales to the Group’s retail facilities and Royal Park Hotels.
To support innovation that goes beyond the bounds ofestablished business domains, we have also begun full-fledged
cooperation with venture businesses. One initiative here is our
Corporate Accelerator Program. This aims to create new businesses together with venture businesses and began soliciting
applications in June 2016.

Support for businesspromotion

Seoul
Tokyo
Osaka

Consultation

FukuokaShanghai

Shimojishima

Naha

Taipei

Shimojishima, Miyakojima City, Okinawa Prefecture

Delivery of fresh fish

32 

Business
Development,
Consulting &SolutionsGroup

MITSUBISHI ESTATE CO., LTD.

Real estate development

Real estate investment

Real estate liquidityD evelopment method proposals
B usiness plan supportP roject managementE ffective utilization / joint ventures(equivalent exchanges / termleasehold)Provisional use
ReconstructionR eal estate investment strategy
formulation support
Market research and analysis
Due diligenceAcquisition support
Asset managementR eal estate-backed financial
supportSecuritization
Specified real estate joint ventures
Sales and leaseback
Real estate brokerage

Comprehensive building
analysis and renovation

Design, supervision, andconstruction

CRE strategy support

New business development

Earthquake resistance analysis
Facility management
Energy saving and IT utilization inbuildings and facilities
Interior and exterior renovation
Barrier-free facility construction
Protective measures for buildings
and facilities
Conversion
Building renovation business(renovation of existing buildings
and subsequent leasing)Environmental assessment andresearch
Consulting for urban development
and private finance initiatives (PFIs)
Consulting, design, and supervision
for environmental and civilengineering solutions
Construction management
Design and supervision forbuildings and structuresD esign and supervision for interiors
and exteriorsS ingle-unit homes and rental andcorporate housingR esidential and office renovation

Organization of CRE information
CRE valuation
Support for strategy formulationand implementation

Business partnership
Investment / M&A

Annual Report 2017 

Building operation andmanagementO peration and management plan
analysis and proposals
L ong-term maintenance plan
consultingC ommissioned operation andmanagement of buildings,
retail facilities, and hotels
Subleasing
Tenant marketing

33

FINANCIAL HIGHLIGHTS BY SEGMENT
Years ended March 31

Revenue from Operations (left scale)Operating Income (left scale)Operating Income Ratio (right scale)

Office Building Business

Lifestyle Property BusinessBillions of yen%Billions of yen

%

600

60

180

60

500

50

150

50

400

40

120

40

300

30

90

30

200

20

60

20

100

10

30

10

0

0

0
2013

2014

2015*1

2016*2

2017

0
2013

2014

2015

2016

2017

*1.	As of April 2014, the Commercial Property Development & Investment Business has
been integrated into the Office Building Business.
*2.	As of April 2015, domestic retail & logistics property businesses (not including somemultipurpose facilities), no longer in the Office Building Business, now featuring theLifestyle Property Business.

Residential Business

International BusinessBillions of yen%Billions of yen

%

500

10

90

60

400

8

75

50

60

40

300

6
45

30

200

4
30

20

15

10

100

2

0

0
2013

2014

2015

2016*

0

2017

Marunouchi area as photographed from above the Imperial Palace

0
2013

2014

2015

2016*

2017

* As of July 2015, certain operations of Mitsubishi Jisho House Net Co., Ltd., have been
moved from the Real Estate Services Business to the Residential Business.

* As of April 2015, the Overseas Investment Management Business has been moved
from the International Business to the Investment Management Business.

Investment Management BusinessArchitectural Design & Engineering Business

CORPORATE GOVERNANCE

Billions of yen%Billions of yen

%

30

60

30

12

25

50

25

10

20

40

20

8

to society through urban development.” In line with that

15

30

15

6

mission, we aim to work with stakeholders to create shared

10

20

10

4

value while reinforcing the corporate governance that forms

5

10

5

2

the bedrock of our business.

0

0

0
2013

2014

2015

2016*

2017

The mission of the Mitsubishi Estate Group is “to contribute

0
2013

2014

2015

2016

2017

* As of April 2015, the Overseas Investment Management Business has been moved
from the International Business to the Investment Management Business.

Hotel Business

Real Estate Services BusinessBillions of yen%Billions of yen

%

40

8

30

12

25

10

30

6
20

8

15

6

10

4

5

2

20

4

10

2

0

0
2013

2014

2015

2016

2017

0

0
2013

2014

2015

2016*

2017

* As of July 2015, certain operations of Mitsubishi Jisho House Net Co., Ltd., have been
moved from the Real Estate Services Business to the Residential Business.

34 

MITSUBISHI ESTATE CO., LTD.

Annual Report 2017 

35

CORPORATE GOVERNANCE

Message from the Chairman of the Board

Overview of Corporate Governance System

Let me begin by reporting a change in Mitsubishi Estate’s management team. In April 2017, Junichi
Yoshida took up the mantle of president and chief executive officer. Yoshida has proven himself highly
capable of formulating management visions from a Groupwide perspective in his past positions as ancorporate executive officer and a director. Moreover, he has demonstrated a high degree of proficiency
in communicating with employees and officers, a skill cultivated over his long career in human resource
management. The Board of Directors is united in its appraisal of Yoshida as a leader with the capacity todraw out the full potential of the Group’s human resources and thereby drive the growth of the Group.
I too felt a renewed desire to facilitate ongoing improvements in Mitsubishi Estate’s corporate value by
ensuring effective governance when I took up a new role, the position of chairman of the Board in my case.
I am committed to utilizing the insight into business execution I gained during my time as president, whileremaining keenly aware of the separation of responsibilities between the management supervision andbusiness execution functions, in order to contribute to more active and constructive discussions at meetingsof the Board of Directors.
The Medium-Term Management Plan announced in May 2017 is the first plan established following
the June 2016 transition to the “Company with Nominating Committee, etc.,” structure described in the
Companies Act of Japan. In formulating this plan, we examined possible measures for facilitating theGroup’s growth from the perspective of frontline operations. At the same time, the Board of Directors
discussed the medium-term management tasks faced by the Group as well as our goals for the future.
Accordingly, the plan is a marriage of on-site realism and abstract management vision. This plan was truly
born out of brisk discussion. However, there may be a need to further improve how we conduct discussions at meetings of the Board of Directors, and the evaluations of the effectiveness of the Board of
Directors that we began instituting in fiscal 2017 will be a powerful tool to this effect. Advancing the
Medium-Term Management Plan is a top priority for management. As we move forward, the Board of
Directors will continue to monitor the progress of the plan while fine-tuning it based on operating environment changes and engaging in deeper, more strategy-oriented discussions.
All directors feel the weight of their responsibilities as members of the Board of Directors of a company
that must continue to create value through community development activities over the next century andbeyond. We will not limit ourselves just to overseeing the implementation of the Medium-Term Management
Plan. Rather, we will pursue higher corporate value by formulating management policies aimed at responding to a wide range of social needs, including engaging in sophisticated community development activities
to achieve coexistence with the environment and bolstering the international competitiveness of Tokyo.

Basic Policy

Board of Directors

We aim to realize our basic mission of contributing to thecreation of a truly meaningful society through attractive urban
development that gives due consideration to both environmental concerns and the residential, work, and recreational
needs of our time. With this in mind, we recognize the needfor a harmonious balance between corporate growth and theinterests of our various stakeholders.
Based on this mission, the Group endeavors to promotemanagement that is focused on the interests of shareholders
and to realize efficient and sound-minded Group management
and is working to structure a management system that has
more vitality and flexibility. We view corporate governanceas one of our most important systems and, therefore, are constantly working toward the creation of structure best suited
to the Group.

The Board of Directors decides the basic policy of the Company’s
management, and it also carries out supervision of the execution of duties by directors and corporate executive officers.
As of June 29, 2017, the Board of Directors consists of 15
directors, of whom seven are outside directors. The role ofchairman of the Board of Directors is held by the chairman of
the Board of the Company, who does not concurrently serve
as a corporate executive officer.

Non-executive,
independent,
outside directors
7Internal directors whoare concurrently serving as
corporate executive officers
5

System Structure
Executive /Non-executive

As a “Company with Nominating Committee, etc.,” Mitsubishi
Estate has established the Nominating Committee, the Audit
Committee, and the Remuneration Committee, which are
positioned under the Board of Directors and are membered
by a majority of outside directors. These committees help
promote high standards and ensure transparency of thedecision-making process.

Internal directors who
are not corporate
executive officers
3

Nominating Committee, Audit Committee, and Remuneration Committee
The memberships of each committee are as follows.
Nominating Committee

Isao Matsuhashi(Committee chairman)

August 2017

MITSUBISHI ESTATE CO., LTD.

Audit Committee

OutsideDirector

Remuneration Committee

Yutaka Yanagisawa(Committee chairman)

Shin Ebihara(Committee chairman)

Hirotaka Sugiyama

Toru Okusa

Junichi Tanisawa

Noboru Nishigai

Shu Tomioka

OutsideDirector

Noboru Nishigai

OutsideDirector

Masaaki Shirakawa

OutsideDirector

Shin Nagase

OutsideDirector

Masaaki Shirakawa

OutsideDirector

Setsuko Egami

OutsideDirector

Iwao Taka

OutsideDirector

Setsuko Egami

OutsideDirector

Chairman of the Board
Mitsubishi Estate Co., Ltd.

36 

Composition of the Board of Directors

Annual Report 2017 

37

CORPORATE GOVERNANCE

Directors
As of June 29, 2017

Name
PositionAppointment year
Number of shares held
(As reported in Fiscal 2017 Financial Report,
available only in Japanese)

Hirotaka Sugiyama

Junichi Yoshida

Jo KatoJunichi Tanisawa

Hiroshi Katayama

Chairman of the Board

Director

Director 

Director Director
2007
48 thousand shares2016
32 thousand shares
2011
74 thousand shares

Noboru Nishigai

Yutaka Yanagisawa

Toru Okusa

Director

Director

Director
2017
21 thousand shares
2016
22 thousand shares
2013
31 thousand shares
2016
22 thousand shares2014
24 thousand shares

Isao Matsuhashi

Shin Ebihara

Shu Tomioka

Masaaki Shirakawa

Outside Director

Outside Director

Outside Director

Outside Director









2007
–shares
Born on April 16, 1933
Apr. 1956	Joined Japan Travel Bureau
Foundation
Jun. 1990	President and Representative
Director, JTB Corp.
Jun. 1996	Chairman and Representative
Director, JTB Corp.
Jun. 2002	Director and Adviser, JTB Corp.
Apr. 2004	Chairman and Director,
NARITA INTERNATIONALAIRPORT CORPORATION
Jun. 2004	Adviser, JTB Corp.
(Current position)
Jun. 2007	Retired from the position of
Chairman and Director, NARITA
INTERNATIONAL AIRPORTCORPORATION
Jun. 2007 Director, Mitsubishi Estate Co., Ltd.
(Current position)

2015–shares
Born on February 16, 1948
Apr. 1971 Joined the Ministry of Foreign
Affairs of Japan
Jun. 2001	Director-General, Treaties
Bureau, the Ministry of Foreign
Affairs of Japan
Sep. 2002 Director-General, North American
Affairs Bureau, the Ministry ofForeign Affairs of Japan
Jan. 2005	Assistant Chief Cabinet
Secretary, the Cabinet Secretariat
Mar. 2006	Ambassador Extraordinary andPlenipotentiary to the Republicof Indonesia
Apr. 2008	Ambassador Extraordinary
and Plenipotentiary to
the United Kingdom
Feb. 2011	Retired from the Ministry ofForeign Affairs of Japan
Jun. 2015 Director, Mitsubishi Estate Co., Ltd.
(Current position)

2006
10 thousand shares
Born on April 15, 1948
Nov. 1975 Joined Morgan Guaranty Trust
Company of New YorkFeb. 1991	Branch Manager andRepresentative in Japan,
J.P. Morgan Securities Asia
Pte. Limited, Tokyo BranchJul. 1998 Director and Vice Chairman,
J.P. Morgan Securities Asia
Pte. Limited
Apr. 1999	Representative in Japan,
J.P. Morgan Securities Asia
Pte. Limited
Mar. 2001 Vice Chairman, J.P. Morgan
Securities Asia Pte. Limited
Oct. 2002 Retired from J.P. Morgan
Securities Asia Pte. Limited
Jun. 2006	Director, Mitsubishi Estate Co., Ltd.
(Current position)

2016–shares
Born on September 27, 1949
Apr. 1972	Joined Bank of Japan
Jul. 2002	Director, Bank of Japan
Jul. 2006 Professor, Kyoto University
School of GovernmentMar. 2008	Vice President, Bank of Japan
Apr. 2008 President, Bank of Japan
Mar. 2013	Retired from Bank of Japan
Jun. 2016	Director, Mitsubishi Estate Co., Ltd.
(Current position)

Yutaka Yanagisawa, Iwao Taka, Hiroshi Katayama, Shu Tomioka, Shin Ebihara, Junichi Tanisawa,
Masaaki Shirakawa, Noboru Nishigai, Shin Nagase, Toru Okusa

Shin Nagase

Setsuko Egami

Iwao Taka

Outside Director

Outside Director

Outside Director(Front row, from left)







2016
–shares
Born on March 13, 1950
Apr. 1972	Joined ALL NIPPON AIRWAYS
CO., LTD
Apr. 2009	Representative Director and
Deputy President, ALL NIPPONAIRWAYS CO., LTD.
Apr. 2012 President, ANA Strategic
Research Institute Co., Ltd.
Apr. 2016	Full-Time Advisor, ANA
HOLDINGS INC.
Jun. 2016	Director, Mitsubishi Estate Co., Ltd.
(Current position)
Mar. 2017	Retired from the position of
Full-Time Advisor,
ANA HOLDINGS INC.

2015
–shares
Born on July 16, 1950
Apr. 1983	Editor-in-Chief of Travaillemagazine, Japan Recruit Center
Dec. 2001	Director, Frontier Service
Development Laboratory,
East Japan Railway Company
Apr. 2009	Professor, Graduate School of
Humanities, Musashi University(Current position)
Professor, Faculty of Sociology,
Musashi University(Current position)
Apr. 2012	Dean, Faculty of Sociology,
Musashi University
Jun. 2015	Director, Mitsubishi Estate Co., Ltd.
(Current position)

2016–shares
Born on March 10, 1956
Apr. 1994	Full-Time Lecturer, Faculty ofInternational Economics,
Reitaku University
Apr. 2001	Professor, Faculty of International
Economics (currently Faculty of
Economics and Business
Administration),
Reitaku University (Current position)
Apr. 2002	Professor, School of International
Economics (currently School of
Economics and Business
Administration), Chikuro Hiroike
School of Graduate Studies,
Reitaku University (Current position)
Apr. 2009	Dean, Faculty of Economics andBusiness Administration,
Reitaku University
Jun. 2015	Statutory Auditor,
Mitsubishi Estate Co., Ltd.
Jun. 2016 Director, Mitsubishi Estate Co., Ltd.
(Current position)(Back row, from left)

Jo Kato, Isao Matsuhashi, Junichi Yoshida, Hirotaka Sugiyama, Setsuko Egami

38 

MITSUBISHI ESTATE CO., LTD.

Annual Report 2017 

39

CORPORATE GOVERNANCE

Outside Directors

Nominating Committee
Duties

Deciding the details of the proposals of the general meeting of shareholders related to the election and­dismissal of directors

Major activities

The Nominating Committee established standards for nominating director candidates and then determined thedetails of the director nomination proposal put to the Ordinary General Meeting of Shareholders held in June
2017. In addition, reports and deliberations were conducted at meetings of the Nominating Committee withregard to the nomination of the president & chief executive officer and other corporate executive officers prior
to the resolution by the Board of Directors.

Number of meetings

6

Reason for nomination
Isao
Matsuhashi

The Company expects that he would carry out the supervision and check functions regarding the Company’s
management from an objective viewpoint independent from management executives in charge of business affairs
by leveraging his management experience in a lifestyle-related service company.

Shin Ebihara

The Company expects that he would carry out the supervision and check functions regarding the Company’s
management from an objective viewpoint independent from management executives in charge of business affairs
by leveraging his wealth of international experience and knowledge gained through his extensive years as a diplomat.

Shu Tomioka

The Company expects that he would carry out the supervision and check functions regarding the Company’s
management from an objective viewpoint independent from management executives in charge of business affairs
by leveraging his management experience in a foreign-affiliated investment bank.

MasaakiShirakawa

The Company expects that he would carry out the supervision and check functions regarding the Company’s management from an objective viewpoint independent from management executives in charge of business affairs by leveraging
his knowledge in finance and economics, among other fields gained through his experience working at a central bank.

Shin Nagase

The Company expects that he would carry out the supervision and check functions regarding the Company’s
management from an objective viewpoint independent from management executives in charge of business affairs
by leveraging his management experience at an airline company.

SetsukoEgami

The Company expects that she would carry out the supervision and check functions regarding the Company’s
management from an objective viewpoint independent from management executives in charge of business affairs
by leveraging her abundant knowledge of corporate strategy, marketing strategy, and human resource development.

Iwao Taka

The Company expects that he would carry out the supervision and check functions regarding the Company’s
management from an objective viewpoint independent from management executives in charge of business affairs
by leveraging his extensive knowledge regarding business ethics and compliance, among other fields.

Independence Standards for Independent Outside Directors
The candidates for outside directors shall fulfill duty of care of a prudent manager toward the Company, understand the Group’s basic mission of contrib­
uting to the creation of a truly meaningful society by building attractive, environmentally sound communities where people can live, work, and relax with
contentment, apply their qualities and capabilities to contribute to enhancing medium-to-long-term sustainable corporate value, as well as their experienceand knowledge in specialized fields such as global business, finance and risk management in view of its business characteristics such as supporting urban
development in the Marunouchi area, and have personality and knowledge enabling objective and fair judgments, based on the perspective that they would
contribute to the common interests of the shareholders without bias toward the interest of any particular party of interest. However, as a general principle,
candidates are not elected if the Tokyo Stock Exchange’s standards for independence and the following independence standards for outside directors apply
to them.
(1) A shareholder or executive member of an entity holding voting rights exceeding 10% of total voting rights of the Company.
(2) A transaction party or executive member of an entity whose transactional amounts in the most recent fiscal year have exceeded 2% of consolidated
revenue from operations of the Company.
(3) A representative employee, employee, or member of staff of the Company’s accounting auditor.
(4) An attorney, certified public accountant, tax accountant, consultant, or other party who has received compensation from the Company exceeding¥10 million in the most recent fiscal year.

Audit Committee
DutiesConducting audits on the execution of duties by directors and corporate executive officers, creating the audit
reports related to this, and deciding on the details of proposals of the general meeting of shareholders related
to the appointment, dismissal, or non-reappointment of the accounting auditor

Major activities

Full-time members of the Audit Committee conducted audits based on the audit standards, policies, and plans
formulated by the committee while also meeting periodically with the accounting auditor and the Internal Audit
Office to foster coordination. Information gained through these activities was reported to the Audit Committee.
Opinions were exchanged and important matters were discussed after such information had been shared withall committee members. The committee itself also fostered coordination by receiving regular reports on audit
plans, systems, and results from the accounting auditor and the Internal Audit Office. Based on policies regarding the dismissal or non-reelection of accounting auditors, the Audit Committee decided to re-elect theaccounting auditor. The amount of remuneration of the accounting auditor was decided through a consensus
reached after examining this matter as required.

Number of meetings

11

Remuneration Committee
Duties

Deciding the policy related to remuneration decisions for directors and corporate executive officers and on the
remuneration amounts for each individual

Major activities

The Remuneration Committee determined the policy related to decisions on the remuneration of directors andcorporate executive officers based on which it decided the amounts of monetary and stock compensation to beissued to each individual. Also, the Remuneration Committee passed a resolution to introduce a Restricted Stock
Compensation System that will allot restricted shares, in place of the previously provided stock options, to theCompany’s corporate executive officers and executive officers as well as Group executive officers for the purposeof providing an incentive for the eligible officers to consistently increase the Company’s corporate value andfurther promote shared value between the eligible officers and shareholders.

Number of meetings

5

Overview of Activities in Fiscal 2017
Attendance by Outside Directors at Meetings of the Board of Directors and Committees (Meetings Attended / Total Meetings)
Outside Directors

Isao Matsuhashi

Board of Directors

Nominating Committee

Audit Committee

Remuneration Committee

11/11

6/6

—

—
5/5

Shin Ebihara

11/11

—

—

Shu Tomioka

11/11

—

11/11

—

Masaaki Shirakawa

7/7*1

6/6

—

5/5

Shin Nagase

7/7*1

—

11/11

—

Setsuko Egami

11/11

6/6

—

5/5

Iwao Taka

11/11* 2

—

11/11

—

*1. Outside directors Masaaki Shirakawa and Shin Nagase assumed their positions on June 29, 2016, which is the reason why the number for total meetings pertaining to these twodiffers from that of other outside directors.
*2. The number for attendance at meetings of the Board of Directors by Outside Director Iwao Taka in fiscal 2017 includes meetings that this individual attended as an outside
statutory auditor.

40 

MITSUBISHI ESTATE CO., LTD.

Annual Report 2017 

41

CORPORATE GOVERNANCE

Remuneration

Corporate Executive Officers, Executive Officers, and Group Executive Officers
As of June 29, 2017

Total Remuneration Paid to Directors, Corporate Executive Officers, and Statutory Auditors in Fiscal 2017
Category

Internal directors
Corporate executive officers
Internal statutory auditors
Outside directors and statutory auditors

Total remuneration(Millions of yen)

Monetary remuneration(Millions of yen)

Stock compensation(Millions of yen)

Recipients

352
927
8
104

297
658
8
104

54
268
—
—

10
13
1
9

Note: The above amounts include remuneration payments made to the four directors and four statutory auditors (three of whom are outside statutory auditors) who retired from theirpositions as of the end of the 117th Ordinary General Meeting of Shareholders held on June 29, 2016.

