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

MITSUBISHI ESTATE CO., LTD.
ANNUAL REPORT 2015

Enhancing the Possibilitiesof Tomorrow
A N N U A L R E P O RT 2 0 1 5This 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
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Printed in JapanEnhancing the Possibilitiesof Tomorrow
Tokyo Station—throughout the history of Japan, the station has played a primary roleas an intercity transportation hub. On the west side of the station, encompassing
approximately 120 hectares* the Marunouchi area is one of Japan’s leading businesscenters and comprises the Marunouchi, Otemachi, and Yurakucho. Occupied by aconcentration of head offices of financial institutions and of companies listed on thestock exchange, the Marunouchi area lies at the heart of Japan’s economy.
The Mitsubishi Estate Group has been continuously developing the Marunouchi
area for over 120 years. Past development efforts carried out to suit each generation
have resulted in a portfolio of approximately 30 office buildings that Mitsubishi
Estate holds in the area. And even today, the Mitsubishi Estate Group continues its
redevelopment of the Marunouchi area, pursuing its evolution into “the world’s mostinteraction-inspiring neighborhood” that will be the source of future value creation.
*	120 hectares is approximately 35% of the size of Manhattan’s Central Park (843 acres, or about 341
hectares), 85% of the size of London’s Hyde Park (350 acres, or about 142 hectares), and about 4.3 times
the size of the Tuileries Garden, in Paris (28 hectares).



MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2015

1

In the Marunouchi area, the Mitsubishi EstateGroup is fostering office demand of the future
by supporting the business growth of its tenantfirms. The Group supplies not only core
infrastructure, such as office space designed for
venture enterprises, but also support services,such as business partner matching services andnetworking opportunities. The Group is favorably
positioned in a business district densely
populated by about 4,000 enterprises. The ability
to support business growth to this high standard
is unique to the Mitsubishi Estate Group.

Constant Development of Services
Fosters Future Demand

The Mitsubishi Estate Group is taking steps toenhance synergies between the Group companiesof the Residential Business with a view to future
expansion in business scale and to strengthening
cash flow. The goal is to diversify revenue sources
and increase the value of properties we develop.
We aim to diversify revenue sources and raisethe value of development assets by leveraging
the specialist knowledge of each Group company
in the condominium, custom-built housing,renovation, management, purchase and sales,
leasing, and brokerage areas, and by deepening
the cooperation between each company.
Utilizing these enhanced synergies, theResidential Business will place even greater
emphasis on its interface with customers andprovide detailed solutions to their diversifying
needs, such as renovating their homes or moving.

By providing services to its current customers, the Mitsubishi Estate Group gains a deeper understanding ofcustomer needs. At the same time, the Group proceeds with the development of its businesses to provide
solutions to the changes and diversification it perceives in customer needs. The accumulated knowledge
from this continuous development process contributes to the Mitsubishi Estate Group’s visionary ability
to discover the beginnings of future demand before anyone else and to the innovation that enables an
expansion of the potential market.

2

MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2015

3

Consolidating the Foundations
That Create the Future
Whenever people gather together, such meetings breed opportunities and generate value
creation. In urban development, even more than land or capital, people are the essential businessresource. Many skills are needed: know-how and expertise in real estate development; technicalcapabilities; analytical skills to understand the needs of customers, investors, and others ormarket conditions and to predict future movements; the ability to build partnerships withlandowners, local authorities, and tenants; and the vision to perceive the requirements of thetimes. These inherent but not obvious strengths that each employee possesses combine together
to form the backbone of an organization.

The source of the dynamism of our development is our interactions withothers. Whether we are developing the Marunouchi area, “the world’s mostinteraction-inspiring neighborhood,” residences that mature along with theneighborhood as a part of the community, office buildings and retail andlogistics facilities, or overseas real estate, we create dynamism through thoseinteractions. To that end, we will reinforce the foundations for future value
creation by enhancing the power of our organization using management
methods that draw out our people’s abilities.

4

MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2015

5

CONTENT S

8

10

11

34

44

About the Mitsubishi
Estate GroupThe Current JapaneseReal Estate Market

Financial Highlights

Financial Highlights
by Segment

Financial Section

35

12

Corporate Governance

To Our Stakeholders
Enhancing Corporate Value andDeepening the Foundations of Growth
for a Richer Future36

 essage from theM
Chairman of the Board

44
46
50
52
52
53
55
56
79

Eleven-Year Summary of Selected Financial Data
Financial Review
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Independent Auditor’s Report

80
Corporate Data

17
Business Review
18
20
22
24
26
28

Office Building Business 1
Office Building Business 2
Lifestyle Property BusinessResidential Business
International Business
Investment Management Business

30
Summary of Management &Services Business

30
31
32
33

 rchitectural Design &A
Engineering Business
Hotel Business eal Estate Services Business /R
Business Creation Department
Business Development,
Consulting & Solutions

37
38
41

Outline of Corporate GovernanceDirectors and Statutory Auditors
Executive Officers

MITSUBISHI ESTATE CO., LTD.

Principal Mitsubishi Estate Group Companies
Corporate History
Organization
Corporate Information

42
Risk Management

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 as of thiswriting. 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 materially from those expressed or impliedin its forward-looking statements.

6

80
82
83
84

ANNUAL REPORT 2015

Asset Book

CSR Report

http://www.mec.co.jp/e/investor/
irlibrary/annual/index.html

http://www.mec.co.jp/e/csr/report/
index.html

7

ABOUT THE MITSUBISHI ESTATE GROUP

Mitsubishi Estate Co., Ltd., is a leading creator of urban change through the developmentof real estate including office buildings, residential properties, and commercial properties.
As part of our ongoing commitment to achieve sustainable growth, we strive to create
new value in Japan and overseas under the brand slogan “A Love for People, a Love for the City.”

Building Business

Lifestyle Property BusinessThis is Mitsubishi Estate’s core business,
which engages in the development,
leasing, and property management ofoffice buildings, mainly in Tokyo andother major Japanese cities. We promoteurban development that contributes toincreased appeal of cities while maintaining a balance between management
property and property for sale in ourasset portfolio.

Mitsubishi Estate operates the PREMIUM
OUTLETS®, MARK IS, and other retailfacilities using a comprehensive system
where it remains continuously involved
with the retail property from the planningstage to ongoing operations. Under the“Logicross” brand, Mitsubishi Estate ispursuing logistic business opportunities
nationwide. The Company is also
expanding the variety of its properties.

Operating Income¥156,332 million

Residential Business

International BusinessWe offer services to meet a variety ofneeds in the condominium, custom-built
housing, renovation, management,purchase and sales, leasing, and brokerage
areas. As the circulation of existinghomes expands and people’s lifestyles
grow increasingly diverse, we arestrengthening our remodeling construction and renovation business to seize
upon such changes.

Revenue from Operations¥1,110,259 million
Total Assets

Mitsubishi Estate has pursued businessoverseas since the 1970s by establishingreal estate leasing and development
businesses in the United States and theUnited Kingdom. In recent years, we havealso been proactively developing our realestate businesses in rapidly expanding
Asian markets and advancing into
continental Europe.

¥4,901,526 million
Investment Management Business
For investors seeking real estate asset
management, we provide a wide range ofservices based on our specialized expertise,utilizing collaboration among ouroperating bases in Japan, the UnitedStates, and Europe. These services include
real estate investment trusts (REITs) tomeet management needs for long-term
stability as well as private placement funds
to meet the specific management needsof institutional investors.