Board Policies and Procedures in Determining the Remuneration of Senior Management and Directors(i) Procedures for Deciding Remuneration Paid to Officers
The policy concerning decisions on the details of remuneration paid to Directors and Corporate Executive Officers of the Company and the details of remuneration for each person shall bedecided upon by a resolution at the Remuneration Committee, which is chaired by an outside director and membered by a majority of outside directors.
(ii) The Basic Policy for Deciding Remuneration for Officers
The basic policy for deciding remuneration for directors and corporate executive officers of the Company is as follows.
•T he remuneration system shall be one that is linked with our medium-to-long-term performance targets, etc., aimed at in the management strategy and the Medium-Term Management Planand realizes sustained corporate value improvement and sharing of value with our shareholders.
•T he remuneration system shall be one that allows for giving incentives to management executives’ who take up challenges and appropriate risk taking in line with the strategy targets andexpectations of shareholders and other stakeholders.
•T he remuneration system shall be one that makes it possible to fulfill the high accountability for the benefit of our shareholders and other stakeholders through objective deliberations andjudgments by the Remuneration Committee.
(iii) Remuneration systems for Officers
The remuneration systems for directors and corporate executive officers shall be separately established in consideration of respective functions and roles to be fulfilled for the purpose ofachieving the sustained corporate value improvement. In addition, directors who concurrently serve as corporate executive officers shall be paid remuneration as corporate executive officers.
•D irectors (excluding directors who concurrently serve as corporate executive officers)
In consideration of their function and role of supervising performance of duties by corporate executive officers and directors, they shall receive, in principle, only basic remuneration in the formof money, and the standards shall be decided upon individually taking into account factors such as position and responsibilities as directors and whether they are full-time or part-time.
•C orporate Executive Officers
In consideration of their function and role of taking charge of business execution of the Company, their remuneration shall, in principle, comprise basic remuneration and variable remuneration.
Variable remuneration comprises monetary compensation that is paid based on short-term performance and stock compensation that is paid based on evaluation on medium-to-long-term
performance, etc. The standards and ratio of basic remuneration and variable remuneration, valuation indicators for variable remuneration, and other matters shall be decided upon taking into
account medium-to-long-term performance targets, etc., aimed at in the management strategy and the Medium-Term Management Plan and factors such as position and responsibilities ascorporate executive officers.

Junichi Yoshida

Jo KatoNaoto Aiba

Kenichi Iwata

Representative Corporate Executive Officer
President & Chief Executive Officer

Representative Corporate Executive Officer
Deputy President

Representative Corporate Executive Officer
Executive Vice President

Executive Vice President

Atsuo Kyono

Tetsuji Arimori

Junichi Tanisawa

Tetsuo Yuasa

Representative Corporate Executive Officer
Executive Vice President

Representative Corporate Executive Officer
Executive Vice President

Representative Corporate Executive Officer
Executive Vice President

Senior Executive Officer

Hiroshi Katayama

Noboru Nishigai

Hisashi Komada

Kenji Hosokane

Senior Executive Officer

Senior Executive Officer

Senior Executive Officer

Senior Executive Officer

Evaluation of the Effectiveness of the Board of Directors
The Company regularly conducts self-evaluations of each director with regard to operation of the Board of Directors and the content
of deliberation. The results of these evaluations shall be reported to the Board of Directors, and the Board of Directors analyzes andevaluates its effectiveness based on these self-evaluations and other information.
The process and results of evaluation of the effectiveness of the Board of Directors conducted in fiscal 2017 are as follows.

1. Process of Evaluation

2. Results of Evaluation and Future Initiatives(1) Method of Evaluation
All Directors provided self-evaluation in the form of a response to aquestionnaire relating to the composition, operation, effectiveness,
etc., of the Board of Directors and each of the Nominating, Audit,
and Remuneration committees, and taking these results into
consideration, they shared the issues with each other and examined
proposed corrective measures at Board of Directors meetings.

As a result of examination and discussions at Board of Directors
meetings, two points were identified concerning the main issues
and future initiatives for further improvement of effectiveness.
• There is a need to review the agenda of the Board of Directors
and secure the priority of discussion on issues with high importance in order to further increase opportunities and time fordiscussions on the formulation of management plans.
• There is a need to increase the opportunities for reporting at
the Board of Directors and to enhance the content of suchreports in order to further expand opportunities and time fordiscussing and sharing information to promote dialogue withshareholders and investors.

(2) Items of Evaluation
Composition of theBoard of Directors
Operation of
the Board of
Directors
Effectiveness of
the Board of
Directors
Others42 Proportion of outside directors, size in numbers, diversity
Frequency, required time, selection of agenda, content ofhandout materials, information other than handouts provided,questions and answers, training, etc.
Management plan, delegation of authority to corporate executive
officers, risk management systems, dialogue with shareholders andinvestors, election and dismissal of key management personnel,
successor training plan, remuneration paid to officers, etc.
Composition, operation, cooperation of each of theNominating, Audit, and Remuneration committees, method of
the evaluation of the effectiveness of the Board of Directors, etc.

MITSUBISHI ESTATE CO., LTD.

Soichiro Hayashi

Hidemi Waki

Group Executive Officer

Group Executive Officer

Executive Officers
Group Executive Officers


Keiji Takano

Soichiro Hayashi

Ikuo Ono

Hidemi Waki

Masaki Yamagishi

Yutaka Tajima

Atsushi Nakajima

Futoshi Chiba

Toru Kimura

Akinori Nakajo

Yutaro Yotsuzuka

Akihiko Watanabe
Yuji Fujioka
Bunroku Naganuma
Masaharu Miyajima
Tetsuya Okusa

Yutaka Tajima

Futoshi Chiba

Group Executive Officer

Group Executive Officer

Annual Report 2017 Nobuhiro Okumoto

43

RISK MANAGEMENTThe Mitsubishi Estate Group has established the Mitsubishi Estate Group Risk Management rules and has set up a risk management
system to manage risks in all its business activities. Mitsubishi Estate has established the Risk Management & Compliance Committee
to oversee the Group’s risk management and the Risk Management & Compliance Subcommittee as a working-level consulting
body responsible for such matters as the collection of risk management-related information. The corporate officer in charge of risk
management is appointed by resolution of the Board of Directors to take responsibility for overseeing risk management, and general managers of each business group and general managers in the Corporate Group departments have been designated as risk
management officers. We promote risk management activities through the Mitsubishi Estate’s Legal & Compliance Department,
which serves as the secretariat.
Prior to the deliberation of important investment projects at the Management Committee, the Strategic Investment
Committee deliberates and evaluates the nature of risks and related countermeasures and other matters.
We have also established and implement action guidelines, contact and initial response systems, and business continuity
planning systems for use in times of crisis.

Dealing with Major Risks
Below are some examples of risks that have come to light in the Group through risk management activities and various businessactivities and countermeasures that have been taken.

Risks of Information Security

In light of society’s growing concerns over the protection of personal information and information management, the Mitsubishi Estate Group has established the Mitsubishi Estate Group’s
Basic Regulations on Information Management Compliance. We are aiming to further improveinformation management through continuous monitoring and supervision.
In response to the enactment of the revised Act on the Protection of Personal Information,
the Mitsubishi Estate Group has, in order to ensure the appropriate handling of personal
information, revised relevant regulations such as the Mitsubishi Estate Group’s Policy on
Personal Information Protection and rules on the treatment of personal information.

Risks of International Business
Expansion

With the expansion of our international business, preventing corruption has become an important theme. In 2013, the Group established a corruption prevention system, and in 2016 we
instituted a system of assessing corruption by contract and requiring due diligence withrespect to transaction counterparties where risk is assessed as high. In addition, we are seeking
to gain a greater understanding of rules relating to the prevention of corruption among staff
through training programs and are also constantly monitoring this position. Recognizing therisks staff posted overseas may face in terms of being caught up in incidents and accidents,
we have prepared a manual outlining the specific actions they should take in an emergency.

Risks of Natural and
Man-Made Disasters, etc.

The occurrence of such natural disasters as earthquakes, floods, or climate change, or manmade disasters including accidents or fires may impact the performance, financial position,or other aspect of the Group’s business. The Group is redeveloping its properties to installadvanced disaster-management functions and has established disaster-response measuresthrough area management.

Risks of Fluctuations
in Exchange Rates

In addition to those held in Japan, the Group is developing and holding assets in the UnitedStates, Europe, and Asia, for which the book values and income are accounted for in local
currencies. Consequently, any fluctuation in exchange rates would affect the yen conversion
rate used for foreign currency denominated assets and liabilities and business transactions.
The Group minimizes these risks of fluctuations in interest rates using such methods as borrowing funds in local currencies when procuring assets overseas.

Risks of Fluctuationsin the Real Estate Market

The real estate market is closely correlated with movement in the economy. Deteriorationin the economy has a strong impact on declines in real estate prices and rental fees and theincrease in vacancy rates. In view of this correlation, the basic policy of the Group is to conclude relatively long-term lease contracts with customers in its office building leasing business.
The prospects of stable lease revenues mitigate to a certain degree the risk of sharp movements in the economy.

Risks of Increases
in Interest Rates

The Group acquires funding for its operations by borrowing from financial institutions or
issuing corporate bonds. The Bank of Japan (BOJ) has implemented a policy of quantitativeand qualitative monetary easing in response to the credit crunch in financial markets and theslowdown in the global economy. Should interest rates rise, however, because of a change inthe BOJ’s policy or a deterioration in the demand-supply balance for Japanese government
bonds (JGBs) caused by growth in the issuance of JGBs, it may negatively affect the performance, financial position, or other aspect of the Group’s business.
The Group hedges interest rate risk on a certain portion of its variable interest rate financing
through interest rate swaps to convert its interest rate payments into fixed payments. In the future,
the Group plans to manage its interest rate risk by procuring funds based on a consideration of its
fixed and variable interest rate borrowings and its outstanding corporate bond balances.

Risk Management & Compliance System
As of August 2017

Board of Directors
Appoint

Corporate Officer in Charge of Risk Management & Compliance

Risk Management & Compliance
Committee
Chairman: Mitsubishi Estate
President & Chief Executive Officer

Mitsubishi Estate

Risk Management &Compliance Subcommittee

Executive Committee

Group Company

Line and Staff
Department, Other

Each Department

Risk Management
Promotion Officers

Compliance Promotion
Officers

Risk Management
Promotion Personnel

Compliance Promotion
Manager

Assistance

Risk Management
OfficerCompliance Officer

AdviceMitsubishi Estate Legal & Compliance Department (Risk Management Promotion Secretariat / Compliance Promotion Secretariat)

Risk Management Activities
Strengthening Group Risk Management

1

2

Risk management activities of each individual
business group and Group company

Identification and monitoring of key risks that needparticular attention from the Group

Individual Group companies and business groups identify importantrisks based on a risk analysis and carry out activities throughout theyear to reduce the risks identified. In addition, general managers
of each business group ascertain the status of risk management
activities of different business companies under the jurisdiction ofeach business group and provide coordination and support.

To accurately grasp the risks facing the Group as a whole, and by
selecting and mapping key risks that require measures to be taken,
the risks that must be addressed and their level of priority arebrought to light. While monitoring risks throughout the year,
particularly key risks, support is provided as necessary.

Visualization of risk priorities through risk mapping
MediumRisk impact

Large

Risks that necessitate theimprovement of existing measuresor introduction of new measures

Candidates for risks needing countermeasuresin the future

Key risks requiring countermeasuresduring fiscal year

Risks that are appropriately
dealt with by continuing
existing measures

Ongoing risks requiring countermeasures(currently having impact)

Ongoing risks requiring countermeasures(large impact)

44 

MITSUBISHI ESTATE CO., LTD.

Annual Report 2017 

45

HUMAN RESOURCE MANAGEMENT

To create truly valuable urban environments, nurturing the people responsible for such environments is indispensable.
The Mitsubishi Estate Group is committed to providing the training and educational programs to develop human resources
to create new value over the medium-to-long term and to arranging support for working approaches that offer environmentsthat encourage the active participation of all staff while respecting individual lifestyle needs.

Staff Education and Training Ideology
The Mitsubishi Estate Group recognizes the vital importanceof its people as the key management resource underpinningthe entire organization.
What we seek in our employees are the following five
attributes: vision, professionalism, integrity, team building,and challenge and innovation.

The Five Attributes We Seek in Our Employees

We implement job rotations taking into account career growthstages and we have established systematic training programsin the workplace, with training tailored to the needs of people
in different positions and at varying career stages. In addition,
we are making efforts to train staff throughout the organization
by such means as holding human resource development training sessions as one of the most important issues for managers.
–Vision–People with

ambition and desire

People who

lead change—Challenge & innovation—

People who can fight as part

People with front-line effectiveness andthe power to see work through—Professional—

Exterior view of the Otemachi Building

People ofof a groupsincerity and fairness—Team building——Integrity—

FINANCIAL SECTION

Wide-Ranging Staff Education and Training

Building a Supportive and Stimulating Work Environment

We have established a wide range of training programs
throughout the Group aimed at developing the capabilities ofall staff and raising awareness of human rights as well as theneed for strict adherence to the Group’s compliance policies.
In addition to individual study and training programs
offered by each Group company, we are providing a broad
range of cross-Group training programs, including thoseon business skills and those for new employees and newly
appointed managers, aiming to create a united sense of
purpose throughout the Group.
Furthermore, in order to nurture human resources with the skills
needed to perform in a global context, we are making efforts toenhance basic global skills. For example, to raise the linguistic skillsof all employees, we are introducing short-term language training
programs. We also encourage employees to take part in various
programs held globally to deepen their understanding of the world
and the communities within it. Aiming to strengthen global businessskills, we have also introduced training systems involving practicalexperience at Group companies in the U.S. and the U.K. and havealso been fostering human resources able to perform effectively
on a global basis by sending employees to study abroad.

A good work-life balance that respects individuality anddifferent values is essential to establishing a working environment that encourages the active participation of all staff. We
have been introducing various flexible working arrangements
and childcare and nursing care leave systems to give staff
multiple options in how they choose to work. With regard tochildcare leave, since fiscal 2015, 100% of employees havereturned to work after taking such leave, and the retention
rate one year after the return to work has also been 100%.
As the number of women hired and their years of continuous employment increase, the number of female candidates
for management positions has grown and the ratio of female
managers has also risen. Mitsubishi Estate believes that creating
an environment conducive to the performance of both maleand female employees will feed through to a rising ratio of
female managers. We are committed to continuing to promote
diversity, including the active role of women, in the workplace.

46 

MITSUBISHI ESTATE CO., LTD.

Annual Report 2017 

47

FINANCIAL SECTION

Eleven-Year Summary of Selected Financial Data (Consolidated)
3/20073/20083/20093/20103/20113/20123/20133/20143/20153/20163/2017¥  947,641¥  787,652¥  942,626¥1,013,415¥  988,447¥1,013,069¥  927,157¥1,075,285¥1,110,259¥1,009,408¥1,125,405

Operating income

166,165

177,983

138,567

148,972

158,258

146,299

118,349

161,271

156,332

166,199

192,495

Ordinary income

151,674

162,061

108,624

117,381130,830

120,665

92,381

139,638

133,113

144,851

169,851

Profit attributable to owners of parent

97,662

86,96345,423

11,90064,21956,51245,50764,29773,33883,426102,6813,447,272

4,327,137

4,429,070

4,355,065

4,245,209

4,387,015

4,711,521

4,765,368

4,901,526

5,311,840

5,484,115

Total equity*

1,225,644

1,238,889

1,148,494

1,183,156

1,202,270

1,256,791

1,239,547

1,329,057

1,495,838

1,509,680

1,592,777

Interest-bearing debt

1,012,588

1,645,407

1,834,195

1,762,111

1,639,050

1,716,890

2,085,417

1,973,042

1,929,355

2,291,038

2,396,994

Capital expenditures

138,169

270,798

201,088

114,085

76,332

282,171

208,135

159,677

177,331

275,316

275,372

Depreciation and amortization

54,25756,86760,36473,92670,62867,46573,36474,80572,696

74,24575,974

Financial Results (Millions of yen)
Revenue from operations

Financial Position (Millions of yen)
Total assets
1

Cash Flows (Millions of yen)
Cash flows from operating activities

150,710(16,248)

45,824

212,668

259,263203,243

122,286

336,489

200,078

135,821

168,527

Cash flows from investing activities(85,389)(212,207)(214,500)(112,639)(67,223)(272,009)(217,992)(133,537)(46,568)(231,003)(327,292)

Cash flows from financing activities(34,093)

238,942

141,055(106,852)(140,269)

57,18927,150(177,514)(189,109)309,237(4,921)

Cash and cash equivalents at end of year

206,089

219,712

184,552

177,825

229,062

215,771

191,837

224,739

198,489

412,392

243,341

Earnings¥70.95¥62.99¥32.90¥ 8.58¥46.27¥40.72¥32.79¥46.34¥52.85¥60.13¥74.00Cash dividends

14.00

16.00

16.00

12.00

12.00

12.00

12.00

12.00

14.00

16.00

20.00

¥233,406¥245,911¥209,522¥230,730¥237,109¥222,885¥200,587¥246,332¥239,934¥252,034¥279,718

4.9%

4.6%

3.2%

3.4%

3.7%

3.4%

2.6%

3.4%

3.2%

3.3%

3.6%

Per Share Amounts (Yen)

Principal Financial Indicators
EBITDA (Millions of yen)*2
ROA*3

9.5

8.5

4.7

5.2

6.6

6.5

5.0

7.5

7.7

8.5

8.7

ROE

8.3%

7.1%

3.8%

1.0%

5.4%

4.6%

3.6%

5.0%

5.2%

5.6%

6.6%

Payout ratio

19.7%

25.4%

48.6%

139.9%

25.9%

29.5%

36.6%

25.9%

26.5%

26.6%

27.0%

4

Interest coverage ratio* (Times)

Stock Information
Stock price (Yen)*5
Number of shares issued and outstanding (Thousands of shares)

Mitsubishi Estate’s Stock
Price Changes on theTokyo Stock Exchange

5,000¥3,870¥2,420¥1,102¥1,530¥1,407¥1,476¥2,596¥2,446¥2,787¥2,090.5¥2,0301,382,518

1,382,518

1,382,518

1,390,397

1,390,397

1,390,397

1,390,397

1,390,397

1,390,397

1,390,397

1,390,685

Yen
4,000

3,000

2,000

1,000

0
3/20063/20073/20083/20093/20093/20103/20113/20123/20133/20143/20153/20163/2017

Notes:
1. Total equity is calculated by deducting non-controlling interests and stock acquisition rights from total net assets.
2. EBITDA is calculated as the sum total of operating income, interest and dividend income, equity in earnings of unconsolidated subsidiaries and affiliates, depreciation andamortization, and goodwill.
3. ROA (Operating Income / Total assets) is calculated based on the average total assets from the beginning to the end of the period.
4. The interest coverage ratio (ICR) is calculated by dividing the sum total of operating income, interest and dividend income, and equity in earnings of unconsolidated subsidiaries
and affiliates by the sum total of interest expenses and commercial paper interest.
5. As of March 31

48 

MITSUBISHI ESTATE CO., LTD.

Annual Report 2017 

49

FINANCIAL SECTION

Fiscal 2017 Business Environment
In Tokyo, office building development continued throughfiscal 2017, underpinned by firm office demand against a
backdrop of recovering corporate earnings. In 2016, several
large-scale office buildings* were completed in Tokyo’s 23
wards—concentrated in Chiyoda-ku and Minato-ku—resulting
in the floor area of new supply expanding year on year for thethird consecutive year, by 7.7%, to 646,281 m2.
In the office market, ongoing strong demand for offices
led to vacancy rates in the five central Tokyo metropolitan
wards (Minato-ku, Chiyoda-ku, Chuo-ku, Shinjuku-ku, andShibuya-ku) declining for the sixth consecutive year, to 3.6%
as of March 2017. Average rents have also followed a steadyupward trend, approaching levels before the economic crisis
that followed the bankruptcy of the Lehman Brothers in 2008.
In the housing market, the average price of condominiums
in the Tokyo metropolitan area edged down 0.5% year on
year, to ¥54.90 million, but held at a high level. This reflected

the fact that construction costs remained high as labor
expenses in the construction industry continued to rise owing
to labor force shortages. Against this backdrop, the supply of
condominiums in the area declined year on year in a continuation of the trend seen since 2013, contracting 11.6% compared with 2016, to 35,772 units.
The Tokyo Stock Exchange REIT Index continued to rise
and trading activity remained lively. The index is expected tostay on an uptrend supported by favorable real estate market
conditions in Japan (underpinned by rising property prices
particularly in downtown Tokyo and increasing office building
rents). The index is also expected to benefit from the Bank ofJapan’s introduction of a policy of “quantitative and qualitative monetary easing with a negative interest rate” and its
subsequent adoption, in September, of a policy of “quantitative and qualitative monetary easing with yield curve control.”* Buildings with a standard floor area of 200 tsubo and above
1 m2 = 0.3025 tsubo

Supply of New Large-Scale Office Buildingsin the 23 Wards of Tokyo

Office Building Market (Average Rents /Vacancy Rates in Five Central Tokyo Metropolitan Wards)

Thousand m2

Yen / tsubo-month

%

1,000

25,00010

800

20,0008600

15,000

6400

10,000

4

200

5,000

2

2007

2008

2009

2010

2011

2012

2013


Notes:
1. Buildings with a standard floorarea of 200 tsubo and above		 2. 1 m2 = 0.3025 tsubo

2014

2015

2016

Source: Sanko Estate Co., Ltd.

3/09

3/10

Average rent (left scale)

3/11

3/12

3/13

3/14

Vacancy rate (right scale)

3/15

3/16

3/17

M/Y

Source: Miki Shoji Co., Ltd.