Millions of yen

Fiscal year ended March 31, 2015 (consolidated)

Building Business
Lifestyle Property BusinessResidential Business
International Business
Investment Management BusinessArchitectural Design & Engineering Business
Hotel Business
Real Estate Services Business
Other
Adjustments
Total

Revenue from Operations

Operating Income

Total Assets

484,816
105,706
390,491
71,176
14,885
19,46730,827
13,9393,747(24,799)
1,110,259

102,820
26,162
12,11425,901
4,282
663
754
524
16
(16,906)
156,332

3,094,967
321,405
605,504
479,785
146,538
24,98528,034
20,731
27,696
151,876
4,901,526

Hotel BusinessArchitectural Design & Engineering Business
Making use of the knowledge, ability, andcutting-edge technologies accumulated
over the 120-year period since ourfounding in the Meiji period, thiscomprehensive urban and architecturalplanning business meets societal needs
through construction, civil engineering,and urban and regional development
planning and consulting.

Real Estate Services BusinessThis business maintains a network ofeight hotels under the Royal Park Hotels
brand in Sendai, Tokyo (Nihonbashi,
Shiodome, and Haneda), Yokohama,
Nagoya, Kyoto, and Fukuoka. We arepromoting the expansion of grouphotels and improved brand value witha management foundation focused on
customer satisfaction.

This business provides a wide range ofservices for individuals and corporations,from real estate agency and consulting to
the management of condominium andoffice building leasing and parking lots.

As of April 2015, the following segment changes have occured.
•	Domestic retail & logistics property businesses (not including some multi-use facilities), no longer in the Building Business, now featuring the
newly created Lifestyle Property Business.
•	Overseas investment management business has been moved from the International Business to the Investment Management Business.
•	Mitsubishi Jisho House Net Co., Ltd., has been moved from the Real Estate Services Business to the Residential Business.

8

MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2015

9

THE CURRENT JAPANESE REAL ESTATE MARKET

FINANCIAL HIGHLIGHTS
Years ended March 31

Supply of New Large-Scale Office Buildings in the 23 Wards of Tokyo

Office building development in Tokyo
continues, supported by a firm demandfor office space. In 2013, much of the
new supply was concentrated in
Chuo-ku, Chiyoda-ku, and Minato-ku,
located in the city center. (Source:
Sanko Estate Co., Ltd.) However, theconcentration ratio of new supply inthose areas declined in 2014 because
of several large-scale office building
development projects in Shinjuku-ku,
Shinagawa-ku, and Koto-ku.

m2
1,000,000

800,000

600,000

400,000

200,000

0
2005

2006

2007

2008

2009

2010

2011

2012

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

2013

Revenue from Operations

Billions of yen

1.2

300

0.8

200

0.4

100

0
2011

2012

2013

2014

2015

2011

Source: Sanko Estate Co., Ltd.

Yen / tsubo-month%

25,00010

20,0008

15,000

6

10,000

4

5,000

2

0

0
3/06

3/07

Average Rent (left scale)

3/08

3/09

3/10

3/11

3/12

3/13

3/14

Vacancy Rate (right scale)  

3/15

Corporate earnings have been recovering since 2013, which has been reflectedin an improvement in vacancy rates in
the five central Tokyo metropolitan
wards (Minato-ku, Chiyoda-ku,
Chuo-ku, Shinjuku-ku, and Shibuya-ku).
Average rents have also followed thisupward trend. In January 2015, theaverage rent per tsubo reached ¥17,000,
rising to that level for the first timesince October 2011.

120,000

60

100,000

50

80,00040

60,00030

40,00020

20,000

10

0

0
2005

2006

2007

2008

2009

Sales of New Condominiums in the Tokyo Area (left scale)
	

2010

2011

2012

2013

2014

Trillions of yen

%

8

6

6

5

5

60

6
4

4

3

3

2

2

1

1

40

4

20

2

0

0
2011

2012

Net Income (left scale)

2013

2014

In 2014, the average price of condominiums in the Tokyo metropolitan
area increased 2.7% from the previous
fiscal year, to ¥50.6 million. The
increase can be attributed to higher
prices for construction materials
and a surge in labor expenses due toa shortage in labor supply in theconstruction industry. The supply of
condominiums in the area declined
20.5% from 2013, to 44,913 units.