Tokyo Stock Exchange REIT Index

Units

Millions of yen

80,00080

March 31, 2003 =1,000
3,000

Revenue from Operations / Operating Income In fiscal 2017, the fiscal year ended March 31, 2017, consolidated revenue from operations amounted to ¥1,125,405
million, an increase of ¥115,997 million, or 11.5%, year on year.
Consolidated operating income increased ¥26,296 million, or
15.8%, from the previous fiscal year, to ¥192,495 million.
Results for each business segment are as follows.
In the Office Building Business segment, revenue fromoperations and operating income both increased as a resultof newly completed buildings and higher rental revenue andincome from existing buildings and increased revenue fromproperty sales, and despite a decline in rental revenue andincome owing to the closure of buildings for redevelopment.
As of March 31, 2017, the nationwide vacancy rate (all purposes) stood at 2.93%—above the 2.22% recorded at the endof the previous fiscal year but lower than our initial forecast of
3.5%—as, although tenant replacements went pretty muchaccording to plan at the start of the fiscal year, progress withleasing was better than expected. Due to these developments, revenue from operations in the segment rose ¥61,888
million year on year, to ¥484,238 million. Operating income,meanwhile, increased ¥24,629 million, to ¥133,570 million.
In the Lifestyle Property Business segment, revenue fromoperations increased ¥2,386 million, to ¥88,955 million, owing
to such factors as the consolidation of Tokyo Ryutsu Center
Inc. However, operating income was essentially unchanged
year on year, at ¥25,807 million, as property sales declined
compared with the previous fiscal year.
In the Residential Business segment, revenue and income
both rose, despite the number of condominium units sold being
on a par with the previous fiscal year, supported by a year-onyear increases in the average price of units sold and the sale ofrental condominiums. As a result, segment revenue fromoperations increased ¥62,624 million, to ¥407,850 million, andoperating income increased ¥1,218 million, to ¥19,253 million.
In the International Business segment, revenue fromoperations declined owing to such factors as lower property
Revenue from Operations

Operating Income /Operating Income Ratio

sales and the impact of fluctuating foreign exchange rates.
However, operating income rose on the back of higher
income from property sales and increased non-recurringincome. As a result, segment revenue from operations
decreased ¥9,399 million year on year, to ¥66,556 million, but
operating income increased ¥6,892 million, to ¥26,313 million.
In the Investment Management Business segment, revenue declined owing partly to the appreciation of the yen
compared with the previous fiscal year. As a result, revenue
from operations in this segment decreased ¥3,671 million year
on year, to ¥21,323 million, while operating income declined¥561 million, to ¥4,520 million.
In the Architectural Design & Engineering Business segment,
revenue from Mitsubishi Jisho Sekkei Inc.’s architectural design andengineering services was essentially unchanged from the previous
fiscal year due to the booking of revenues for services related to
the Otemachi Park Building (Chiyoda-ku, Tokyo). However, revenue
from interior design and construction work declined as the averageamount received per project fell. As a result, segment revenue fromoperations declined ¥1,970 million year on year, to ¥19,309 million,
and operating income fell ¥1,309 million, to ¥445 million.
In the Hotel Business segment, we made progress instrengthening the management structure of each individual hotel
under the Royal Park Hotels brand managed by Royal Park
Hotels and Resorts which oversees business activities in thesegment, and have been adding new hotels with a primary
focus on accommodation. In fiscal 2017, segment revenue fromoperations increased ¥422 million year on year, to ¥33,512 million,
while operating income rose ¥442 million, to ¥1,932 million.
In the Real Estate Services Business segment, revenue
from operations rose ¥4,427 million year on year, to ¥24,243
million, supported by growth in the number of brokeragetransactions handled and higher average commissions pertransaction as well as by some orders for large-scale properties. Operating income rose ¥1,554 million, to ¥2,157 million.
In the Other segment, revenue from operations increased¥355 million year on year, to ¥4,237 million, while the segment
reported income of ¥289 million at the operating level, a ¥326
million improvement compared with operating loss incurredin the previous fiscal year.
Operating Income / EBITDA

Profit Attributable to Ownersof Parent / ROE

Trillions of yen

Billions of yen%Billions of yen

Billions of yen

%

2,500

1.2

200

20

300

120

12

2,000

1.0

100

10

150

15
80

8

60

6

40

4

20

2

60

60,00040,00040

20,000

20

1,500

0.8

1,000

0.6

500

0.4

0

0
2007

2008

2009

2010

Sales of new condominiums in theTokyo area (left scale)Condominium prices (right scale)

50 

3/08

CY

Sales of New Condominiums in the Tokyo Area /Condominium Prices



0

0

0

Financial Review

2011

2012

2013

2014

2015

2016

100

10

50

5

100

0.2

0
3/03 3/04 3/05 3/06 3/07 3/08 3/09 3/10 3/11 3/12 3/13 3/14 3/15 3/16 3/17 M/Y

CY

Source: Real Estate Economic Institute Co., Ltd.

200



Source: The Association for Real Estate Securitization0002013 2014 2015 2016 20172013 2014 2015 2016 2017

Operating income (left scale)Operating income ratio (right scale)

MITSUBISHI ESTATE CO., LTD.

Annual Report 2017 

002013 2014 2015 2016 2017

Operating income
EBITDA02013 2014 2015 2016 2017

Profit attributable to owners of parent(left scale)ROE (right scale)Years ended March 31

51

FINANCIAL SECTIONOther Income (Expenses) Millions of yen

FY2016YOY
Change1,125,405 1,009,408

115,997

FY2017

Non-operating revenue decreased ¥1,569 million year on year,to ¥9,380 million. Other expenses declined ¥272 million, to¥32,024 million, as reduced loss on disposal of fixed assets
offset an increase in interest expenses.
Total extraordinary income declined ¥2,937 million year
on year, to ¥16,484 million, as a gain on negative goodwill of¥13,505 million generated by the conversion of companies
into consolidated subsidiaries was offset by lower gain on
sales of investment securities.
Extraordinary loss increased ¥1,031 million year on year,to ¥23,455 million, due to increased impairment loss on therevaluation of some fixed assets and a ¥6,431 million loss on
step acquisitions generated by the conversion of companies
into consolidated subsidiaries.

Revenue from Operations
Office Building Business

484,238

422,349

61,888Lifestyle Property Business

88,95586,5692,386

Residential Business

407,850

345,226

62,624

International Business

66,55675,956(9,399)Investment Management
Business

21,32324,994(3,671)

Architectural Design &Engineering Business

19,30921,279(1,970)Hotel Business

33,512

33,089422

Real Estate Services Business

24,243

19,815

4,427

Other

4,237

3,882

355

Eliminations(24,820)(23,754)(1,066)

Operating Income

192,495

166,199

26,296

Office Building Business

133,570

108,940

24,629Lifestyle Property Business

25,807

25,842(35)

Residential Business

19,25318,035

1,218

International Business

26,313

19,421

6,892

Investment Management
Business

4,520

5,082

(561)

Architectural Design &Engineering Business

445

1,754

(1,309)Hotel Business

1,932

1,490

442

Real Estate Services Business

2,157

602

1,554

Other

289

(37)

326

(21,793)(14,933)(6,859)Profit Attributable to Owners of Parent 
Income before income taxes and minority interests increased¥21,031 million year on year, to ¥162,881 million. Corporatetax, etc., increased ¥2,501 million, to ¥46,073 million. As aresult, profit attributable to owners of parent increased¥19,254 million, or 23.1%, year on year, to ¥102,681 million.
Earnings per share amounted to ¥74.00.

Analysis of Financial Position (1) Consolidated Cash Flows
On a consolidated basis, cash and cash equivalents at the endof the fiscal year amounted to ¥243,341 million, a decrease of¥169,050 million compared with the previous fiscal year-end.
That was the result of a decrease in income before income
taxes and minority interests, a decrease in inventories, proceeds from long-term borrowings, purchases of property andequipment, and the repayment of long-term borrowings.

Comparison of Fiscal 2017 and Fiscal 2016 Consolidated Cash Flows

Eliminations or Corporate

Millions of yen

84,85375,974

Millions of yen

1,125,405

Lifestyle
Property
Business

1,009,408
OfficeBuilding
Business

2,386

Hotel
Business

422

Real Estate
Services
Business

Other

Eliminations

355(1,066)FY2016

4,427

62,624

61,888Proceeds from sales of property andequipment and beneficial interests intrust of property and equipment(32,460)

Increase Increase
10,634 11,328
12,249in equityin(82,780)
162,881inventories invest298,515
Other
Deprements
Adjust(52,189)
ciationment for
IncomeandextraEffect of exchange rate on cash
taxes,
amortiordinary
and cash equivalents /etc.
zationincome412,392
Decrease in cash andProceeds fromor loss
cash
equivalents
resulting from exclusion
sales
ofmarketable
Incomeof subsidiaries from consolidation
securities andbeforeinvestment
securities
incometaxes(275,372)
and(243,051)
243,341
Purchases
minority
Repay- (33,709)
ofinterests(73,883) Newly(26,676) (5,363)
ment
property
Cash
Other acquired
anddividends Other
funds
equipment
paidComparison of Fiscal 2017 and Fiscal 2016 Revenue from Operations

International
Investment ArchitecturalBusiness Management
Design &Business Engineering(9,399)Residential
Business(3,671)Business(1,970)Net cash provided
by operating activities

Net cash used
in investing activities

Net cash usedin financing activities

168,527(327,292)(4,921)

Total Assets / ROA(Operating Income/Total Assets)

Cash FlowsFY2016FY2017

Trillions of yen%

Trillions of yen

%

6.0

6

1.6

40

5.0

5
1.2

30

4.0

4

3.0

3

0.8

20

2.0

2
0.4

10

1.0

1

200

Millions of yen

1000Lifestyle
Property
Business

(35 )

1,218

6,892

(1,309)442

Real
EstateServices
Business

1,554

Other

326

192,495
Eliminations
or Corporate

–300
–400
2014

Cash flows from operating activities
Cash flows from financing activities

24,629FY2017

MITSUBISHI ESTATE CO., LTD.

0

0
2013

OfficeBuilding
Business

52 

–100
–200

(6,859)166,199

FY2016

Total Equity /Total Equity Ratio

400

Comparison of Fiscal 2017 and Fiscal 2016 Operating Income

Hotel
Business

FY2017

Billions of yen
300

Investment Architectural
Management
Design &International
Business Engineering
Residential
Business(561)
Business
Business

Cash Flows from Operating Activities
Net cash provided by operating activities was ¥168,527
million, up ¥32,706 million year on year. Income before
income taxes and minority interests amounted to ¥162,881
million, while depreciation and amortization—a non-cash
item—totaled ¥75,974 million. These and other cash inflows
were adjusted to reflect the decline in inventories andincreases in corporate tax payable, equity investments, andother items.
Cash flows from Investing Activities
Net cash used in investing activities totaled ¥327,292 million,up ¥96,289 million from the previous year. The net cash wasused primarily for purchases of property and equipment.
Cash Flows from Financing Activities
Net cash used in financing activities totaled ¥4,921 million,
compared with net cash provided by financing activities of¥309,237 million in the previous fiscal year. This result can be
attributed mainly to the repayment of long-term borrowings
and to the redemption of corporate bonds.

Annual Report 2017 

2015

2016

2017

Cash flows from investing activities

2013 2014 2015 2016 2017

Total assets (left scale)ROA (Operating income /Total assets) (right scale)002013 2014 2015 2016 2017

Total equity (left scale)
Total equity ratio (right scale)Years ended March 31

53

FINANCIAL SECTION(2) Consolidated Balance Sheets
Total assets stood at ¥5,484,115 million on March 31, 2017, up¥172,275 million from a year earlier, principally as a result of
the operating, investing, and financing activities previously
identified, and the related changes in assets and liabilities.
Total liabilities increased ¥63,994 million, to ¥3,716,654
million. The balance of interest-bearing debt as of March 31,
2017, stood at ¥2,396,994 million, an increase of ¥105,956
million compared with the year-end balance in fiscal 2016.
Deducting cash and cash equivalents, the balance of net

interest-bearing debt as of March 31, 2017, was ¥2,153,652
million, an increase of ¥275,007 million year on year.
Total net assets increased ¥108,280 million year on year, to¥1,767,460 million. The growth in net assets can be attributed
to increases in such items as retained earnings, unrealized
holding gain on securities, and retirement benefits andliability adjustments.

Interest-Bearing Debt (Mitsubishi Estate; Non-Consolidated)

Subordinated loans (adjustable interest) %Billions of yen

Subordinated loans (fixed interest)

2,500

Mitsubishi Estate and some of its consolidated subsidiaries
own office buildings and retail facilities in Tokyo and othermajor cities in Japan as well as overseas, with the aim ofobtaining rental revenue from these buildings and facilities.
Because certain leased office buildings among these are usedby the Company or some of its consolidated subsidiaries, theCompany has classified such buildings as rental properties
containing self-use space.
The following table shows the year-end amounts, changes
in these amounts during the period under review, and the fairvalues of investment and rental properties and other real estatethat includes portions used as investment and rental properties.


100

Fiscal Year Ended
March 31, 2017
(April 1, 2016,
to March 31, 2017)

Subordinated bonds (adjustable interest)

2,000

Fixed interest ratio(right scale)

1,500Interest-bearing debt ratio(right scale)

1,000Bank loans(adjustable interest)

500

Matters Related to Rental Properties 

Subordinated bonds (fixed interest)

80

CP
60

40

Bank loans(fixed interest)

Straight bonds
Subordinated bonds (fixed interest)
Subordinated bonds (adjustable interest)
Subordinated loans (fixed interest)
Subordinated loans (adjustable interest)
Bank loans (fixed interest)
Bank loans (adjustable interest)
Commercial paper
Fixed interest ratio (right scale)Interest-bearing debt ratio (right scale)

540.0
—
—
—
—
290.2
212.2
—
79.6
48.0

575.0
—
—
—
—
285.6
389.2
—
68.9
53.4

2010

560.0
—
—
—
—
329.1
401.2
—
68.9
53.3

2011

550.0
—
—
—
—
324.0
365.7
—
70.5
51.7

2012

620.0
—
—
—
—
306.8
453.7
—
67.1
53.4

2013

715.0
—
—
—
—
319.8
640.7
350
60.5
59.2

2014

685.0
—
—
—
—
314.3
615.7
—
61.9
57.8

2015

665.0
—
—
—
—
420.1
601.7
280
63.3
57.1

2016

2017

645.0
175.0
75.0
—
—
573.3
583.8
—
67.9
61.4

612.7
175.0
75.0
50.0
50.0
747.1
427.0
—
74.2
61.0

8

2.5

4
2
0

0.5
0
2008

Straight bonds / Duration
Straight bonds / Average interest (right scale)Bank loans / Average interest (right scale)
Total / Average interest (right scale)

9.47
1.93
1.33
1.66

2009

9.04
1.90
1.29
1.58

2010

8.89
1.88
1.05
1.42

2011

8.22
1.88
1.01
1.40

2012

7.71
1.72
0.87
1.27

2013

7.52
1.54
0.72
1.05

2014

6.82
1.55
0.70
1.07

2015

6.31
1.52
0.62
0.96

2016

2017

5.94
1.41
0.61
0.96

6.19
1.38
0.66
0.95

Years ended March 31

54 

MITSUBISHI ESTATE CO., LTD.

(16,194)(9,997)

Rental revenue

15,996

15,9093,327,104

Rental costs

Market value as of the end of the period

11,522

12,625

6,517,887

5,792,464

Difference

4,474

3,283

Other income (loss)

(580)

(340)

Balance as of the beginning of the period

182,876

182,779

Increase (decrease) during the period

647

96

Balance as of the end of the period

183,523

182,876

Market value as of the end of the period

274,081286,600

Balance ofInterest-Bearing Debt
net hghbri

Times

Rental Properties Containing Self-Use Space

10

Note:
Real estate that includes portions used as investment and rental properties has portions
that are used by Mitsubishi Estate and some of its consolidated subsidiaries for the
purpose of providing related services and conducting operation management.
Accordingly, rental revenue associated with these portions has been excluded. Costs
associated with applicable properties and real estate, such as depreciation costs,
building management costs, and taxes, have been included in rental costs.

Interest Coverage Ratio

Earnings per Share

Unrealized Gainon Rental Properties

Times

Yen

Trillions of yen

10

80

3.0

70
2.0

8

8

1.5

6

6

1.0

4

4

2.5

60
2.0

50
40

0.5

Straight bonds /Duration

132,934

3,644,937

2

1.5

30

1.0

20

2

1.0

Bank loans / Averageinterest (right scale)156,318

Other income (loss)

Balance as of the end of the period

1.5

Total / Average interest(right scale)Difference

191,691

2.0

6

280,688317,832

Years%Straight bonds /Average interest(right scale)413,622

280,387

Increase during the period

2.5

10

436,705

Rental costs

3,135,413

Trillions of yen
net

3.0

Rental revenue

Rental Properties

3,327,104

Amounts recorded on consolidated balance sheets

Interest and Residual Terms of Straight Bonds (Mitsubishi Estate; Non-Consolidated)

Millions of yen

Fiscal Year Ended
March 31, 2016
(April 1, 2015, to
March 31, 2016)

Millions of yen

Fiscal Year Ended
March 31, 2016
(April 1, 2015, to
March 31, 2016)

Rental Properties Containing Self-Use SpaceYears ended March 31

12



Fiscal Year Ended
March 31, 2017
(April 1, 2016, to
March 31, 2017)

Balance as of the beginning of the period02009

Also, the following table shows profit and loss related toreal estate, including the rental properties containing self-use
space for each fiscal year.

Amounts recorded on consolidated balance sheets

Straight bonds
2008

2. Fair values as of the end of each consolidated fiscal year are as follows:(1) The fair values of domestic properties and real estate have been calculated by
Mitsubishi Estate, based mainly on the Japanese Real Estate Appraisal
Standards.
(2) The fair values of overseas properties and real estate have been calculated
mostly by local appraisers.

Rental Properties

20

0Notes:
1. The amount included on the consolidated balance sheets presented in the table
above is equal to the total acquisition price for applicable properties or real estateless the aggregate amounts of depreciation and impairment loss for these propertiesor real estate.

0.5

10
0

0
2013 2014 2015 2016 201700
2013 2014 2015 2016 201702013 2014 2015 2016 20172013 2014 2015 2016 2017

Net interest-bearing debt (left scale)Net interest-bearing debt (after hybrid
debt deductions)* (left scale)Net interest-bearing debt/EBITDA(right scale)Net interest-bearing debt/EBITDA(after hybrid debt deductions)*(right scale)* The subordinated bond and subordinatedloan subject to equity credit from a credit
rating agency (50% equity treatment) are
shown after deductions.

Annual Report 2017 Years ended March 31

55

FINANCIAL SECTION

Consolidated Balance Sheets
Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
March 31, 2017 and 20162017

Millions of yen

Thousands of
U.S. dollars (Note 2)

2016

2017

AssetsLiabilities and net assets

Current assets:

Current liabilities:¥  243,681¥  412,983$  2,172,039

Notes and accounts receivable–trade (Note 13)

43,82335,261

390,618

Marketable securities (Notes 13 and 14)

13,515

14

120,465

(270)

(528)

(2,411)Inventories (Note 3)

408,294

439,0443,639,315

Equity investments (Notes 13 and 14)

292,764

276,8422,609,538

Deferred income taxes (Note 7)

10,73014,552

95,645

Other current assets

69,152

55,764

616,384

1,081,690

1,233,935

9,641,596

Cash on hand and in banks (Notes 13 and 15)

Allowance for doubtful receivables

Total current assets

Investments:

11,831

20,688105,460

Investment securities (Notes 13 and 14)

233,689

196,296

2,082,983

Asset for retirement benefits (Note 6)

9,487

9,810

84,568Other investments (Notes 4 and 13)

180,033

176,092

1,604,717

435,042

402,8883,877,730

Property and equipment (Note 5):Land
Land in trust$ 2,859,186

58,331500,041

Accrued income taxes (Note 7)

16,471

22,903

146,819

Advances and deposits

116,562

152,660

1,038,978Accrued expenses and other current liabilities

76,717

92,181

683,814586,623

670,877

5,228,839

Long-term debt (Notes 5 and 13)

2,070,567

1,939,426

18,455,898

Lease deposits received (Note 13)

398,014393,3093,547,679

Total current liabilities
Long-term liabilities:

Liability for retirement benefits (Note 6)

22,042

32,464

196,476

Deferred income taxes (Note 7)

481,226

446,117

4,289,386

Negative goodwill

90,53583,827

806,983

67,64586,636602,951

Total long-term liabilities

3,130,031

2,981,782

27,899,376

Total liabilities

3,716,654

3,652,660

33,128,216

			 Issued – 1,390,685,972 shares in 2017 and 1,390,397,097 shares in 2016

141,659

141,373

1,262,672

		Capital surplus

161,477

161,188

1,439,319

		Retained earnings

674,259

600,116

6,009,981

		 Less treasury stock, at cost

(5,489)(5,385)(48,929)

971,906

897,293

8,663,044

109,644

89,945

977,307

73

(30)

658

		 Land revaluation reserve

Net assets:
Shareholders’ equity (Note 8):
		 Common stock, without par value:
			 Authorized – 1,980,000,000 shares;

1,987,344

1,955,451

17,714,098

Total shareholders’ equity

708,801

549,811

6,317,865

Accumulated other comprehensive income:

2,217,339

22,236,251

		 Unrealized holding gain on securities

137,754

1,186,669

		 Deferred gain (loss) on hedging instruments

Construction in progress

92,367122,261

823,317527,128

521,248

4,698,533

5,416,331

4,982,617

48,278,201

		 Foreign currency translation adjustments(13,363)

13,900(119,112)(1,559,574)(1,431,555)(13,901,187)

		 Retirement benefits liability adjustments (Note 6)(2,612)(12,676)(23,288)3,856,757

3,551,062

34,377,014

Total accumulated other comprehensive income

620,870

612,3875,534,098

Stock acquisition rights
Non-controlling interests
Intangible and other assets
Total assets

2017¥  344,800

133,132

Property and equipment, net

2016

56,0992,494,685

Less accumulated depreciation2017¥  320,772

Machinery and equipment and other

Buildings and structures

Thousands of
U.S. dollars (Note 2)

Notes and accounts payable–trade (Note 13)

Other non-current liabilities

Investments in and advances to unconsolidated subsidiaries
and affiliates (Note 13)

Total investments

Short-term borrowings and current portion of long-term debt
(Notes 5 and 13)

Millions of yen

110,624

123,954

986,049¥ 5,484,115¥ 5,311,840$ 48,882,390

529

529

4,716

174,154

148,970

1,552,314

Contingent liabilities (Note 11)
Total net assets

1,767,460

1,659,180

15,754,174

Total liabilities and net assets¥5,484,115¥5,311,840$48,882,390

See accompanying notes to consolidated financial statements.

56 

MITSUBISHI ESTATE CO., LTD.

Annual Report 2017 

57

FINANCIAL SECTION

Consolidated Statements of Income

Consolidated Statements of Changes in Net Assets

Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2017 and 2016

Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2017 and 2016

Millions of yen

Thousands of
U.S. dollars (Note 2)

2017

2016

2017

¥1,125,405¥1,009,408$10,031,244

Cost of revenue from operations (Note 3)(847,725)(764,863)(7,556,156)

Selling, general and administrative expenses(85,184)(78,345)(759,286)

Operating income

192,495

166,199

1,715,800

4,902

4,840

43,694(22,743)(20,189)(202,723)

872

605

7,778

(12,645)(9,605)(112,716)(29,614)(24,349)(263,966)

162,881

141,850

1,451,834

Revenue from operations

Other income (expenses):
Interest and dividend income
Interest expenses
Equity in earnings of unconsolidated subsidiaries and affiliates
Other, net (Note 12)
Income before income taxes
Income taxes (Note 7):
Current(43,451)(43,994)(387,298)

Deferred(2,622)

422(23,371)(46,073)(43,571)(410,670)

116,808

98,2781,041,163

ProfitProfit attributable to:Non-controlling interests
Shareholders of Mitsubishi Estate Co., Ltd.

(14,126)(14,851)(125,916)¥  102,681¥   83,426$   915,246

See accompanying notes to consolidated financial statements.

Millions of yen

Balance at April 1, 2015
Changes in the year:
Issuance of new shares
Cash dividends paid
Profit attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Land revaluation reserve (Note 1-h)Changes in the scope of consolidationChanges in equity related to transactions
with non-controlling shareholders
Net change in items other than those inshareholders’ equity
Total of changes in the year
Balance at April 1, 2016
Changes in the year:
Issuance of new shares
Cash dividends paid
Profit attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Land revaluation reserve (Note 1-h)Changes in the scope of consolidationChanges in equity related to transactions
with non-controlling shareholders
	Net change in items other than those inshareholders’ equity
Total of changes in the year
Balance at March 31, 2017

Commonstock

CapitalsurplusRetainedearnings

Shareholders’ equity
Total
Treasuryshareholders’stockequity¥141,373¥162,638¥538,687¥(5,259)(20,812)83,426(3)(25)(1,160)(228)
102(1,446)—
141,373(1,449)161,188285

285¥837,440

Accumulated othercomprehensive income
Unrealized
Deferred gain
holding gain (loss) on hedging
on securities
instruments¥127,609¥ (5)(37,663)(37,663)
89,945

(25)
(25)
(30)

19,698
19,698¥109,644

104
104
¥ 73

(20,812)83,426(228)
73(1,160)(1,446)61,428600,116(126)(5,385)59,852897,293(104)571(24,976)
102,681(104)
0(3,451)(110)(24,976)
102,6810(3,451)
(110)
2

2

285
¥141,659

288¥161,477

74,143¥674,259(104)¥(5,489)Land
revaluation
reserve

Accumulated other comprehensive income
Foreign
Retirement
Total
currency
benefits liability
accumulatedtranslation
adjustments
other compreadjustments(Note 6)hensive income

74,613¥971,906

Millions of yen

Shareholders of Mitsubishi Estate Co., Ltd.

¥108,648¥ 36,255$  968,432

Balance at April 1, 2015
Changes in the year:
Issuance of new shares
Cash dividends paid
Profit attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Land revaluation reserve (Note 1-h)Changes in the scope of consolidationChanges in equity related to transactions
with non-controlling shareholders
	Net change in items other than those inshareholders’ equity
Total of changes in the year
Balance at April 1, 2016
Changes in the year:
Issuance of new shares
Cash dividends paid
Profit attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Land revaluation reserve (Note 1-h)Changes in the scope of consolidationChanges in equity related to transactions
with non-controlling shareholders
	Net change in items other than those inshareholders’ equity
Total of changes in the year
Balance at March 31, 2017

Non-controlling interests¥ 13,599¥ 15,378$  121,217

See accompanying notes to consolidated financial statements.

Consolidated Statements of Comprehensive Income
Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2017 and 2016
Millions of yen

ProfitThousands of
U.S. dollars (Note 2)

2017

2016

2017

¥116,808¥ 98,278$1,041,163

19,703(37,665)

175,625

Other comprehensive income (Note 21):
Unrealized holding gain (loss) on securities

159

4

1,419

3,363

15,32029,978Foreign currency translation adjustments(26,882)(5,810)(239,615)

Retirement benefits liability adjustments

10,092(17,907)

89,960

Deferred gain (loss) on hedging instruments
Land revaluation reserve

Share of other comprehensive income (loss) of companies
accounted for by the equity method
Total other comprehensive income (loss)
Comprehensive income (Note 21)

(996)

(586)

(8,882)

5,439(46,644)

48,487¥122,247¥ 51,633$1,089,650

Total comprehensive income (loss) attributable to:¥504,756¥ 20,798¥  5,238¥658,398

Stockacquisitionrights

Noncontrollinginterests

Total
net assets¥500¥143,825¥1,640,163—(20,812)83,426(228)
73(1,160)—(1,446)

16,492
16,492521,248(6,898)(6,898)13,900(17,914)(17,914)(12,676)(46,010)(46,010)612,387

29
29
529

5,145
5,145
148,970(40,836)
19,016
1,659,180
571(24,976)
102,681(104)
0(3,451)
(110)
2

5,879
5,879
¥527,128(27,263)(27,263)¥(13,363)

10,063
10,063¥ (2,612)

8,483
8,483
¥620,870—¥529

25,18325,183¥174,154

33,666108,280¥1,767,460

See accompanying notes to consolidated financial statements.

58 

MITSUBISHI ESTATE CO., LTD.

Annual Report 2017 

59FINANCIAL SECTION

Consolidated Statements of Changes in Net Assets (continued)

Consolidated Statements of Cash Flows

Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2017 and 2016

Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2017 and 2016

Millions of yen

Thousands of
U.S. dollars (Note 2)

2017

2016

2017

¥ 162,881
75,974
3,247(1,013)
227(13,505)
12,260
6,431
(872)
(989)
4,330
(4,902)
22,743(8,865)84,853(32,460)(5,837)(4,896)(62,000)
237,609
5,641(22,532)(52,189)
168,527¥ 141,850
74,245
2,931(11,350)
—
—
2,561
—
(605)
15,525(2,780)(4,840)20,189(900)(33,202)(32,487)(41,614)
11,48932,289173,301
5,312(19,210)(23,582)
135,821$ 1,451,834
677,194
28,944(9,030)2,027(120,376)
109,285
57,330(7,778)(8,816)
38,597(43,694)
202,723(79,020)756,341(289,336)(52,028)(43,640)(552,634)
2,117,921
50,282(200,845)(465,192)
1,502,165

9,100(10,615)
11,223(274,686)
1,534(7,749)10—
21,840(273,365)
18,055(1,548)

81,112(94,621)100,037(2,448,405)
13,680(69,074)—

10,978—(2,776)—(24,748)

295

—

2,631

(52,929)(688)(327,292)(3,040)(3,932)(231,003)(471,781)(6,140)(2,917,309)(25,278)—
263,710(166,494)
34,805(76,556)

26,262(28,000)
247,372(115,717)
255,781(39,055)(225,319)—
2,350,566(1,484,044)
310,240(682,381)(107)(25,112)(9,886)(4,921)(5,144)(168,830)
412,392(219)¥ 243,341—(20,670)(16,735)
309,237(153)
213,902
198,489—¥ 412,392(960)(223,840)(88,124)(43,864)(45,855)(1,504,863)
3,675,838(1,959)$ 2,169,015

Thousands of U.S.dollars (Note 2)

Balance at April 1, 2015
Changes in the year:
Issuance of new shares
Cash dividends paid
Profit attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Land revaluation reserve (Note 1-h)Changes in the scope of consolidationChanges in equity related to transactions
with non-controlling shareholders
	Net change in items other than those inshareholders’ equity
Total of changes in the year
Balance at April 1, 2016
Changes in the year:
Issuance of new shares
Cash dividends paid
Profit attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Land revaluation reserve (Note 1-h)Changes in the scope of consolidationChanges in equity related to transactions
with non-controlling shareholders
	Net change in items other than those inshareholders’ equity
Total of changes in the year
Balance at March 31, 2017

Commonstock

CapitalsurplusRetainedearnings$1,260,123$1,449,667$4,801,568

Shareholders’ equity
Total
Treasuryshareholders’stockequityAccumulated othercomprehensive income
Unrealized
Deferred gain
holding gain (loss) on hedging
on securities
instruments$(46,876)$1,137,437$ (45)(335,714)(335,714)
801,722

(228)
(228)
(273)

175,585
175,585$  977,307

931
931
$ 658

(185,507)
743,620(28)(227)(10,343)(2,037)911(12,894)—
1,260,123(12,923)
1,436,744

2,549

2,549

547,542
5,349,111(1,125)(48,001)

533,494
7,997,977

(927)

5,098
(222,625)
915,246(927)
2(30,766)(983)

2(30,766)
(983)
23
2,575
$1,439,319(185,507)
743,620(2,037)656(10,343)(12,894)(222,625)
915,246

2,549$1,262,672$7,464,482

23
660,870$6,009,981(927)$(48,929)

665,067$8,663,044

Thousands of U.S.dollars (Note 2)

Balance at April 1, 2015
Changes in the year:
Issuance of new shares
Cash dividends paid
Profit attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Land revaluation reserve (Note 1-h)Changes in the scope of consolidationChanges in equity related to transactions
with non-controlling shareholders
	Net change in items other than those inshareholders’ equity
Total of changes in the year
Balance at April 1, 2016
Changes in the year:
Issuance of new shares
Cash dividends paid
Profit attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Land revaluation reserve (Note 1-h)Changes in the scope of consolidationChanges in equity related to transactions
with non-controlling shareholders
	Net change in items other than those inshareholders’ equity
Total of changes in the year
Balance at March 31, 2017Land
revaluation
reserve

Accumulated other comprehensive income
Foreign
Retirement
Total
currency
benefits liability
accumulatedtranslation
adjustments
other compreadjustments(Note 6)hensive income$4,499,124$ 185,390$  46,693$5,868,600

Stockacquisitionrights

Noncontrollinginterests

Total
net assets$4,458$1,281,977$14,619,518—(185,507)
743,620(2,037)656(10,343)—(12,894)

147,001
147,001
4,646,126(61,491)(61,491)
123,898(159,682)(159,682)(112,989)(410,116)(410,116)
5,458,484

258
258
4,716

45,86445,864
1,327,841(363,993)
169,501
14,789,019
5,098(222,625)
915,246(927)
2(30,766)(983)
23

52,40752,407$4,698,533(243,010)(243,010)$ (119,112)

89,70089,700$ (23,288)

75,61375,613$5,534,098—$4,716

224,473
224,473$1,552,314

300,086
965,154$15,754,174

See accompanying notes to consolidated financial statements.

Cash flows from operating activities
Income before income taxes and minority interests
Depreciation and amortization(Gain) loss on sales or disposal of property and equipment(Gain) loss on sales of securities
Valuation (gain) loss on equity investments
Gain on negative goodwill
Impairment loss
(Gain) loss on step acquisitions
Equity in net income of affiliates
Increase (decrease) in allowances
Increase (decrease) in liability for retirement benefits
Interest and dividend income
Interest expense(Increase) decrease in notes and accounts receivable(Increase) decrease in inventories(Increase) decrease in equity investments
Increase (decrease) in notes and accounts payable
Increase (decrease) in lease deposits received
Other
		Subtotal
Interest and dividends received
Interest paid
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities
Proceeds from sales of marketable securities
Purchases of marketable securities
Proceeds from sales of property and equipment
Purchases of property and equipment
Proceeds from sales of investment securities
Purchases of investment securities
	Proceeds from sales of investments in subsidiaries
resulting in change in scope of consolidation
	Payments for sales of investments in subsidiaries
resulting in change in scope of consolidation
	Proceeds from purchase of investments in subsidiaries
resulting in change in scope of consolidation (Note 15)
	Purchase of investments in subsidiaries
resulting in change in scope of consolidation (Note 15)
Other
Net cash provide by (used in) investing activities
Cash flows from financing activities
Net increase (decrease) in short-term borrowings
Net increase (decrease) in commercial paper
Increase in long-term borrowings
Repayment of long-term borrowings
Proceeds from issuance of corporate bonds
Repayment of corporate bonds	Purchase of investments in subsidiaries that do not
result in change in scope of consolidation
Cash dividends paid
Other
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents of subsidiaries excluded from consolidation
Cash and cash equivalents at end of year (Note 15)
See accompanying notes to consolidated financial statements.

60 

MITSUBISHI ESTATE CO., LTD.

Annual Report 2017 

61

FINANCIAL SECTION

Notes to Consolidated Financial Statements
Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2017 and 2016

1

SIGNIFICANT ACCOUNTING POLICIESa. Basis of preparation
The accompanying consolidated financial statements of Mitsubishi
Estate Co., Ltd. (the “Company”) and consolidated subsidiaries areprepared on the basis of accounting principles generally accepted inJapan, which are different in certain respects as to the applicationand disclosure requirements of International Financial ReportingStandards, and are compiled from the consolidated financial statements prepared by the Company as required by the Financial
Instruments and Exchange Act of Japan.
The notes to the consolidated financial statements include information that may not be required under accounting principles generally
accepted in Japan but is presented herein as additional information.
As permitted by the Financial Instruments and Exchange Act ofJapan, amounts of less than one million yen have been rounded off.
As a result, the totals shown in the accompanying consolidated
financial statements (both in yen and U.S. dollars) do not necessarily
agree with the sums of the individual amounts.
Certain amounts in the prior year’s financial statements have been
reclassified to conform to the current year’s presentation.
b. Principles of consolidation
The accompanying consolidated financial statements include theaccounts of the Company and its consolidated subsidiaries that it
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 consolidated financial statements
on an equity basis.
All significant intercompany balances and transactions have been
eliminated in consolidation.
c. Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain
estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes. The
actual results could differ from those estimates.
d. Foreign currency translation
Current and non-current monetary accounts denominated in foreign
currencies are translated into yen at the current rates.
The revenue and expense accounts of the foreign consolidated
subsidiaries are translated using the average rate during the year.
Except for shareholders’ equity, the balance sheet accounts are alsotranslated into yen at the rates of exchange in effect at the balance
sheet date. The components of shareholders’ equity are translated
at their historical exchange rates.
e. Cash equivalents
The Company and its consolidated subsidiaries consider all highly
liquid investments that are readily convertible into cash and havean original maturity of three months or less to be cash equivalents.
The reconciliation between cash in the balance sheets and cash
equivalents at March 31, 2017 and 2016 is presented in Note 15“Supplemental Cash Flow Information.”f. Marketable securities and investment securities
Securities other than those of subsidiaries and affiliates are classified
into three categories: trading, held-to-maturity, or other securities.
Trading securities are carried at fair value and held-to-maturity
securities are carried at amortized cost. Marketable securities classified as other securities are carried at fair value with any changes in
unrealized holding gain or loss, net of applicable income taxes,
included directly in shareholders’ equity. Non-marketable securities
classified as other securities are carried at cost. Cost of securities
sold is determined by the moving-average method.

62 

g. Inventories
Inventories are mainly stated at cost, determined by the identified-cost
method. Net book value of inventories in the consolidated balance
sheets is written down when their net realizable values decline.
h. Property and equipment, depreciation and impairment
Property and equipment, except for land as discussed below, is statedat cost less accumulated depreciation. Depreciation of property, plantand equipment is calculated principally by the declining-balancemethod based on the estimated useful lives and the residual value
determined by the Company, except for certain buildings of theCompany and domestic consolidated subsidiaries acquired on or after
April 1, 1998 and facilities attached to buildings and other non-building
structures acquired on or after April 1, 2016, which are depreciatedby the straight-line method. Property and equipment of foreignsubsidiaries on which depreciation is calculated by the straight-line
method at rates determined based on the estimated useful livesof the respective assets. The Company and its consolidated subsidiaries have capitalized the costs incurred for significant renewals
and additions; however, costs for maintenance and repairs arecharged to income.
As of March 31, 2002, the Company revalued its land at fair value,
pursuant to Article 2 of the “Enforcement Ordinance for the Law
Concerning Revaluation Reserve for Land” and its amendments. The
related unrealized gain, net of applicable income taxes, has beenrecorded as “Land revaluation reserve” in net assets.
The Company and its consolidated subsidiaries review theirproperty and equipment (including land) for impairment whenever
events or changes in its business circumstances indicate that thecarrying amount of the assets may not be fully recoverable. They
perform cash flow analyses to determine if impairment exists. If
impairment is determined to exist, any related loss on impairment
is calculated based on the cash flow analyses.
The useful lives of property and equipment are summarized as follows:
Buildings and structures
2 to 75 years
i. Intangible and other assets
Intangible and other assets primarily consist of goodwill and land use
rights. Goodwill is stated on the basis of cost and is being amortizedover a period of 5 years or an estimated economical period on astraight-line basis. A loss is recognized if the fair value falls below thecarrying amount. Land use rights are stated on a cost basis.
j. Retirement benefits
Accrued retirement benefits and prepaid pension costs for employees
have been recorded mainly at the amount calculated based on theretirement benefit obligation and the fair value of the pension plan
assets as of the balance sheet date.
The retirement benefit obligation for employees is attributed toeach period by the benefit-formula method.
Actuarial gain or loss is amortized in the year following the year
in which the gain or loss is recognized primarily by the straight-line
method over periods (mainly 1 year through 15 years), which areshorter than the average remaining years of service of employees.
Certain foreign consolidated subsidiaries have adopted thecorridor approach for the amortization of actuarial gain and loss.
Prior service cost is being amortized as incurred by the straight-line
method over periods (mainly 1 year through 10 years), which areshorter than the average remaining years of service of the employees.

MITSUBISHI ESTATE CO., LTD.

k. Income taxes
Deferred tax assets and liabilities are determined based on thefinancial statements and the tax bases of assets and liabilities, using
the enacted tax rates in effect for the year in which the temporary
differences are expected to reverse. Deferred tax assets are also
recognized for the estimated future tax effects attributable to operating loss carry forwards. Valuation allowances are established to reducedeferred tax assets if it is more likely than not that some portion or allof the deferred tax assets will not be realized.

(d)	Revenue of construction contracts, of which the percentage
of completion can be reliably estimated, is recognized by the­percentage-of-completion method. The percentage-of-completion
method is calculated at the cost incurred by the end of the consolidated fiscal year as a percentage of estimated total cost. The
completed-contract method continues to be applied for othercontracts for which the percentage of completion cannot be
reliably estimated.
(e)	Other operating revenue is recognized on an accrual basis.

l. Derivative financial instruments
The Company and certain of its consolidated subsidiaries utilize
derivative financial instruments for the purpose of hedging their
exposure to adverse fluctuations and changes in interest rates (interest
rate swaps) and foreign exchange rates (currency swaps), but do notenter into such transactions for speculative or trading purposes.
Derivative financial instruments are carried at fair value with any
changes in unrealized gain or loss charged or credited to operations,
except for those which meet the criteria for deferral hedge accounting
under which unrealized gain or loss is deferred as an asset or liability.

n. Appropriation of retained earnings
Under the Companies Act of Japan, the appropriation of retained
earnings with respect to a given financial year is made by a resolutionof a general meeting of shareholders held subsequent to the close ofsuch a financial year. The accounts for that year do not, therefore,
reflect such appropriations. See Note 8 for more information.

m. Revenue recognition
The consolidated statements of income reflect revenue from operations in the following manner:(a)	Revenue from the leasing of office space is recognized as rent
accrued over the leasing period.
(b)	Revenue from sales of condominiums, residential houses, andland is recognized when the units are delivered and accepted bycustomers. Revenue from consignment commissions for residential
sales earned by the real estate service business segment is recognized at the time of contract conclusion for services provided up
to the conclusion and at the time of ownership transfer for services
provided up to the transfer.
(c)	Revenue from real estate brokerage is recognized when an underlying lease agreement goes into force or the underlying units aredelivered.

2p. Additional information
The Company and its domestic consolidated subsidiaries adopted“Revised Implementation Guidance on Recoverability of Deferred Tax
Assets” (ASBJ Guidance No. 26, March 28, 2016) from the beginningof the fiscal year ended March 31, 2017.

U.S. DOLLAR AMOUNTS

The translation of yen amounts into U.S. dollar amounts is included
solely for convenience, as a matter of arithmetic computation only, at therate of ¥112.19 = U.S.$1.00, the approximate rate of exchange prevailing

3o. Change in accounting policy(Application of “Practical Solution on a Change in Depreciation
Method Due to Tax Reform 2016”)
Following revisions to the Corporation Tax Act of Japan, the Company
and its domestic consolidated subsidiaries adopted “Practical
Solution on a Change in Depreciation Method Due to Tax Reform
2016” (Accounting Standards Board of Japan (ASBJ) Practical Issues
Task Force (PITF) No. 32 of June 17, 2016) from the beginning of the
fiscal year ended March 31, 2017, and changed the depreciation
method of facilities attached to the buildings and other non-building
structures acquired on or after April 1, 2016 from the decliningbalance method to the straight-line method.
As a result, operating income, ordinary income, and income before
income taxes increased ¥1,974 million ($17,596 thousand) in the fiscal
year ended March 31, 2017.

on March 31, 2017. The inclusion of such amounts is not intended to
imply that yen amounts have been or could be readily converted,
realized, or settled in U.S. dollars at the above or any other rate.

INVENTORIESInventories at March 31, 2017 and 2016 were as follows:
Millions of yen

Thousands of U.S. dollars

2017

2016

2017

Real estate for sale

¥ 60,195¥ 54,827$  536,551

Land and housing projects in progress

3,012,105

337,928

366,354

Land held for development

1,058

8,905

9,433

Other

9,112

8,956

81,225

Total¥408,294¥439,044$3,639,315

Write-downs of inventories as a result of a decrease in profitability for the years ended March 31, 2017 and 2016 were ¥15,200 million ($135,485
thousand) and ¥1,728 million, respectively, and recognized in cost of revenue from operations.

Annual Report 2017 

63

FINANCIAL SECTION

4

Millions of yen

OTHER INVESTMENTS

Other investments at March 31, 2017 and 2016 were as follows:

Lease deposits
Long-term prepaid expenses and other
Total

5

Millions of yen

Thousands of U.S. dollars

2017

2016

2017

¥106,149¥115,382$  946,162

73,88360,709658,555¥180,033¥176,092$1,604,717

SHORT-TERM BORROWINGS AND LONG-TERM DEBTAt March 31, 2017 and 2016, short-term borrowings and the current portion of long-term debt were as follows:
Millions of yen

Thousands of U.S. dollars

2017

2016

2017

Loans, principally from banks¥ 86,415¥103,125$  770,263

Current portion of long-term debt

234,356

241,675

2,088,923¥320,772¥344,800$2,859,186

Total

The weighted-average interest rates per annum on short-term borrowings outstanding at March 31, 2017 and 2016 were 0.44% and 0.37%,
respectively. Short-term borrowings are principally unsecured.
At March 31, 2017 and 2016, long-term debt was as follows:
Millions of yen

Thousands of U.S. dollars

2016

2017

0.577% unsecured bonds due 2020¥   15,000¥   15,000$   133,701

0.54% unsecured bonds due 2021

15,00015,000133,701

1.262% unsecured bonds due 2021

15,00015,000133,701

1.103% unsecured bonds due 2021

20,00020,000178,269

1.095% unsecured bonds due 2021

10,00010,00089,134

1.178% unsecured bonds due 2022

20,00020,000178,269

1.087% unsecured bonds due 2022

20,00020,000178,269

1.026% unsecured bonds due 2022

30,00030,000267,4032.42% unsecured bonds due 2022

10,00010,00089,1340.929% unsecured bonds due 2022

10,00010,00089,134

1.5% unsecured bonds due 2022

10,00010,00089,1342.075% unsecured bonds due 2023

10,00010,00089,134

2.28% unsecured bonds due 2024

10,00010,00089,134

1.067% unsecured bonds due 2024

10,00010,00089,1340.643% unsecured bonds due 2024

20,00020,000178,269

0.270% unsecured bonds due 2026

10,000—89,1342.305% unsecured bonds due 2027

10,00010,00089,1342.385% unsecured bonds due 2027

10,00010,00089,134

2.52% unsecured bonds due 2027

15,00015,000133,701

2.425% unsecured bonds due 2027

10,00010,00089,1342.555% unsecured bonds due 2028

10,00010,00089,134

2.9% unsecured bonds due 2032

10,00010,00089,1342.615% unsecured bonds due 2032

10,00010,00089,134

2.04% unsecured bonds due 2032

20,00020,000178,269

1.72% unsecured bonds due 2033

10,00010,00089,1340.859% unsecured bonds due 2036

10,000—89,1340.789% unsecured bonds due 2056

15,000—133,7010.610% unsecured bonds inherited from DAINIPPON ENTERPRISE INC. due 2018

1,237

—

11,0300.390% unsecured bonds inherited from DAINIPPON ENTERPRISE INC. due 2020

1,550

—

13,815

1.02% interest deferrable and early redeemable subordinated unsecured bonds due 2076

75,00075,000668,5083ML+88bp interest deferrable and early redeemable subordinated unsecured
bonds due 2076

75,00075,000668,5081.33% interest deferrable and early redeemable subordinated unsecured bondsdue 2076

70,00070,000623,941

30,00030,000267,403

—

8,023

—

2017

2016

2017

1.443% unsecured bonds due 2016—¥   15,000—

1.985% unsecured bonds due 2016—

10,000—1.88% unsecured bonds due 2016—

10,000—0.553% unsecured bonds due 2016—

15,000—0.459% unsecured bonds due 2016—

10,000

—1.79% unsecured bonds due 2017—

10,000—0.428% unsecured bonds due 2017¥   20,000

20,000$   178,269

2.045% unsecured bonds due 2017

10,00010,00089,1341.825% unsecured bonds due 2017

10,00010,00089,1343.125% unsecured bonds due 2017

10,00010,00089,134

1.77% unsecured bonds due 2017

20,00020,000178,269

0.187% unsecured bonds due 2018

15,00015,000133,701

1.65% unsecured bonds due 2018

10,00010,00089,1342.005% unsecured bonds due 2018

10,00010,00089,1340.811% unsecured bonds due 2018

10,00010,00089,134

1.48% interest deferrable and early redeemable subordinated unsecured bondsdue 2076

3% unsecured bonds due 2018

10,00010,00089,134

Floating rate bonds due 2016 (payable in U.S. dollars)

1.84% unsecured bonds due 2018

15,00015,000133,701

1.72% unsecured bonds due 2018

10,00010,00089,134Loans from banks and insurance companies:
Secured

0.631% unsecured bonds due 201910,00010,00089,134

1.87% unsecured bonds due 201915,00015,000133,701

1.62% unsecured bonds due 201910,00010,00089,1340.571% unsecured bonds due 201910,00010,00089,134

1.53% unsecured bonds due 201910,00010,00089,134

1.975% unsecured bonds due 201910,00010,00089,1341.805% unsecured bonds due 201910,00010,00089,134

2.5% unsecured bonds due 2020

10,00010,00089,134

1.165% unsecured bonds due 2020

10,00010,00089,13464 

MITSUBISHI ESTATE CO., LTD.

Thousands of U.S. dollars

2017

UnsecuredLess current portion

Annual Report 2017 

138,578

46,3691,235,215

1,303,557

1,231,709

11,619,193

2,304,923

2,181,102

20,544,822(234,356)(241,675)(2,088,923)¥2,070,567¥1,939,426$18,455,898

65

FINANCIAL SECTION

The aggregate annual maturities of long-term debt subsequent to March 31, 2017 are summarized as follows:Year ending March 31,

Millions of yen

Thousands of U.S. dollars

2018¥  234,356$ 2,088,923

2019

211,285

1,883,284

2020

308,323

2,748,226

2021

184,725

1,646,539

2022
2023 and thereafter

172,816

1,540,389

1,193,416

10,637,459¥2,304,923

Total$20,544,822

6

RETIREMENT BENEFIT PLANS

The Company and most of its domestic consolidated subsidiaries have either funded or unfunded defined benefit plans, defined contribution plans,
and lump-sum payment plans in the form of a defined benefit plan. The Company has adopted a retirement benefit trust for the lump-sum payment
plan and defined benefit plan. Rockefeller Group, Inc., a foreign consolidated subsidiary of the Company, has adopted defined benefit plans.
The simplified method, which assumes the retirement benefit obligation to be equal to the benefits payable if all eligible employees voluntarily
terminated their employment at the fiscal year-end, has been adopted in accounting for defined benefit plans for some consolidated subsidiaries
and the Company’s executive officers.
The changes in the retirement benefit obligation during the years ended March 31, 2017 and 2016 were as follows:
Millions of yen

Retirement benefit obligation at the beginning of the year

8,595
16,079Retirement benefits paid

(5,323)(5,293)(47,453)

Prior service cost

211

—

1,883

Translation adjustments

(625)

12

(5,572)

Land

199,095

1,774,626

Land in trust

128,591

1,146,198

Other

6,438

57,3901

10¥489,281$4,361,185

Retirement benefit obligation at the end of the year

Long-term borrowings
Total

Thousands of U.S. dollars

2017

2016

2017

¥ 6,829—$ 60,877

10,681—

95,205¥17,510—$156,082

The assets pledged as collateral for the above non-recourse loans at March 31, 2017 were as follows:

Buildings and structures
Land
Construction in progress
Total

Plan assets at the beginning of the year

Thousands of U.S. dollars

2017

2016

2017

¥21,765—$194,008

7,312—

65,1786,118—

54,534¥35,196—$313,721

(120)

6,247

¥134,263$1,225,504

Millions of yen

Thousands of U.S. dollars

2017

2016

2017

¥111,304¥119,099$  992,108

Expected return on plan assets

2,841

3,089

25,331

Actuarial gain and loss

11,903(11,207)

106,103

Contributions by the Company

2,608

4,168

23,250Retirement benefits paid

(3,912)(3,879)(34,875)

Translation adjustments

(387)

9

(3,454)

Other
Millions of yen

700¥137,489

The changes in plan assets during the years ended March 31, 2017 and 2016 were as follows:

The following borrowings were non-recourse loans at March 31, 2017 and 2016, which are secured by collaterals as the sole source of recovery.

Current portion of long-term borrowings

48,9701,811

12,247

Millions of yen

4,603
13,966$1,370,712

Total

5,493
964

1,374

Other property and equipment$1,196,752

1,803¥153,780

Construction in progress¥119,284

Actuarial gain and loss

Thousands of U.S. dollars

Machinery and equipment

2017¥134,263

Interest cost

Millions of yen

Buildings and structures

2016

Service cost

The assets pledged as collateral for short-term borrowings of ¥100 million ($891 thousand), long-term debt of ¥138,578 million ($1,235,215
thousand), and other current liabilities of ¥5,106 million ($45,519 thousand) at March 31, 2017 were as follows:

Thousands of U.S. dollars

2017

Plan assets at the end of the year

286

25

2,553

¥124,645¥111,304$1,111,017

The funded status of the plans and the amounts recognized on the consolidated balance sheet as of March 31, 2017 and 2016 for theCompany’s and the consolidated subsidiaries’ defined benefit plans were as follows:
Millions of yen

Thousands of U.S. dollars

2017

2016

2017

Funded retirement benefit obligation¥ 120,031¥ 118,193$ 1,069,896

Plan assets at fair value(124,645)(111,304)(1,111,025)(4,614)

6,888(41,129)

Unfunded retirement benefit obligation

17,457

16,070155,608

Net liability for retirement benefits on the balance sheet

12,843

22,959114,478

Liability for retirement benefits

22,042

32,464

196,476

Asset for retirement benefits(9,487)(9,810)(84,568)

288

305

2,571

¥  12,843¥  22,959$  114,478

Other current liabilities
Net liability for retirement benefits on the balance sheet

Note: The accrued employees’ retirement benefits recognized by Rockefeller Group, Inc., a consolidated subsidiary, were included in “Other current liabilities.”

66 

MITSUBISHI ESTATE CO., LTD.

Annual Report 2017 

67

FINANCIAL SECTION

The components of retirement benefit expenses for the years ended March 31, 2017 and 2016 were as follows:
Millions of yen

Thousands of U.S. dollars

2017

2016

2017

Service cost

¥ 5,493¥ 4,603$ 48,970

Interest cost

964

1,811

8,595

Expected return on plan assets(2,841)(3,089)(25,331)

Amortization of actuarial loss

4,251

(690)

37,894

Amortization of prior service cost

183

(107)

1,634

Other

216

135

1,928

¥ 8,267¥ 2,663$ 73,691

Retirement benefit expenses

Note: Retirement benefit expenses for consolidated subsidiaries adopting the simplified method, which assumes the retirement benefit obligation to be equal to the benefits payable
if all eligible employees voluntarily terminated their employment at the fiscal year-end, are included in “Service cost.”

The components of retirement benefits liability adjustments included in other comprehensive income (before tax effect) for the years ended March
31, 2017 and 2016 were as follows:
Millions of yen

Thousands of U.S. dollars

2017

2016

2017

Prior service cost¥      (27)¥   (107)$      (248)Actuarial gain and loss

14,351(25,864)

127,917¥14,323¥(25,972)$127,668

Total

7

INCOME TAXESThe effective tax rates reflected in the consolidated statements of income for the years ended March 31, 2017 and 2016 differed from the statutory
tax rate for the following reasons:Statutory tax rate

2017

2016

30.86%

33.06%

0.01

1.04

Increase (decrease) in income taxes resulting from:Different tax rates applied
Expenses not deductible for income tax purposes

0.25

0.27

Revenues deductible for income tax purposes(0.14)(5.54)

Change in valuation allowance(1.03)

10.68

Undistributed earnings of affiliates

0.03

0.11

Equity income(0.24)(0.10)

Gain on negative goodwill(2.56)—

Loss on step acquisitions

1.22

—

Effect of enacted changes in tax laws and rates on Japanese tax(0.05)(4.76)

Other
Effective tax rate

(0.05)(4.04)

28.29%

30.72%The significant components of deferred tax assets and liabilities as of March 31, 2017 and 2016 were as follows:
The components of retirement benefits liability adjustments included in accumulated other comprehensive income (before tax effect) as ofMarch 31, 2017 and 2016 were as follows:
Millions of yen

Thousands of U.S. dollars

2017

2016

2017

Unrecognized prior service cost¥  185¥   225$  1,650

Unrecognized actuarial gain and loss

(5,042)(19,599)(44,947)¥(4,857)¥(19,373)$(43,297)

Total

The fair values of plan assets, by major category, as a percentage of total plan assets as of March 31, 2017 and 2016 were as follows:
2017

2016

Bonds

7%

22%

Stocks

55%

54%

11%

11%

General accounts
Other

28%

13%

Total

100%

100%

Note: Approximately 45% and 40% of total plan assets were held in the retirement benefit trust as of March 31, 2017 and 2016, respectively.

The expected returns on plan assets has been estimated based on the anticipated allocation to each asset class and the expected long-term
returns on assets held in each category.
The assumptions used in accounting for the above plans were as follows:
2017

2016

Millions of yen

Thousands of U.S. dollars

2017

2016

2017

¥   2,357¥   1,646$    21,012

13,287

16,567

118,441

Valuation loss on inventories

8,265

12,96973,675

Unrealized loss on property and equipment

89,52888,898798,007

Unrealized loss on property and equipment by consolidation

10,976

11,144

97,834

Loss on valuation of investment securities

2,525

6,250

22,511

Loss on valuation of equity investments

6,715

7,437

59,857

Land revaluation reserve

23,91026,361

213,124

Accrued bonuses

2,921

2,681

26,039Other

48,09150,151

428,659

Deferred tax assets:
Net operating loss carry forwards
Liability for retirement benefits

208,579

224,108

1,859,164

Valuation allowance(80,765)(93,370)(719,896)

Total deferred tax assets

127,814130,737

1,139,268

Total gross deferred tax assets

Deferred tax liabilities:
Reserves under Special Taxation Measures Law(62,992)(62,271)(561,484)

Land revaluation reserve(265,912)(265,912)(2,370,194)

Unrealized gain on property and equipment by consolidation(118,001)(113,392)(1,051,798)

Discount rates

0.0%–4.15%

0.0%–3.85%

Unrealized gain on property and equipment(36,955)(36,668)(329,401)

Expected rates of return on plan assets

1.0%–6.75%

1.0%–6.75%

Unrealized gain on securities(45,962)(36,496)(409,685)

Rates of salary increase

0.4%–4.0%

0.4%–4.0%

Other

The required contributions to defined contribution plans by consolidated subsidiaries for the years ended March 31, 2017 and 2016 were ¥213
million ($1,899 thousand) and ¥160 million, respectively.

68 

MITSUBISHI ESTATE CO., LTD.

(57,975)(31,391)(516,760)

Total deferred tax liabilities(587,799)(546,132)(5,239,325)

Net deferred tax liabilities¥(459,985)¥(415,394)$(4,100,056)

Annual Report 2017 

69

FINANCIAL SECTION

8SHAREHOLDERS’ EQUITYThe Companies Act of Japan provides that an amount equal to 10% of
the amount to be disbursed as distributions of capital surplus (otherthan the capital reserve) and retained earnings (other than the legal
reserve) be transferred to the capital reserve and the legal reserve,
respectively, until the sum of the capital reserve and the legal reserve
equals 25% of the capital stock account. The capital reserve amounted

911 CONTINGENT LIABILITIES

to ¥161,477 million ($1,439,319 thousand), and the legal reserveamounted to ¥21,663 million ($193,099 thousand) at March 31, 2017.
Such distributions can be made at any time by resolution of thegeneral meeting of shareholders or by the Board of Directors if
certain conditions are met, but neither the capital reserve nor thelegal reserve is available for distributions.

At March 31, 2017, the Company and its consolidated subsidiaries had the following contingent liabilities:(1) Guarantee of loans

Guarantees of house purchasers’ loans from banks

Millions of yen

Thousands of U.S. dollars¥39,191$349,328

Other

14

124

Total

¥39,205$349,453

Millions of yen

Thousands of U.S. dollars¥10,885$97,027

AMOUNTS PER SHARE
Yen

U.S. dollars

2017

2016

2017

Basic

¥74.00¥60.13$0.65

Diluted

73.98

60.12

0.65

Cash dividends applicable to the year

20.00

16.00

0.17

Yen

U.S. dollars

As of March 31,

2017

2016

2017

Net assets¥1,147.80¥1,088.11$10.23Years ended March 31,

Net income:Basic net income per share was computed based on the net income
available for distribution to shareholders of common stock and theweighted average number of shares of common stock outstanding
during the year, and diluted net income per share was computed
based on the net income available for distribution to the shareholders
and the weighted average number of shares of common stock outstanding during each year after giving effect to the dilutive potentialof shares of common stock to be issued upon the exercise of warrants
and stock subscription rights.

Amounts per share of net assets are computed based on net assets
available for distribution to shareholders and the number of shares ofcommon stock outstanding at the year-end.
Cash dividends per share represent the cash dividends proposedby the Board of Directors as applicable to the respective years
together with the interim cash dividends paid.

10 LEASES(2) Guarantee for business undertakings

Business undertaking guarantees

Rockefeller Group International Inc. provides business undertaking guarantees for property development projects in proportion to its share.

12 OTHER INCOME (EXPENSES)The components of “Other, net” in “Other income (expenses)” for the years ended March 31, 2017 and 2016 were as follows:
Millions of yen

Thousands of U.S. dollars

2017

2016

2017

—

¥  2,709—¥ 13,505—$ 120,376

1,013

11,3509,030

Reversal of accrued payment

—

4,098

—

Reversal of provision for loss on obligation of additional investments

—

1,262

—

Settlement received

1,966

—

17,530Loss on disposal of fixed assets(4,453)(6,064)(39,694)

Loss related to retirement of fixed assets(4,762)(4,223)(42,451)

Impairment loss*

Gain on sales of fixed assets
Gain on negative goodwill
Gain on sales of investment securities(12,260)(2,561)(109,285)

Future minimum lease payments subsequent to March 31, 2017 on non-cancelable operating leases are summarized as follows:

Provision for environmental measures—(5,068)—Years ending March 31,

Provision for business transfer—(10,570)—

Millions of yen

Thousands of U.S. dollars

2018¥  5,458$   48,651

Loss on step acquisitions

117,837

1,050,340(6,431)—(57,330)2019 and thereafter

Other, net¥123,295$1,098,991(1,221)(539)(10,891)¥(12,645)¥ (9,605)$(112,716)

Total

The Company and its consolidated subsidiaries lease office buildings and retail properties and earn income on these leases. Future minimum
lease income subsequent to March 31, 2017 from non-cancelable operating leases is summarized as follows:
Years ending March 31,

Millions of yen

Thousands of U.S. dollars

2018¥  270,673$ 2,412,636

995,841

8,876,380¥1,266,514$11,289,017

2019 and thereafter
Total

70 

MITSUBISHI ESTATE CO., LTD.

* Impairment loss
The Company recorded consolidated impairment losses on the following asset groups
for the fiscal year ended March 31, 2017:

The Company recorded consolidated impairment losses on the following asset groups
for the fiscal year ended March 31, 2016:

Major Application
Leased assets, etc.
(total 12 groups)

Major Application
Leased assets, etc.
(total 5 groups)

Category

Location

Land, Buildings, etc.

New Jersey, U.S.A, etc.

Asset grouping for the Company and its consolidated subsidiaries (collectively, the“Group”) was made based on a minimum unit that generates cash flows, which issubstantially independent from cash flows of other assets or asset groups. Company
condominiums are regarded as shared assets. As a result, for the fiscal year ended
March 31, 2017, the book values of 12 asset groups, consisting of those for which themarket prices fell considerably compared with the book values due to the decline ofland prices and those for which profitability decreased considerably due to fallen rent
levels or deteriorated market conditions, etc., were reduced to the respective collectible
amounts and such reductions were recorded as impairment losses in the amount of¥12,260 million ($109,285 thousand).
The breakdown of such impairment losses was ¥6,041 million ($53,853 thousand) inland and ¥6,218 million ($55,432 thousand) in buildings and structures.
The collectible amounts of asset groups are measured using net sale value or use
value, and the net sale value is principally expressed as an appraised value by a realestate appraiser. Future cash flows mainly discounted at a rate of 5% are used tocompute the use value.

Annual Report 2017 

Category

Location

Land, Buildings, etc.

Chiba, Chiba Prefecture, etc.

Asset grouping for the Company and its consolidated subsidiaries was made based ona minimum unit that generates cash flows, which is substantially independent from cash
flows of other assets or asset groups. Company condominiums are regarded as sharedassets. As a result, for the fiscal year ended March 31, 2016, the book values of 5 asset
groups, consisting of those for which the market prices fell considerably compared withthe book values due to the decline of land prices and those for which profitability
decreased considerably due to fallen rent levels or deteriorated market conditions, etc.,
were reduced to the respective collectible amounts and such reductions were recorded
as impairment losses in the amount of ¥2,561 million.
The breakdown of such impairment losses was ¥1,665 million in land and ¥895 million
in buildings and structures.
The collectible amounts of asset groups are measured using net sale value or use
value, and the net sale value is principally expressed as an appraised value by a realestate appraiser. Future cash flows mainly discounted at a rate of 5% are used tocompute the use value.

71

FINANCIAL SECTION

13 FINANCIAL INSTRUMENTS

Overview(1) Policy for financial instruments
In consideration of plans for capital investments, the Group raises
funds mainly through bank borrowings and bond issues. In terms offund management, the Group makes every effort to avoid market risks
by emphasizing liquidity and shortening the fund management
period. The Group uses derivatives for the purpose of hedging
exposure to interest rates, reducing interest expenses, and hedging
the risk of fluctuations in foreign exchange rates and does not enter
into derivatives for speculative purposes.
(2) Types of financial instruments and related risks
Trade receivables–notes and accounts receivable–are exposed tocredit risk in relation to customers. Trade receivables denominated inforeign currencies, which arise from overseas operation, are exposed
to foreign currency exchange risks.
Marketable securities and investment securities are exposed tomarket risks. Those securities are composed of mainly held-tomaturity debt securities and the shares of common stock of othercompanies with which the Group has business relationships.
Equity investments are composed of mainly preferred equity
investments in special purpose companies under the Law concerning
Liquidation of Assets, investments in real estate investment trusts,
and investments in silent partnerships for special purpose companies.
They are exposed to the credit risks of issuers and risks of fluctuationsin interest rates and market prices, respectively.
Lease and guarantee deposits for leased assets are exposed to thecredit risks of customers.
Substantially, all trade payables–accounts and notes payable–havepayment due dates within one year. Some of those denominated inforeign currencies are exposed to foreign currency exchange risks.
Borrowings and bonds are taken out principally for the purpose of
making capital investments and the repayment dates of the long-term
debt extend up to 60 years from the balance sheet date. Certain
long-term debt with variable interest rates is exposed to interest rate
fluctuation risks. However, to reduce such risks for long-term debt
bearing interest at variable rates, the Group utilizes derivative transactions (interest rate swaps) as hedging instruments.
Derivative transactions include interest rate swaps, currency swaps,
and forward foreign exchange contracts. The Group also enters into
interest rate swap transactions to fix interest expense for long-term
debt bearing interest at variable rates and to reduce interest rate
fluctuation risks. Some of the consolidated subsidiaries enter into
interest swap and currency swap transactions in accordance with thesame policies and purposes adopted by the Company.

(3) Risk management for financial instruments(a) Monitoring of credit risk (the risk that customers or counterparties
may default)
In accordance with the internal policies for managing credit riskof the Group arising from receivables and lease and guarantee
deposits, each related division in each business segment monitors
credit worthiness of their main customers periodically, and monitors
due dates and outstanding balances by individual customer. In
addition, the Group is making efforts to identify and mitigate risksof bad debts from customers who are having financial difficulties.

(b) Monitoring of market risks (the risks arising from fluctuations inforeign exchange rates, interest rates, and others)
In order to mitigate the interest rate risks for loans payable andbonds bearing interest at variable rates, the Group may also enter
into interest rate swap and currency swap transactions.
			 For marketable securities and investment securities, the Group
periodically reviews the fair values of such financial instruments
and the financial position of the issuers (business partners). In
addition, the Group continuously evaluates whether securities
other than those classified as held-to-maturity should be maintained taking into account their fair values and relationships with
the issuers (business partners).
(c) Monitoring of liquidity risk (the risk that the Group may not be able
to meet its obligations on scheduled due dates)
Based on a report from each division, the Group prepares andupdates its cash flow plans on a timely basis and stabilizes liquidity
to manage liquidity risk.
(4) Supplementary explanation of the estimated fair value of financial
instruments
The fair value of financial instruments is based on their quoted market
price, if available. When there is no quoted market price available,
the fair value is reasonably estimated. Since various assumptions andfactors are reflected in estimating the fair value, different assumptions
and factors could result in different fair value.

Estimated Fair Value of Financial Instruments
The carrying value of financial instruments on the consolidated balance sheet as of March 31, 2017 and unrealized gains (losses) were as follows.
The following table does not include financial instruments for which it is extremely difficult to determine the fair value.
(Please refer to Note B on page 74).
Millions of yen

Thousands of U.S. dollars

20171) Cash on hand and in banks

Carrying
value

Estimated
fair value¥  243,681¥  243,681

Difference

Carrying
value

Estimated
fair value

Difference—$2,172,039$2,172,039—

2) Notes and accounts receivable–trade43,823

390,618

		 Allowance for doubtful receivables*(270)(2,411)

43,55243,552—

388,207388,207—		 (i) Held-to-maturity debt securities

15,112

15,114¥     2

134,701

134,724$22

		 (ii) Other securities

225,933

225,933—

2,013,851

2,013,851

—

60

424

363

543

3,787

3,244

3) Securities and investment securities

		 (iii) Investments in subsidiaries and affiliates

10,102

10,102—

90,04390,043—

Total assets¥  538,443¥  538,809¥   366$4,799,386$4,802,654$  3,267

1) Notes and accounts payable–trade¥   56,099¥   56,099—$  500,041$  500,041—

4) Equity investments2) Short-term borrowings

86,41586,415—770,263770,263—

3) Current portion of long-term borrowings

149,281

149,281—

1,330,611

1,330,611—

4) Current portion of long-term bonds

85,07585,075—758,311758,311—5) Long-term bonds

777,712814,378¥36,665

6,932,101

7,258,921$326,819

6) Long-term borrowings

1,292,854

1,310,801

17,946

11,523,797

11,683,764

159,967

Total liabilities¥2,447,439¥2,502,051¥54,612$21,815,127$22,301,914$486,787

Millions of yen

20161) Cash on hand and in banks2) Notes and accounts receivable–trade
		 Allowance for doubtful receivables*

Carrying
value

Estimated
fair value

Difference¥  412,983¥  412,983—

34,733

—

405

425

¥    19

189,926

189,926—
527

35,261(528)
34,733

3) Securities and investment securities
		 (i) Held-to-maturity debt securities
		 (ii) Other securities

60

587

11,12911,129—Total assets¥  649,239¥  649,786¥   5461) Notes and accounts payable–trade		 (iii) Investments in subsidiaries and affiliates
4) Equity investments¥    58,331¥    58,331—

2) Short-term borrowings

103,125

103,125—

3) Current portion of long-term borrowings

163,651

163,651—

4) Current portion of long-term bonds

78,02378,023—5) Long-term bonds

825,000

874,718¥49,7186) Long-term borrowings

1,114,426

1,146,046

31,619Total liabilities¥2,342,558¥2,423,896¥81,338* The value of notes and account receivable–trade is shown at net value, after deducting allowance for doubtful accounts.

72 

MITSUBISHI ESTATE CO., LTD.

Annual Report 2017 

73

FINANCIAL SECTION

Derivatives transactions
			 Please refer to Note 16. “Derivatives and Hedging Activities.”

Note A: M
 ethods to determine the estimated fair value of financial instruments andother matters related to securities and derivative transactions

14 MARKETABLE SECURITIES AND INVESTMENT SECURITIESAssetsCash on hand and in banks
			Since these items are settled in a short period of time, their carrying value
approximates fair value.
Notes and accounts receivable–trade			Since these items are settled in a short period of time, their carrying value
approximates fair value.
Marketable securities and investment securities			The fair value of stocks is based on quoted market prices. The fair value of debt
securities is mainly based on prices provided by the financial institutions making
markets in these securities. For information on securities classified by holding
purpose, please refer to Note 14. “Marketable Securities and Investment Securities.”
Equity investments
			 The fair value of equity investments is based on quoted market prices.
Liabilities

Notes and accounts payable–trade			Since these items are settled in a short period of time, their carrying value
approximates fair value.
Short-term borrowings
			Since these items are settled in a short period of time, their carrying value
approximates fair value.
Current portion of long-term borrowings
			Since these items are settled in a short period of time, their carrying value
approximates fair value.
Current portion of bonds
			Since these items are settled in a short period of time, their carrying value
approximates fair value.
Bonds
			 The fair value of bonds is based on the quoted market price.
Long-term borrowings
			Since variable interest rates of certain long-term borrowings are determined basedon current interest rates in a short period of time, their carrying value approximatesfair value. The fair value of long-term borrowings with fixed interest rates is basedon the present value of the total of principal and interest discounted by the interest
rates to be applied if similar new borrowings were entered into.

Note B: Financial instruments for which it is extremely difficult to determine the fair value
Millions of yen

Thousands of
U.S. dollars¥ 17,278$  154,012

282,6622,519,494

Marketable securities and investment securities classified as other securities at March 31, 2017 and 2016 were as follows:(ii) Equity investments *2(iii) Lease and guarantee deposit receivables *106,149

946,162(iv) Lease and guarantee deposit payables *4

398,0143,547,679

3

Millions of yen

2016(i) Unlisted stocks *1¥ 25,954(ii) Equity investments *2

265,712(iii) Lease and guarantee deposit receivables *3

115,382(iv) Lease and guarantee deposit payables *393,3094*1 Because no quoted market price is available and it is extremely difficult to determine
the fair value, unlisted stocks are not included in the above table.
*2 Because it is extremely difficult to determine the fair value of equity investmentsthat are not listed and have no quoted market price, they are not included in theabove table.
*3 Because no quoted market price for lease and guarantee deposit receivables for rental
properties is available and calculation of the actual period of duration from lease
initiation to evacuation is difficult, it is extremely difficult to estimate a reasonableamount of cash flow and therefore they are not included in the above table.
*4 Because no quoted market price for lease and guarantee deposit payables for rental
properties is available and calculation of the actual period of duration from lease
initiation to evacuation is difficult, it is extremely difficult to estimate a reasonableamount of cash flow and therefore they are not included in the above table.

Equity securities
Other
		Subtotal

Equity securities
Corporate bonds
Other
		Subtotal
Total

Fair value¥75,080
4,491
79,572¥223,945
10,103
234,048¥148,864
5,611
154,475$669,228
40,038709,266$1,996,123
90,0542,086,178$1,326,895
50,016
1,376,912

2,235
—
142
2,378
¥81,951

1,978
—
9
1,987
¥236,036

(257)
—
(133)
(390)
¥154,084

19,927—
1,272
21,200$730,466

17,634—82
17,716$2,103,895(2,293)—(1,190)(3,483)$1,373,428

Millions of yen

2016
Cost

Fair value

Unrealized
gain (loss)¥71,594
4,491
76,086¥188,127
11,130199,257¥116,532
6,638
123,171

2,218
—
142
2,361
¥78,447

1,789
—
9
1,798
¥201,056

(429)
—
(133)
(562)
¥122,609

Securities whose fair value exceeds their cost:
Equity securities
		Subtotal
Securities whose cost exceeds their fair value:
Corporate bonds

Millions of yen

Thousands of U.S. dollars

Due in one
year or lessDue after one year
through five years

Due after five years
through ten years

Due after
ten years

Due in one
year or lessDue after one year
through five years

Due after five years
through ten years

Due after
ten years¥243,681
43,823

—
—

—
—

—
—

$2,172,039
390,618

—
—

—
—

—
—

5
10,8002,420¥  214
1,200
—

¥110
—
—

—
—
—

44
96,265
21,571$ 1,907
10,696—$  980
—
—

—
—
—

Total

31
¥300,761

17¥1,431

374
¥484

—
—

283
$2,680,822

159$12,762

3,336$4,316——

As of March 31, 2016

Due in one
year or lessDue after one year
through five years

Due after five years
through ten years

Due after
ten years¥412,983
35,261

—
—

—
—

—
—

Notes and accounts receivable–trade

Fair value

Cost

Securities whose cost exceeds their fair value:

Equity securities

Cash on hand and in banks

Cost

Unrealized
gain (loss)

Unrealized
gain (loss)

Securities whose fair value exceeds their cost:

Other

Note C: The redemption schedule for receivables and marketable securities with maturities

As of March 31, 2017

Thousands of U.S. dollars

2017

2017

(i) Unlisted stocks *1

Millions of yen

Other		Subtotal
Total

Marketable securities and investment securities:
Held-to-maturity debt securities
National and local government bonds
Corporate bonds
Other
Other marketable securities with maturities:
Other

Millions of yen

Cash on hand and in banks
Notes and accounts receivable–trade

Proceeds from sales of securities classified as other securities totaled ¥1,417 million ($12,637 thousand) and ¥17,937 million for the years ended
March 31, 2017 and 2016, respectively. Gross realized gains were ¥1,013 million ($9,030 thousand) and ¥11,350 million for the years ended March
31, 2017 and 2016, respectively. The gross realized loss was ¥16 million for the year ended March 31, 2016.
The Company and its consolidated subsidiaries recognized ¥227 million ($2,027 thousand) and ¥0 million of impairment loss on investment
securities for the years ended March 31, 2017 and 2016, respectively.
Marketable debt securities classified as held-to-maturity securities at March 31, 2017 and 2016 were as follows:

Held-to-maturity debt securities

5
—
—

¥195
—
—

¥204
—
—

—
—
—

Debt securities whose fair value exceeds their cost:—¥448,249

108
¥303

9
¥213

—
—

		Subtotal

Corporate bonds
Other

Government bonds
Corporate bonds

Other marketable securities with maturities:
Other
Total

Government bonds
Millions of yen

Corporate bonds
Long-term borrowings
Total

Amortized cost

Fair value

Unrealized
gain (loss)

Amortized cost

Fair value

Unrealized
gain (loss)¥   400
100
501¥   414
100
515

¥ 13
0
13

$  3,573
896
4,470$  3,693
896
4,590

$120
0
120

—
11,924
2,685
14,610¥15,112—
11,916
2,683
14,599¥15,114

—
(8)
(2)
(10)
¥  2

—
106,290
23,940130,231$134,701—
106,21223,920130,133$134,724

—
(77)
(19)
(97)
$ 23

Debt securities whose cost exceeds their fair value:

Note D: The redemption schedule for bonds and long-term borrowings

As of March 31, 2017

Thousands of U.S. dollars

2017

Marketable securities and investment securities:
National and local government bonds

Millions of yen

Thousands of U.S. dollars

Due in one
year or lessDue after one
year throughtwo years

Due after two
years throughthree years

Due after three
years throughfour years

Due after four
years throughfive years

Due after
five years

Due in one
year or lessDue after one
year throughtwo years

Due after two
years throughthree years

Due after three
years throughfour years

Due after four
years throughfive years

Due after
five years¥ 85,075
149,281¥234,356¥ 66,162
145,123¥211,285¥ 75,000
233,323¥308,323¥ 51,550
133,175¥184,725¥ 65,000
107,816¥172,816¥  520,000
673,416¥1,193,416$  758,311
1,330,611$2,088,923$  589,736
1,293,548$1,883,284$668,508
2,079,717$2,748,226$  459,488
1,187,050$1,646,539$  579,374
961,015$1,540,389$ 4,634,994
6,002,465$10,637,459

Due in one
year or lessDue after one
year throughtwo years

Due after two
years throughthree years

Due after three
years throughfour years

Due after four
years throughfive years

Due after
five years¥ 78,000
163,651¥241,651¥ 85,000
142,678¥227,678¥ 65,000
141,166¥206,166¥ 75,000
157,002¥232,002¥ 50,000
115,642¥165,642¥  550,000
557,936¥1,107,936

Corporate bonds
Other
		Subtotal
Total

Millions of yen

As of March 31, 2016
Corporate bonds
Long-term borrowings
Total

74 

MITSUBISHI ESTATE CO., LTD.

Annual Report 2017 

75

FINANCIAL SECTION

Millions of yen

16 DERIVATIVES AND HEDGING ACTIVITIES

2016
Amortized cost

Fair value

Unrealized
gain (loss)

¥405
—
405

¥425
—
425

¥19
—
19

—
—
—
—
¥405

—
—
—
—
¥425

—
—
—
—
¥19

(1) Interest-related transactions
Millions of yen

Debt securities whose fair value exceeds their cost:
Government bonds
Corporate bonds
		Subtotal

2017

Debt securities whose cost exceeds their fair value:
Government bonds
Corporate bonds
Other
		Subtotal
Total

Thousands of U.S. dollars

Class of transactions

Subject to hedge accounting

Interest rate swap contracts
Fixed rate payment andfloating rate receipt

Long-term borrowingsInterest rate swap contracts by
short-cut methodFixed rate payment andfloating rate receipt

Long-term borrowings

Total

Notional
amountDue after
one year¥ 29,588¥ 29,588

264,042259,708¥293,631¥289,296

Due after
one year

Fair value¥122 $  263,735 $  263,735$1,093

Fair value*

Notional
amount2,314,897*¥122 $2,617,267 $2,578,632$1,0932,353,532

Millions of yen

2016

15 SUPPLEMENTAL CASH FLOW INFORMATIONThe reconciliation of cash and cash equivalents as of March 31, 2017 and 2016 was as follows:

Cash on hand and in banks
Time deposits with maturities of more than three months
Marketable securities with maturities of three months or less
Cash and cash equivalents

Millions of yen

Thousands of U.S. dollars

2017

2016

2017

¥243,681(605)
265¥243,341¥412,983(605)
14¥412,392$2,172,039(5,394)2,369$2,169,015

The major components of assets acquired and liabilities assumed of a consolidated subsidiary, which was acquired through a stock purchase,
as well as the reconciliation of the difference between the acquisition cost and the proceeds from the acquisition, were as follows:

Current assets
Fixed assets
Current liabilities
Fixed liabilities
Non-controlling interests
Gain on negative goodwill
Acquisition cost
Acquisition cost before obtaining control
Loss on step acquisition
Cash and cash equivalents of subsidiary
Proceeds from acquisition

Millions of yen

Thousands of U.S. dollars

2017

2016

2017

¥ 14,315
42,831(2,006)(17,734)(16,488)(12,702)
8,215(12,190)
6,431(2,752)¥   (295)

—
—
—
—
—
—
—
—
—
—
—

$ 127,602
381,778(17,884)(158,072)(146,973)(113,223)
73,227(108,656)
57,330(24,532)$  (2,631)

Class of transactions

Subject to hedge accounting

Interest rate swap contracts
Fixed rate payment andfloating rate receipt

Long-term borrowingsInterest rate swap contracts by
short-cut methodFixed rate payment andfloating rate receipt

Long-term borrowings

Total

Current assets
Fixed assets
Goodwill
Current liabilities
Fixed liabilities
Gain on negative goodwill
Acquisition cost
Acquisition cost before obtaining control
Gain on step acquisition
Cash and cash equivalents of subsidiary
Payments for acquisition

Millions of yen

Thousands of U.S. dollars

2016

2017

¥   3,226
184,115—(4,207)(126,331)(802)
56,000——(3,070)¥  52,929¥  1,169
22,974248(147)(19,398)
—
4,846
(703)
(95)
(1,006)¥  3,040$   28,758
1,641,101—(37,502)(1,126,051)(7,153)
499,153——(27,371)$  471,781

Due after
one year

Fair value¥ 30,634¥ 30,634¥(70)

193,903

189,757*¥224,537¥220,392¥(70)

The calculation method of fair value is based on data obtained from financial institutions.
* The estimated fair value of interest rate swap contracts is included in the estimated fair value of long-term borrowings and corporate bonds since amounts in such derivative
contracts accounted for by the short-cut method are handled together with long-term borrowings and corporate bonds that are subject to hedge accounting.

(2) Interest and currency-related transactions
Millions of yen

Thousands of U.S. dollars

2017Class of transactions

Subject to hedge accountingInterest rate and currency swap
contractsPayment in JPY andreceipt in USD
Floating rate payment andfixed rate receipt

Long-term borrowings

Total

Notional
amountDue after
one year

Fair value

Notional
amountDue after
one year

Fair value¥57,412¥57,412¥(5,381)$511,742$511,742$(47,971)¥57,412¥57,412¥(5,381)$511,742$511,742$(47,971)

Millions of yen

The major components of assets acquired and liabilities assumed of a consolidated subsidiary, which was acquired through a stock purchase,
as well as a reconciliation of the difference between the acquisition cost and the payment for the acquisition were as follows:
2017

Notional
amount2016
Class of transactions

Subject to hedge accountingInterest rate and currency swap
contractsPayment in JPY andreceipt in USD
Floating rate payment andfixed rate receipt

Long-term borrowingsInterest rate and currency swap
contractsPayment in GBP andreceipt in JPY
Floating rate payment andfixed rate receipt

Corporate bonds

Total

Notional
amountDue after
one year

Fair value¥49,400¥49,400¥(6,796)

8,000

—

(611)

¥57,400¥49,400¥(7,408)

The calculation method of fair value is based on data obtained from financial institutions.

76 

MITSUBISHI ESTATE CO., LTD.

Annual Report 2017 

77FINANCIAL SECTION

Impairment losses of the Company and its consolidated subsidiaries on fixed assets by reportable segment for the years ended March 31, 2017and 2016 were as follows:

17 SEGMENT INFORMATIONThe reportable segments of the Group are components for which
discrete financial information is available and whose operating results
are regularly reviewed by the Board of Directors and other committees
to make decisions about resource allocation and to assess performance. Business performances are aggregated according to businessareas that consist of multiple business groups and defined as organizational units having common business objectives and management
responsibilities within the Group, and such aggregated business areas
are disclosed as reportable segments.

The Company and its consolidated subsidiaries are primarily
engaged in the real estate business. Their business segments areclassified in terms of the nature of each operation or service andconsist of following segments: (1) Office Building Business; (2) Lifestyle
Property Business; (3) Residential Business; (4) International Business;(5) Investment Management Business; (6) Architectural Design andEngineering Business; (7) Hotel Business; (8) Real Estate Services
Business; and (9) Other businesses.

Millions of yen

2017
Reportable segments

Impairment loss

OfficeBuilding
Business

Lifestyle
Property
Business¥236—

Architectural
Investment
Design and
Residential International Management Engineering
Business
Business
Business
Business¥2,718¥8,110¥1,174—

Hotel
Business

Real Estate
ServiceBusiness

Subtotal

Other

Total

¥21

—

¥12,260—¥12,260

Eliminations
or corporate Consolidated—¥12,260

Thousands of U.S. dollars

Impairment loss

$2,106—$24,229$72,295$10,464

—

$188

—

$109,285—$109,285—$109,285
Millions of yen

2016
Reportable segments

The reportable segment information of the Company and its consolidated subsidiaries for the years ended March 31, 2017 and 2016 was
as follows:
Millions of yen

2 017
Reportable segments

OfficeBuilding
BusinessRevenue, operating
income, and assets byreportable segment
Revenue from:
External customers
Intersegment ortransfers
Total revenue
Segment income (loss)
Segment assets
Other items
Depreciation andamortization
Capital expenditures

Lifestyle
Property
Business

Architectural
Investment
Design and
Residential International Management Engineering
Business
Business
Business
Business

Hotel
Business

Real Estate
Services
Business

Subtotal

Other

Total

Eliminations
or corporate Consolidated

Impairment loss

OfficeBuilding
Business

Lifestyle
Property
Business——

Investment
Residential International Management
Business
Business
Business¥451—

Architectural
Design andEngineering
Business

Hotel
Business

Real Estate
Services
Business

Subtotal

Other

Total

—

¥35

—

¥1,347¥1,214¥2,561¥860

2017¥  476,828¥ 84,250¥407,220¥ 66,573¥ 20,790¥12,064¥33,067¥23,890¥1,124,684¥   720¥1,125,405—¥1,125,405

7,409
484,238
133,570¥3,445,008

4,705
88,95525,807¥484,292

630
407,850
19,253¥634,219(16)
66,55626,313¥541,888

532
21,3234,520¥106,990

7,244
19,309445¥27,358444
33,512
1,932¥28,842353
24,243
2,157¥25,70221,303
1,145,988
214,000¥5,294,302

3,517
4,237
289
¥12,649

24,8201,150,226
214,289¥5,306,951¥    (24,820)(24,820)(21,793)¥177,163—
1,125,405
192,495¥5,484,115

47,755¥  162,651

12,704¥ 59,054

3,144¥ 27,267

5,913¥ 39,724

4,216¥    201113¥   1821,478¥   734343¥   568

75,669¥  290,386

64¥   274

75,734¥  290,661

240¥  3,055

75,974¥  293,716

Reportable segments

Architectural
Design andEngineering
Business

Hotel
Business

Real Estate
Services
Business

Subtotal

Other

Total

¥ 1,963¥13,659

—
—

—
—

—
—

¥  5,473¥ 20,723¥ 0—¥  5,473¥ 20,723——¥  5,473¥ 20,723

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

¥111,259—¥111,259—¥111,259

OfficeBuilding
Business

Lifestyle
Property
Business

Balance of goodwill¥   409—¥    69—¥3,030¥7,064——Amortization ofnegative goodwill

—

—

—

Balance of negative
goodwill¥98,647¥12,611—Amortization of
goodwill

Investment
Residential International Management
Business
Business
Business

OfficeBuilding
Business

Segment income (loss)
Segment assets
Other items
Depreciation andamortization
Capital expenditures

Lifestyle
Property
Business

Investment
Residential International Management
Business
Business
Business

Architectural
Design andEngineering
Business

2017
Hotel
Business

Real Estate
Services
Business

Reportable segments

Subtotal

Other

Total

Eliminations
or corporate Consolidated$ 4,250,183$  750,962$3,629,738$  593,396$185,316$107,535$294,745$212,942$10,024,821$  6,422$10,031,244—$10,031,244

66,0484,316,231
1,190,570$30,706,908

41,939792,902230,029$4,316,714

5,617
3,635,356
171,614$5,653,085(149)
593,246
234,548$4,830,095

4,746
190,063
40,295$953,657

64,575
172,111
3,971$243,855

3,962
298,707
17,224$257,082

3,149
216,091
19,227$229,102

189,889
10,214,711
1,907,482$47,190,501

31,35037,772
2,577$112,747

221,240
10,252,484
1,910,059$47,303,249$ (221,240)—(221,240) 10,031,244(194,258)
1,715,800$1,579,140 $48,882,390

425,664$ 1,449,787

113,239$  526,382

28,024$  243,046

52,709$  354,084

37,585$  1,800

1,010$  1,630

13,177$  6,546

3,064$  5,070

674,476$ 2,588,348

577$  2,447

675,054$ 2,590,796

2,140$   27,231

Amortization of
goodwill
Balance of goodwill

Segment assets
Other items
Depreciation andamortization
Capital expenditures$    621—$27,008$62,972——

Hotel
Business

Real Estate
Services
Business

Subtotal

Other

Total

$ 17,504$121,749

—
—

—
—

—
—

$ 48,784$184,721$ 0—$ 48,784$184,721——

Eliminations
or corporate Consolidated$ 48,784$184,721

—

—

—

—

—

—

—

—

—

—

—

—

—

$879,289$112,415

—

—

—

—

—

—

$991,705—$991,705—$991,705
Millions of yen

OfficeBuilding
Business

Segment income (loss)$  3,649—

Architectural
Design andEngineering
Business

Investment
Residential International Management
Business
Business
Business

2016

677,194$ 2,618,027

Reportable segments

Total revenue

Lifestyle
Property
BusinessBalance of negative
goodwill

Reportable segments

Lifestyle
Property
Business

Investment
Residential International Management
Business
Business
Business

Architectural
Design andEngineering
Business

Hotel
Business

Real Estate
Services
Business

Subtotal

Other

Total

Hotel
Business

Real Estate
Services
Business

Subtotal

Other

Total

¥ 2,386¥16,857

—
—

—
—

—
—

¥  6,144¥ 26,952——¥  6,144¥ 26,952——¥  6,144¥ 26,952

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

¥110,780—¥110,780—¥110,780

Lifestyle
Property
Business

Balance of goodwill¥   409—¥   318—¥ 3,030¥10,094——Amortization ofnegative goodwill

—

—

—

Balance of negative
goodwill¥98,238¥12,542—Amortization of
goodwill
Eliminations
or corporate Consolidated

Architectural
Design andEngineering
Business

OfficeBuilding
Business

2 016

Intersegment ortransfers

OfficeBuilding
BusinessAmortization ofnegative goodwill

Millions of yen

Revenue, operating
income, and assets byreportable segment
Revenue from:
External customers

Eliminations
or corporate Consolidated

Thousands of U.S. dollars

Reportable segments

Intersegment ortransfers¥2,561

The following tables present the amortization and balance of goodwill as of and for the years ended March 31, 2017 and 2016 byreportable segment:

2 017

Total revenue—

Millions of yen

Thousands of U.S. dollars

Revenue, operating
income, and assets byreportable segment
Revenue from:
External customers

Eliminations
or corporate Consolidated

Investment
Residential International Management
Business
Business
Business

Eliminations
or corporate Consolidated¥  415,050¥ 84,130¥344,064¥ 75,578¥ 24,851¥13,020¥32,681¥19,354¥1,008,732¥   675¥1,009,408—¥1,009,408

7,298
422,349
108,940¥3,208,271

2,438
86,56925,842¥372,779

1,161
345,226
18,035¥748,400

377
75,956
19,421¥515,844

143
24,994
5,082¥141,126

8,259
21,2791,754¥27,474407
33,0891,490¥28,417461
19,815602¥23,608

20,547
1,029,280
181,170¥5,065,923

3,206
3,882
(37)
¥23,501

23,754
1,033,162
181,133¥5,089,424¥(23,754)(23,754)(14,933)¥222,415—
1,009,408
166,199¥5,311,840

Gain on negative goodwill
The Company recorded a gain on negative goodwill of ¥12,702 million ($113,223 thousand) in the Other businesses segment for the year ended
March 31, 2017.

43,752¥  175,904

12,288¥ 40,272

3,085¥ 29,144

7,033¥ 35,472

5,413¥    378

126¥   116

1,527¥ 1,295284¥   433

73,512¥  283,017

90¥    2973,602¥ 283,046

642¥    369

74,245¥  283,416

Products and service information
Refer to reportable segment information.
Geographic area information
Geographic area information has been omitted since revenue from external customers in Japan and property and equipment located in Japanaccounted for more than 90% of revenue from operations in the consolidated income statement and property and equipment on the consolidated balance sheet, respectively.
Major customer information
The Company does not have any major customers whose share of revenue from operations accounted for more than 10% of revenue fromoperations shown in the consolidated income statement. Accordingly, major customer information has been omitted.

78 

MITSUBISHI ESTATE CO., LTD.

Annual Report 2017 

79FINANCIAL SECTION

18 RENTAL PROPERTIES

19 ASSET RETIREMENT OBLIGATIONSThe Company and some of its consolidated subsidiaries own office buildings for lease, retail facilities for lease, and others in Tokyo and otherareas including overseas countries (the United States and the United Kingdom, etc.) for the purpose of obtaining revenue from leases.
Some office buildings for lease in Japan are regarded as real estate including space used as rental properties since they are used by theCompany and some of its consolidated subsidiaries.
The carrying value on the consolidated balance sheet as of March 31, 2017 and the fair value of these rental properties and real estate including space used as rental properties were as follows:
Millions of yen

2017

Rental properties
Real estate including space used asrental properties

Fair value
As ofMarch 31, 2017

¥6,517,887 $29,655,981

Net change

As ofMarch 31, 2017

¥3,327,104¥317,832¥3,644,937

182,876647

183,523

274,081

1. Outline of asset retirement obligations

Asset retirement obligations include obligations of restoration related
to leasehold and rental contracts.

Thousands of U.S. dollars

Carrying value
As ofApril 1, 2016(1) Asset retirement obligations presented on the consolidatedbalance sheet

As ofApril 1, 2016

Net change

Carrying value

Fair value

As ofMarch 31, 2017

As ofMarch 31, 2017

2. Calculation method for asset retirement obligations

Asset retirement obligations are calculated based on the remaining
contract years as an expected use period with a discount rate
between 0.0% and 2.3%.

$2,832,987 $32,488,968 $58,096,870

1,630,056

5,771

1,635,828

2,443,007

3. C hanges in asset retirement obligations during the years ended March
31, 2017 and 2016 were as follows:
Millions of yen

Thousands of
U.S. dollars

2017

2016

2017

1. The carrying value represents the acquisition cost less accumulated depreciation and accumulated impairment loss.
2. The fair value is based on the following:(1) The fair value of real estate in Japan is calculated by the Company based mainly on the Real Estate Appraisal Standards.
(2) The fair value of real estate in overseas countries is appraised principally by local real estate appraisers.

Balance at the beginningof the year

¥2,689¥1,122$23,975

The carrying value on the consolidated balance sheet as of March 31, 2016 and the fair value of these rental properties and real estate including
space used as rental properties were as follows:

Increase due to the acquisitionof property and equipment

17

1,586

158

Adjustments due to the elapseof time

35

24

318

Decrease due to the fulfillmentof asset retirement obligations

(7)

(43)

(69)

Millions of yen

2016

Rental properties
Real estate including space used asrental properties

Carrying value

Fair value

Net change

As ofMarch 31, 2016

As ofMarch 31, 2016

¥3,135,413¥191,691¥3,327,104¥5,792,464

182,779

96

182,876

286,600

As ofApril 1, 2015

Other
Balance at the end of the year

200

—

1,790

¥2,936¥2,689$26,173(2) Asset retirement obligations not recognized on the consolidatedbalance sheet
As stated below, certain obligations are excluded from recognition ofasset retirement obligations.

1 The carrying value represents the acquisition cost less accumulated depreciation and accumulated impairment loss.
2. The fair value is based on the following:(1) The fair value of real estate in Japan is calculated by the Company based mainly on the Real Estate Appraisal Standards.
(2) The fair value of real estate in overseas countries is appraised principally by local real estate appraisers.
The income or loss from rental properties and real estate including space used as rental properties for the years ended March 31, 2017 and2016 were as follows:
Millions of yen

2017

Rental properties
Real estateincluding spaceused as rental
properties

Lease
income*Lease cost

Lease
income(loss), net¥436,705¥280,387¥156,318

Other, net

Leaseincome*Lease cost¥(16,194)¥413,622¥280,688¥132,9342)	Obligation of restoration based on some real estate rental
agreements
	For some retail facilities, the Company has an obligationof restoration at the termination of leasehold rental agreements.
However, the timing to fulfill the obligation is uncertain since it ispractically possible to continue to use those facilities by re-signing
contracts and some contracts set forth a special provision to reduce
the possibility to fulfill the obligation. Furthermore, given its
business strategies and the current business environment, theCompany intends to continue its operation and not to fulfill theobligation. Although the Company made the best estimation
taking into account all the evidence available as of March 31, 2017,
these obligations are excluded from recognition of asset retirement
obligations since the probability of the obligations in terms ofscope and amount could not be reasonably estimated.

Thousands of U.S. dollars

2016
Lease
income(loss), net1)	Obligation to remove asbestos that is used for some properties
and equipments in a particular way required by the Ordinance on
Preventing Asbestos Hazards
	For such properties, the Company has an obligation to remove
asbestos at demolition of buildings. However, no demolition has
taken place in the past other than those related to redevelopment
or other projects involving many other business associates. It istherefore difficult to reasonably estimate the timing to fulfill suchobligation based on the physical useful life of the assets caused byaging and it is impossible to estimate the timing without specificbusiness plans. Although the Company has been voluntarily
conducting asbestos removal work when that is feasible due tosuch as termination of tenancy, it is impractical to make a reasonable estimation of progress of such voluntary removal work basedon the actual record of the tenancy termination and of the remaining amount of asbestos at demolition. Moreover, it is difficult todistinguish costs of asbestos removal from total costs of demolition. Although the Company made the best estimation taking into
account all the evidence available as of March 31, 2017, theseobligations are excluded from recognition of asset retirement
obligations since the probability of obligations in terms of scope
and amount was not reasonably estimated.

2017

20 RELATED PARTY TRANSACTIONS

Lease
income(loss), net

Other, net¥(9,997) $3,892,555 $2,499,219 $1,393,336$(144,351)

Millions of yen

Thousands of U.S. dollars(5,174)

Transaction
amountBalanceoutstandingat year-end

Transaction
amountBalanceoutstandingat year-end

¥17

—

$154

—

Other, net

Leaseincome*Lease cost

The Company has related party transactions with key management personnel of the Company and major individual shareholders.
The corresponding balances as of March 31, 2017 and 2016 and the amounts of these transactions for the years then ended were as follows:
2017

15,996

11,522

4,474

(580)

15,90912,625

3,283

(340)

142,586

102,703

39,882* Lease income excludes that from real estate including space used as rental properties that was used by the Company and some of its consolidated subsidiaries for leasing service
and operating management.

Type

Director

Name

Occupation

Naoto Aiba

Representative
executive officerof the Company

Ownership ratioof voting shares

Relationship withthe related party

Nature oftransaction

0.00%

Contract for
construction of
housing and otherConstruction of
housing

1. Transaction amounts do not include consumption tax.
2. Transaction amounts are determined in consideration with market prices, the same as general transactions.
Millions of yen

2016
Type

Director

Name

Occupation

Hirotaka Sugiyama

Representative
Director of theCompany

Ownership ratioof voting shares

Relationship withthe related party

Nature oftransaction

0.00%

Contract for
construction of
housing and otherConstruction of
housing

Transaction
amountBalanceoutstandingat year-end¥17—

1. Transaction amounts do not include consumption tax.
2. Transaction amounts are determined in consideration with market prices, the same as general transactions.
3. Under the amendments of the Articles of Incorporation, approved by the Ordinary General Meeting of Shareholders held on June 29, 2016, the Company adopted a “Company
with Nomination Committee, etc.,” structure on the same date, and the occupation was changed from ”Representative director of the Company” to ”Representative executive
officer of the Company.”

80 

MITSUBISHI ESTATE CO., LTD.

Annual Report 2017 

81

FINANCIAL SECTION

21 OTHER COMPREHENSIVE INCOME

22 BUSINESS COMBINATIONS

The reclassification and tax effects allocated to each component of other comprehensive income for the years ended March 31, 2017 and 2016
were as follows:
Millions of yen

Thousands of U.S. dollars

2017

2016

2017

$ 289,028

Unrealized holding gain (loss) on securities:¥ 32,426¥(46,472)

Reclassification adjustments for gains and losses included in net income(3,162)(11,315)(28,189)

Amount before tax effects

29,263(57,788)

260,838

Amount arising during the year

Tax effects(9,560)20,122(85,212)

Unrealized holding gain (loss) on securities

19,703(37,665)

175,625

Amount arising during the year

(80)

(416)

(714)

Reclassification adjustments for gains and losses included in net income

307

399

2,738

Amount before tax effects

227

(16)

2,023

Tax effects

(67)

21

(603)

Deferred gain (loss) on hedging instruments

159

4

1,419

3,363

15,32029,978Deferred gain (loss) on hedging instruments:

Revaluation reserve for land:Tax effects
Foreign currency translation adjustments:
Amount arising during the year

(27,340)(5,904)(243,698)

Amount before tax effects(27,340)(5,904)(243,698)

Tax effects
Foreign currency translation adjustments

458

94

4,083

(26,882)(5,810)(239,615)

9,888(25,173)

88,139Retirement benefits liability adjustments:
Amount arising during the year
Reclassification adjustments for gains and losses included in net income

4,434

(798)

39,529Amount before tax effects

14,323(25,972)

127,668

Tax effects(4,230)8,064(37,708)

Retirement benefits liability adjustments

10,092(17,907)

89,960Share of other comprehensive income of companies accounted forby the equity method:Amount arising during the year
Total other comprehensive income

(996)

(586)

(8,882)¥  5,439¥(46,644)$  48,487

1. Acquisitions
Consolidation of DAINIPPON ENTERPRISE INC.
(1) Outline of business combinationi. Name and business of acquired entity
			 Name:
DAINIPPON ENTERPRISE INC.
			 Business: Holding of real estateii. Objective of acquisition
			To enhance the Company’s portfolio value by purchasing thecommon stocks of the real estate firmiii. Date of acquisition
			 July 5, 2016
iv. Legal form of acquisition
			 Purchase of common stocks
v. Name of acquired entity subsequent to acquisition
			 DAINIPPON ENTERPRISE INC.
vi. Ratio of voting rights acquired
			 100.0%
vii.	Determination of acquirer
As a result of the purchase of the common stocks, the Company
obtained substantial control of DAINIPPON ENTERPRISE INC.
(2) Period for which operating results of acquiree were included in the
consolidated financial statements of the Company
From July 1, 2016 to March 31, 2017(3) Consideration transferred for the acquisition

Cash on hand and in banks
Acquisition cost

Millions of yen

Thousands of U.S. dollars¥56,000¥56,000$499,153$499,153(5) Amount of negative goodwill recorded and its cause
i. Amount: ¥802 million ($7,153 thousand)ii. Cause:	The consideration transferred was less than the fairvalue of the net assets acquired.
(6) Assets acquired and liabilities assumed at the acquisition date

Fixed assets
Total assets
Current liabilities
Fixed liabilities
Total liabilities(2) Period for which operating results of acquiree were included in the
consolidated financial statements of the Company
From July 1, 2016 to March 31, 2017(3) Consideration transferred for the acquisition

Fair value of common stocks
already held before theacquisition dateCash on hand and in banks
Acquisition cost

Millions of yen

Thousands of U.S. dollars¥  3,226
184,115¥187,341$   28,758
1,641,101$1,669,860

Millions of yen

Thousands of U.S. dollars¥  4,207
126,331¥130,539$   37,502
1,126,051$1,163,554(7) Pro forma impact in the consolidated statements of income assuming the business combination was completed at the beginning of
the fiscal year
	Omitted due to immateriality. The pro forma impact was not
subject to audit certification.
Consolidation of Tokyo Ryutsu Center Inc.
(1) Outline of business combinationi. Name and business of acquired entity
			 Name:
Tokyo Ryutsu Center Inc.
			 Business:	Leasing, operation, and management of logistic
facilities and offices

MITSUBISHI ESTATE CO., LTD.

Annual Report 2017 

Thousands of U.S. dollars¥5,7582,457¥8,215$51,326
21,901$73,227(5) Loss on step acquisitions due to difference between acquisition cost
and total amount of acquisition cost for each transaction duringacquisition¥6,431 million ($57,330 thousand)(6) Amount of negative goodwill recorded and its cause
i. Amount: ¥12,702 million ($113,223 thousand)ii.	Cause:	The consideration transferred was less than the fairvalue of the net assets acquired.
(7) Assets acquired and liabilities assumed at the acquisition dateCurrent assets
Fixed assets
Total assets
Current liabilities

82 Millions of yen(4) Major acquisition-related cost
Omitted due to immateriality(4) Major acquisition-related cost
Omitted due to immateriality

Current assets

ii. Objective of acquisition
			To pursue further growth of logistics facility business throughstrengthening collaboration by purchasing the common stocksof Tokyo Ryutsu Center Inc., which was an equity-method
affiliate of the Company.
iii. Date of acquisition
			 August 15, 2016
iv. Legal form of acquisition
			 Purchase of common stocks
v. Name of acquired entity subsequent to acquisition
			 Tokyo Ryutsu Center Inc.
vi. Change in voting rights ratio
			 Before the acquisition:
39.20%
			 After the acquisition:
55.92%
vii. Determination of acquirer			As a result of the purchase of the common stocks, the Company
obtained the substantial control of Tokyo Ryutsu Center Inc.

Fixed liabilities
Total liabilities

Millions of yen

Thousands of U.S. dollars¥14,315
42,831¥57,147$127,602
381,778$509,380

Millions of yen

Thousands of U.S. dollars¥ 2,006
17,734¥19,740$ 17,884
158,072$175,956(8) Pro forma impact in the consolidated statements of income assuming the business combination was completed at the beginning of
the fiscal year
	Omitted due to immateriality. The pro forma impact was not
subject to audit certification.

83

FINANCIAL SECTION

Independent Auditor’s Report
2. Common control transaction(1) Outline of the transaction
i. Targeted business			Co-ownership interest of Sanno Park Tower among other things
owned by DAINIPPON ENTERPRISE INC.
ii. Date of transaction
			 November 25, 2016
iii. Legal form of transaction			Distributed the co-ownership interest of Sanno Park Tower
among other things owned by DAINIPPON ENTERPRISE INC.
to the Company as property dividend.
iv. Name of combined entity subsequent to transaction
			 Mitsubishi Estate Co., Ltd.
v. Other matters with regard to the transaction
			To enhance the Company’s portfolio value by distributing theco-ownership interest of Sanno Park Tower among other things
owned by DAINIPPON ENTERPRISE INC.
(2) Outline of accounting treatment
	The transaction was treated as a common control transaction inaccordance with the “Revised Accounting Standard for Business
Combinations” (ASBJ Statement No. 21 of September 13, 2013)
and the “Revised Guidance on Accounting Standard for Business
Combinations and Accounting Standard for Business Divestitures”(ASBJ Guidance No. 10 of September 13, 2013).
3. Business divestiture(1) Outline of business divestiture
i. Name of company divested
			 Nippon Themepark Development Co., Ltd.
ii. Divested business			Consolidated subsidiary: Towa Nasu Resort Co., Ltd.
			Business: Management of amusement park and hotel,
marketing, and operation of holiday villa areaiii. Objective of business divestiture			Mitsubishi Jisho Residence Co., Ltd., a subsidiary of theCompany, is promoting “Clarifying and accelerating selection
and concentration of business” and established a policy
whereby it intends to withdraw from non-core businesses. The
business owned by Towa Nasu Resort Co., Ltd., a former
subsidiary of Mitsubishi Jisho Residence Co., Ltd., is considered
to be a non-core business. As a result of negotiations withNIPPON PARKING DEVELOPMENT CO., LTD., the parent
company of the purchaser, both parties agreed on the terms of
the sale and purchase and subsequently Mitsubishi Jisho
Residence Co., Ltd., transferred all of its shares of Towa Nasu
Resort Co., Ltd.
iv. Date of business divestiture
			 May 31, 2016v. Other matters with regard to the transaction including legal form
			 A cash consideration was received for transferred shares

84 (2) Outline of accounting treatmenti. Amount of loss on transfer recorded
			 Amount: ¥10,062 million ($89,684 thousand)ii. Appropriate book value of assets and liabilities transferred

Current assets
Fixed assets
Total assets
Current liabilities
Fixed liabilities
Total liabilities

Millions of yen

Thousands of U.S. dollars¥ 4,972
5,848¥10,821$44,326
52,127$96,454

Millions of yen

Thousands of U.S. dollars

¥524
234
¥759

$4,6762,093$6,769iii. Accounting treatment
			The difference between shareholders’ equity of Towa Nasu
Resort Co., Ltd., on a consolidated basis and the fair value ofproceeds received, less other associated expenses related tothe transferred business, in the amount of ¥10,570 million wasrecorded as “Provision for business transfer” in “Other, net” inthe fiscal year ended March 31, 2016.
(3) Reportable segment in which the divested business was included
Residential Business segment(4) Estimated operating performance of divested business included in
the consolidated statements of income for the fiscal year ended
March 31, 2017
Revenue from operations: ¥983 million ($8,763 thousand)Operating loss:¥104 million ($935 thousand)

MITSUBISHI ESTATE CO., LTD.

Annual Report 2017 

85

CORPORATE DATA

Principal Mitsubishi Estate Group Companies
Consolidated subsidiary

Affiliate accounted for by the equity method

OFFICE BUILDING BUSINESS

Address

Phone

Share ofvotingrights (%)

Business activities

Address

Phone

Business activities

Share ofvotingrights (%)

OthersBuilding Management Business
Mitsubishi Jisho Property
Management Co., Ltd.

Marunouchi Nakadori Building, 2-3, Marunouchi 2-chome, +81-3-3287-4111
Chiyoda-ku, Tokyo 100-0005

Comprehensive building
operation and management

100.0

MEC Eco LIFE Co., Ltd.

5F Shinko Building, 6-8, Kanda-Ogawamachi 3-chome,
Chiyoda-ku, Tokyo 101-0052+81-3-3518-8461

Research and creation of environmental
design proposals

100.0

Hokuryo City Service Co., Ltd.

Hokkaido Building, 4-1, Kita 2-jou Nishi, Chuo-ku,
Sapporo, Hokkaido 060-0002+81-11-242-7411

Management and operation of buildings,
residences, and sporting facilities

100.0

Mitsubishi Jisho House Net Co., Ltd.

Shinjuku Front Tower, 21-1, Kita-Shinjuku 2-chome,
Shinjuku-ku, Tokyo 169-0074+81-3-6908-5560

Purchase, sales, and leasing brokerage of homes
for individuals, leasing management

100.0

Yuden Building Kanri Co., Ltd.

Yurakucho Denki Building, 7-1, Yurakucho 1-chome,
Chiyoda-ku, Tokyo 100-0006+81-3-3211-7833

Operation and management of the
Yurakucho Denki Building

62.5

Ryoei Life Service Co., Ltd.

Royal Life Okusawa, 33-13, Okusawa 3-chome,
Setagaya-ku, Tokyo 158-0083+81-3-3748-2650

Management of commercial nursing homes

85.0

Nan Shan Plaza Property Management
Co., Ltd.

130-3, Songren Road, Xinyi District, Taipei City,
11058 Taiwan+886-2-2723-8009

Property management of Nan Shan Plaza

70.0

Tsunagu Network Communications, Inc.

Shin-Otemachi Building, 2-1, Otemachi 2-chome,
Chiyoda-ku, Tokyo 100-0004+81-3-4477-2000

Internet connection services for housing complexes

20.0Sunshine City Corporation

World Import Mart Building, Sunshine City, 1-1,
Higashi-Ikebukuro 3-chome, Toshima-ku, Tokyo 170-8630+81-3-3989-3321

Management of Sunshine City andother buildings

63.2

Rockefeller Group Inc.

1221 Avenue of the Americas, New York, New York
10020-1095, U.S.A.

+1-212-282-2000

Real estate operations

100.0

Tokyo Kotsu Kaikan Co., Ltd.

Tokyo Kotsu Kaikan, 10-1, Yurakucho 2-chome,
Chiyoda-ku, Tokyo 100-0006+81-3-3212-2931

Management of Tokyo Kotsu Kaikan andother buildings

50.0

Mitsubishi Estate New York Inc.

1221 Avenue of the Americas, New York, New York
10020-1095, U.S.A.

+1-212-698-2200

Real estate operations in the United States

100.0

Mitsubishi Estate London Limited

5 Golden Square, London, W1F 9HT, U.K.

+44-20-7292-3180

Real estate operations in Europe

100.0

Sanno Grand Building, 14-2, Nagatacho 2-chome,
Chiyoda-ku, Tokyo 100-0014+81-3-3504-0610

Operation and management of building garages
and sale of various gasoline products

54.9

Mitsubishi Estate Asia Pte. Ltd.

138 Market Street, #27-03 CapitaGreen,
Singapore 048946+65-6576-5790

Real estate operations in Asia

100.0

Mitsubishi Estate (Shanghai) Ltd.

1805 Room Raffles City, 268 Xizang Middle Road,
Shanghai 200001, P.R.C.

+86-21-6340-4000

Real estate business in China

100.0(Outside the scope of consolidation)(Outside the scope of consolidation)

INTERNATIONAL BUSINESS

Building Leasing Business

Parking BusinessTokyo Garage Co., Ltd.

District Heating and Cooling Business
Marunouchi Heat Supply Co., Ltd.

Marunouchi Kitaguchi Building, 6-5, Marunouchi 1-chome, +81-3-3287-2288
Chiyoda-ku, Tokyo 100-0005

Cooling and heating supply businessin the Marunouchi, Otemachi, Yurakucho,
and other districts

64.2

Ikebukuro District Heating
and Cooling Co., Ltd.

World Import Mart Building, Sunshine City, 1
Higashi-Ikebukuro 3-chome, Toshima-ku,
Tokyo 170-8630+81-3-3988-6771

Cooling and heating supply businessin the Higashi-Ikebukuro district

68.0

O.A.P. D.H.C. Supply Co., Ltd.

OAP Tower, 8-30, Tenmabashi 1-chome, Kita-ku, Osaka,
Osaka Prefecture 530-6004+81-6-6881-5170

Cooling and heating supply businessin the Osaka OAP district

Minato Mirai 21 D.H.C. Co., Ltd.

1-45, Sakuragicho 1-chome, Naka-ku, Yokohama,
Kanagawa Prefecture 231-0062+81-45-221-0321

Shin Kokusai Building, 4-1, Marunouchi 3-chome,
Chiyoda-ku, Tokyo 100-0005+81-3-3214-4881

Mitsubishi Jisho Investment Advisors, Inc.

Marunouchi 2-chome Building, 5-1, Marunouchi
2-chome, Chiyoda-ku, Tokyo 100-0005+81-3-3218-0031

Specialist real estate investment management services(real estate investment advisory and other services)

100.0

35.0

Japan Real Estate AssetManagement Co., Ltd.

Shin-Tokyo Building, 3-1, Marunouchi 3-chome,
Chiyoda-ku, Tokyo 100-0005+81-3-3211-7921

Investment corporation asset management

90.0

Cooling and heating supply businessin the Yokohama Minato Mirai district

29.6

TA Realty LLC

28 State Street, Boston, MA 02109, U.S.A.

+1-617-476-2700

Investment management business in the United States

70.0

Europa Capital LLP

15 Sloane Square, London SW1W 8ER, U.K.

+44 - 20-7881-6800

Investment management business in Europe

82.6

80 Raffles Place, No. 18-01, UOB Plaza 1,
Singapore 048624

Investment management business in Asia andOceania

77.8

51.0

Pan Asia Realty Advisors (Singapore)
Pte. Ltd.

+65-6416-7888

Dark fiber leasing and data center housingbusinesses in the Marunouchi and Otemachi
districts

OthersMarunouchi Direct Access Limited

ARCHITECTURAL DESIGN & ENGINEERING BUSINESSLIFESTYLE PROPERTY BUSINESS
Mitsubishi Jisho RetailManagement Co., Ltd.

7-1, Daiba 1-chome, Minato-ku, Tokyo 135-8707+81-3-5579-6671

Operation and management ofcommercial facilities

100.0

Mitsubishi Estate·Simon Co., Ltd.

Otemachi Financial City South Tower, 9-7,
Otemachi 1-chome, Chiyoda-ku, Tokyo 100-0004+81-3-3275-5252

Development, ownership, and operation of
PREMIUM OUTLETS® malls

60.0

Yokohama Sky Building Co., Ltd.

19-12, Takashima 2-chome, Nishi-ku, Yokohama,
Kanagawa Prefecture 220-0011+81-45-441-1221

Leasing of the Sky Building andother properties

54.4

Tokyo Ryutsu Center Inc.

1-1, Heiwajima 6-chome, Ota-ku, Tokyo 143-0006+81-3-3767-2111

Leasing and operating management of logistics
and office buildings

56.2

RESIDENTIAL BUSINESS
Residential Development and Sales Business
Mitsubishi Jisho Residence Co., Ltd.

Otemachi Building, 6-1, Otemachi 1-chome,
Chiyoda-ku, Tokyo 100-8189+81-3-3287-8800

Mitsubishi Estate Home Co., Ltd.

Kokusai-Shin-Akasaka Building Higashi-kan,
14-27, Akasaka 2-chome, Minato-ku, Tokyo 107-0052

Mitsubishi Estate Housing
Components Co., Ltd.
Prime Truss Co., Ltd.

INVESTMENT MANAGEMENT BUSINESSReal estate development, sales, leasing,and management

100.0+81-3-6887-8200

Design and construction of single-unit homes
and housing complexes, renovation of homes
and retail shops

100.0

228-4, Shinminato, Mihama-ku, Chiba,
Chiba Prefecture 261-0002+81-43-242-9031

Manufacture, processing,and sale of construction materials

91.7

15-12, Kiba 2-chome, Koto-ku, Tokyo 135-0042+81-3-3643-3310

Manufacture and sale of housing
construction materials

20.0

Mitsubishi Jisho Sekkei Inc.

Marunouchi 2-chome Building, 5-1, Marunouchi
2-chome, Chiyoda-ku, Tokyo 100-0005+81-3-3287-5555

Construction and civil engineering
design administration

100.0

MEC Design International Corporation

Inui Building Kachidoki, 13-1, Kachidoki 1-chome,
Chuo-ku, Tokyo 104-0054+81-3-6704-0100

Interior design administration and construction,
manufacture, and sale of furniture and household items

100.0Royal Park Hotels and Resorts Co., Ltd.

Otemachi Building, 6-1, Otemachi 1-chome,
Chiyoda-ku, Tokyo 100-0004+81-3-3211-6180

Comprehensive supervision and managementof hotel business

100.0

Yokohama Royal Park Hotel Co., Ltd.

Yokohama Landmark Tower, 2-1-3, Minato Mirai 2-chome, +81-45-221-1111
Nishi-ku, Yokohama, Kanagawa Prefecture 220-8173

Operation of Yokohama Royal Park Hotel

100.0

Tohoku Royal Park Hotel Co., Ltd.

2-1, Teraoka 6-chome, Izumi-ku, Sendai,
Miyagi Prefecture 981-3204+81-22-377-1111

Operation of Sendai Royal Park Hotel

100.0

Royal Park Hotel Management Co., Ltd.

Otemachi Building, 6-1, Otemachi 1-chome,
Chiyoda-ku, Tokyo 100-0004+81-3-5224-6200

Operation of limited-service hotels

100.0Royal Park Hotel Co., Ltd.

1-1, Kakigaracho 2-chome, Nihonbashi,
Chuo-ku, Tokyo 103-8520+81-3-3667-1111

Management and Operation of Royal Park Hotel

55.7

Shin-Otemachi Building, 2-1, Otemachi 2-chome,
Chiyoda-ku, Tokyo 100-8113+81-3-3510-8011

Real estate brokerage, leasing management, parking
management, and state appraisal

100.0

MEC Human Resources, Inc.

Otemachi Building, 6-1, Otemachi 1-chome,
Chiyoda-ku, Tokyo 100-0004+81-3-3212-8674

Human resource-related services

100.0

HOTEL BUSINESS

Custom-Built Housing

Residence Management Business

REAL ESTATE SERVICES BUSINESS
Mitsubishi Real Estate Services Co., Ltd.

OTHERS

Mitsubishi Jisho Community
Holdings Co., Ltd.

6-1, Sanban-cho, Chiyoda-ku, Tokyo 102-0075+81-3-3556-3888

Business management and operations related
to the condominium management business

71.5

MEC Information Development Co., Ltd.

Otemachi Building, 6-1, Otemachi 1-chome,
Chiyoda-ku, Tokyo 100-0004+81-3-3214-9300

Development and management of
information systems and software

100.0

Mitsubishi Jisho Community Co., Ltd.

6-1, Sanban-cho, Chiyoda-ku, Tokyo 102-0075+81-3-5213-6100

Overall condominium and building management,
renovations, and related businesses

100.0

Keiyo Tochi Kaihatsu Co., Ltd.

Shin-Tokyo Building, 3-1, Marunouchi 3-chome,
Chiyoda-ku, Tokyo 100-0005+81-3-3212-0555

Real estate leasing

66.7

Izumi Park Town Service Co., Ltd.

7-2, Takamori, Izumi-ku, Sendai,
Miyagi Prefecture 981-3203+81-22-378-0022

Comprehensive managementof Izumi Park Town

100.0

Marunouchi Hotel Co., Ltd.

6-3, Marunouchi 1-chome, Chiyoda-ku,
Tokyo 100-0005+81-3-3217-1111

Management of the Marunouchi Hotel

31.4

MEC Urban Resort Tohoku Co., Ltd.

1-1, Akedori 1-chome, Izumi-ku, Sendai,
Miyagi Prefecture 981-3206+81-22-377-3136

Operation and management of Izumi Park
Town Golf Club and other properties

100.0

Higashinihon Kaihatsu Co., Ltd.

1442-23, Yosawa Oyamacho, Sunto-gun,Shizuoka Prefecture 410-1326+81-550-78-3211

Management of the Higashi Fuji Country Club,
Fuji International Golf Club, and other properties

100.0

Sakura Golf Development Co., Ltd.

670 Soshiyama, Uchida, Sakura, Chiba Prefecture 285-0077+81-43-498-6630

Management of Asakura Golf Club

49.0

Recreational Facilities

86 

MITSUBISHI ESTATE CO., LTD.

Note: Percentage of voting rights held is as of March 31, 2017.

Annual Report 2017 

87

CORPORATE DATA

Corporate History

Organization

History

The Marunouchi site purchased by Mitsubishi Company fromthe Japanese government.

1890

Mitsubishi Goshi Kaisha (limited partnership) established. Achieved further
expansion of business.

1893

Mitsubishi Estate Company, Limited, established with paid-in capital totaling¥15 million, with the ownership of the Marunouchi Building and site, as well as
business rights for buildings and land within the Marunouchi area, transferredfrom Mitsubishi Goshi Kaisha.

Completed Mitsubishi Ichigokan, offering the first Western-style officearchitecture in Marunouchi.

1923

Marunouchi Building completed in front of Tokyo Station.
(Asset Management)
Office Building Planning Department

1959
1962

Shin-Marunouchi Building completed.

1972

Branches established in Sapporo, Sendai, Nagoya, and Osaka. Strengthened
business in major Japanese cities.

1973

Nagoya Dai-Ichi Hotel opened (Hotel Business launched).

1983

Hokkaido Building completed.

Executive Committee
Asset Management Committee

Tenjin MM Building (IMS) opened in Fukuoka City.
Royal Park Hotel in Hakozaki, Tokyo, opened.
Hiroshima Park Building completed.

Yokohama Landmark Tower completed. Yokohama Royal Park Hotel opened.

1995
1996

2004

Marunouchi Oazo opened.

2005

Tokyo Building opened.

2007

Shin-Marunouchi Building opened.
The Peninsula Tokyo opened.

Lifestyle Property Business Group
Lifestyle Property Business Planning Department

2009

Marunouchi Park Building and Mitsubishi Ichigokan completed.

2010

Mitsubishi Ichigokan Museum opened.

Residential Business GroupCSR Committee
CSR & Environmental Sustainability
Subcommittee

Residential Business Planning Department

Residential Value Chain Management OfficeInternational Business GroupInternational Business Planning Department

Corporate Planning Department

MARK IS shizuoka and MARK IS minatomirai opened.
Grand Front Osaka opened.

2014

Singapore CapitaGreen completed.

2015

Dai Nagoya Building completed.
Otemon Tower • JX Building completed.
OTEMACHI FINANCIAL CITY GRAND CUBE completed.

Otemachi Park Building completed.

Remuneration Committee

2013

Audit Committee Office

Marunouchi Eiraku Building completed.
OTEMACHI FINANCIAL CITY (North Tower, South Tower) opened.

Audit Committee

2012

Nominating Committee

2011

2017

Retail Property Improvements
Management Office

Retail Property Management Department

Taiwan Representative Office

Corporate Group

Chelsea Japan Co., Ltd., became a Mitsubishi Estate consolidated subsidiary(renamed Mitsubishi Estate·Simon Co., Ltd., in February 2013).

88 

Workplace Solutions Office

Investment Management Group

2008

Hirotaka Sugiyama and Junichi Yoshida appointed chairman of the board andpresident & chief executive officer, respectively.
Taiwan Representative Office established.

Relocation Management Office

Investment Management Business Department

Sunshine City Corporation became a Mitsubishi Estate consolidated
subsidiary.
Mitsubishi Estate Asia Pte. Ltd. commenced operations.

2016

Internal Audit Office

2003

Mitsubishi Trust and Banking Building completed (renamed Mitsubishi UFJ
Trust and Banking Building in October 2005).
Paternoster Square completed in the City of London.

Transitioned to a “Company with Nominating Committee, etc.”
organizational structure.
Tokyo Ryutsu Center Inc. became a Mitsubishi Estate consolidated subsidiary.

Urban Planning Office
Area Management Promotion Office

Logistics Facilities Development Department

Marunouchi Building opened.

TA Realty LLC acquired.

Urban Development Promotion Department

Retail Property Leasing Department

2002

Mitsubishi Estate Building Management and Mitsubishi Estate
Property Management integrated.

Marunouchi Development Department

Master Lease Planning and Management Office

GOTEMBA PREMIUM OUTLETS® opened.

Properties and equipment revaluated in accordance with the Law Concerning
Revaluation of Land and other relevant laws and regulations.

Mitsubishi Estate (Shanghai) Ltd. established.

Ikebukuro Development Office

Retail Property Development Department

2001

Mitsubishi Jisho Residence Co., Ltd., established.

Toyosu Development Office

Office Building Development Department 2(Leasing)

Osaka Amenity Park (OAP) completed.

Mitsubishi Jisho Investment Advisors, Inc., established.

Head Office relocated to Otemachi Building.

(Development)
Office Building Development Department 1

Office Leasing and Tenant Relations
Department

1998
2000

Open Innovation Promotion Office

Strategic Investment Committee

1990
1993

Tenant Business Development Office

Museum Management OfficeTokiwabashi Development Department

President & Chief Executive Officer

1989

The first phase of the Izumi Park Town Project launched.

Chairman of the Board

1986

Area Brand Management Department

Strategic Planning Committee

Board of Directors

1984

MEC UK Limited established.
Yokohama Office established (reorganized as Yokohama Branch in April 2000).

Building Safety Management Office
Building Renewal Management Office

Meeting of Shareholders

Mitsubishi Estate Home Co., Ltd., established.

Group Companies Management Office

Office Building Management Department

1969

Mitsubishi Estate New York Inc. established. Began expansion of business overseas.
Mitsubishi Real Estate Services Co., Ltd., established.

Began first stage of Marunouchi redevelopment.

Business Development, Consulting & Solutions Department 3

Office Building Group1953

Reconstruction of Marunouchi Building announced.

Business Development, Consulting & Solutions Department 2

1937

Marunouchi Remodeling Plan formulated. Met demand for offices in the yearsof high economic growth.

Participation in the City of London’s Paternoster Square Project announced.
Capital investment in Rockefeller Group, Inc., initiated.

Building Renovation
Consulting &Solutions OfficeBusiness Development, Consulting & Solutions Department 1

1894

Mitsubishi Estate’s shares listed on the Tokyo Stock Exchange andthe Osaka Securities Exchange.

Hiroshima Branch (renamed Chugoku Branch in April 2000) andKyushu Branch established.

Business Development, Consulting & Solutions Group
Business Development, Consulting & Solutions Planning Department

1952

Akasaka Park House offered for sale in lots, marking the launch of
the Condominium Business.

As of April 1, 2017

Major properties

Corporate Planning Department Affiliated Group Office
Strategic Investment OfficeFinance & Accounting Department

Risk Management & Compliance
Committee
Risk Management &Compliance Subcommittee

Group IT Planning Office

Corporate Communications Department

Investor Relations Office

Human Resources Department

Human Resources Compliance & Diversity Promotion Office

General Affairs Department

Secretary Office

Legal & Compliance Department

Facility Management Office

CSR & Environmental
環境・CSR推進部
Sustainability Department
Business Creation Department

Airport Project Promotion Office

Sapporo Branch
Tohoku Branch
Yokohama Branch

Minato Mirai 21 Office

Nagoya Branch
Kansai Branch

GRAND FRONT OSAKA Office

Chugoku Branch
Kyushu Branch

MITSUBISHI ESTATE CO., LTD.

Annual Report 2017 

89

CORPORATE DATAThe Spirit of Mitsubishi: Three Principles

Corporate Information
As of March 31, 2017


Stock Information
Stock Details
Number of authorized shares: 1,980,000,000 shares
Number of shares issued and outstanding: 1,390,685,972
 (288,875 increase in number of shares from the previous fiscal year-end)
Number of shareholders: 	56,055(Decrease of 1,912 shareholders comparedwith the end of the previous fiscal year)

Shareholder Composition (Percentage of shares held)
Individuals and other

6.24%

0.00%

“Ritsugyo Boeki”

所期奉公

処事光明

立業貿易

Corporate Responsibility to Society

Integrity and Fairness

Global Understanding through Business

Maintain principles of transparency andopenness, conducting business withintegrity and fairness.

Expand business, based on an
all-encompassing global perspective.

¥141,659 million
Business Activities
Development, leasing, and management of officebuildings, retail, and other facilities

Financial institutions

Management of leisure and other facilities

34.73%

Sale and brokerage of real estate and related
consulting services

The Mission of the Mitsubishi Estate GroupWe contribute to society through urban development
By building attractive, environmentally sound communities where people can live,
work and relax with contentment we contribute to the creation of a truly meaningful society.


Number of Employees (Excluding temporary staff)
Non-consolidated: 755
Consolidated: 8,642URL
http://www.mec.co.jp/index_e.html


1.95%
Operating and othercompanies

11.52%

Number ofshares held(Thousands of shares)

Shareholding
percentage(%)

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

88,231

6.34

Japan Trustee Services Bank, Ltd.
(Trust account)

55,108

3.96

STATE STREET BANK AND TRUST COMPANY

54,408

3.91

Meiji Yasuda Life Insurance Company

46,882

3.37

CBNY-GOVERNMENT OF NORWAY

35,483

2.55

Japan Trustee Services Bank, Ltd. (Trust account 5)

26,973

1.93

THE BANK OF NEW YORK MELLON SA/NV 10

24,678

1.77

STATE STREET BANK - WEST PENSION FUND
CLIENTS - EXEMPT 505233

23,039

1.65

Asahi Glass Co., Ltd.

22,714

1.63

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

22,267

1.6

Major Shareholders

Paid-in Capital“Shoji Komei”

Strive to enrich society, both materially andspiritually, while contributing towards thepreservation of the global environment.

Development and sale of land for housing, research,and other facility use

Financial instruments
business operators

45.56%

May 7, 1937

“Shoki Hoko”

Development of real estate for investment purposes
and asset management

Government and local public authorities

Foreign individuals
and companies

Company Name
Mitsubishi Estate Co., Ltd.

Date of Establishment

Head Office
Otemachi Building, 6-1, Otemachi 1-chome, Chiyoda-ku,
Tokyo 100-8133
Phone: +81-3-3287-5100
Sapporo Branch
Hokkaido Building, 4-1, Kita 2-jou Nishi, Chuo-ku,
Sapporo, Hokkaido 060-0002
Phone: +81-11-221-6101
Tohoku Branch
Sendai Park Building, 6-1, Kokubun-cho 3-chome, Aoba-ku,
Sendai, Miyagi Prefecture 980-0803
Phone: +81-22-261-1361

The Mitsubishi Estate Group Code of Corporate Conduct

In order to carry out the Group Mission,
we pledge to observe the following Code of Conduct:1


We will act with integrity

We will base our conduct on laws
and ethics and always reflect withhumility upon our behavior, valuing
our communication with society andplacing priority in our corporate
activities on earning trust throughfairness and transparency.

Yokohama Branch
Yokohama Landmark Tower, 2-1, Minato Mirai 2-chome,
Nishi-ku,
Yokohama, Kanagawa Prefecture 220-8115
Phone: +81-45-224-2211

2

We will strive to earn
the trust of our clients

We will approach all objectives fromour clients’ point of view, providing
safe and reliable products andservices, and make information
available as appropriate.

3

We will strive to createa vibrant workplaceWhile aiming at personal growth, wewill respect the human rights anddiversity of opinions of others andincrease our creativity and professionalism, while displaying ourcollective strengths as a team.

For details on the Mitsubishi Estate Group Guidelines for Conduct:

Nagoya Branch
Nagoya Hirokoji Building, 3-1, Sakae 2-chome, Naka-ku,
Nagoya, Aichi Prefecture 460-0008
Phone: +81-52-218-7755

http://www.mec.co.jp/e/company/charter/index.html

Kansai Branch
OAP Tower, 8-30, Tenmabashi 1-chome, Kita-ku,
Osaka, Osaka Prefecture 530-6033
Phone: +81-6-6881-5160(Formulated December 1, 1997; revised on August 1, 2002, and January 1, 2006)

Chugoku Branch
Hiroshima Park Building, 7-5, Otemachi 3-chome, Naka-ku,
Hiroshima, Hiroshima Prefecture 730-0051
Phone: +81-82-245-1241
Kyushu Branch
Tenjin Twin Building, 6-8, Tenjin 1-chome, Chuo-ku,
Fukuoka, Fukuoka Prefecture 810-0001
Phone: +81-92-731-2211

http://www.mec.co.jp/e/investor/index.html
In addition to financial information and quarterly earnings highlights,
a range of investor relations (IR) materials are available for downloading on the
Mitsubishi Estate Group’s IR website.

90 

MITSUBISHI ESTATE CO., LTD.

Annual Report 2017 

91