2,500
2,000
1,500
1,000
500

0
2011

ROE (right scale)

2012

2013

2014

2015

Total Assets (left scale)
EBITDA/Total Assets (right scale)Interest-Bearing Debt /Net Interest-Bearing Debt/EBITDA
Trillions of yen

Unrealized Gain on Rental Properties
Times

Trillions of yen

2.5

10

2.5

2.0

8

2.0

1.5

6

1.5

1.0

4

1.0

0.5

2

0.5

0

0

0
2011

2012

2013

2014

2015

2011

2012

2013

2014

As of March 31, 2015, interest-bearing
debt declined ¥43.6 billion year on year,
contracting for the second consecutive
year. Net interest-bearing debt over
EBITDA, a stability indicator, was 7.2
times. The Medium-term Management
Plan’s stability target for fiscal 2017 is 8.0
to 8.9 times. Unrealized gain on rental
properties rose ¥84.2 billion from a year
earlier, to ¥2,180.7 billion.

2015

Interest-Bearing Debt (left scale)
Net Interest-Bearing Debt/EBITDA (right scale)

The Tokyo Stock Exchange REIT Index
continued its upward trend for several
reasons. Conditions in the domestic
real estate market were robust against
the backdrop of rising real estate
prices, mainly in downtown Tokyo,
and higher office building rental fees.
Moreover, in October 2014, the Bankof Japan announced a new policy that
included substantial expansion in its
J-REIT purchases.

3,000

0

2015

In fiscal 2015, ROE improved 0.2 percentage point as a result of the increase inconsolidated net income. The target for
EBITDA/Total Assets, a management
indicator, set forth in the new MediumTerm Management Plan was 5.0% forfiscal 2017, a target that we were able toachieve. Development of management
property office buildings leads to growthon the balance sheet, but Mitsubishi Estateis engaged in the policy of increasing
business efficiency by continually
adjusting its portfolio.

*	EBITDA/Total Assets is calculated based on the average
total assets from the beginning to the end of the period

CY

March 31, 2003 =1,000

EBITDA80

Condominium Prices (right scale)
Source: Real Estate Economic Institute Co., Ltd.

Tokyo Stock Exchange REIT Index

2015

Total Assets / EBITDA/Total Assets*

Note: 1m2=0.3025 tsubo

Millions of yen

2014

%

Month/Year

Units 2013

Billions of yen

Source: Miki Shoji Co., Ltd.

Sales of New Condominiums in the Tokyo Area / Condominium Prices

2012

Operating Income

Net Income / ROE
Office Building Market (Vacancy Rates in Five Central Tokyo Metropolitan Wards)

Consolidated revenue from operations infiscal 2015, the fiscal year ended March 31,
2015, rose 3.3% year on year, to ¥1,110.2
billion. Despite a decline in the number ofcondominium units sold in the Residential
Business, the growth in rental revenue andin revenue from the sale of property in the
Building Business supported an overall
increase in revenue from operations.
EBITDA decreased 2.6% year on year, to¥239.9 billion. The primary factors for thisdecrease were the declines in operating
income and in depreciation.

0

CY

2014

Operating Income / EBITDA

Trillions of yen

Free Cash Flow

Earnings per Share

Billions of yen

Yen

300

60

In fiscal 2015, free cash flow decreased¥49.4 billion from fiscal 2014, to ¥153.5
billion. In addition to a decline in cash
flows from operating revenues, expenditures for the purchase of a majority
interest in TA Realty LLC contributed tothe decline in free cash flow. Earnings per
share rose ¥6.51, to ¥52.85 per share,advancing for the second consecutive year.

50
200
40
100

30
20

0
10

0
3/03



10

3/04

3/05

3/06

3/07

3/08

3/09

3/10

3/11

3/12

3/13

3/14

3/15

–100

Month/Year

0
2011

Source: The Association for Real Estate Securitization

MITSUBISHI ESTATE CO., LTD.

2012

ANNUAL REPORT 2015

2013

2014

2015

2011

2012

2013

2014

2015

11

TO OUR STAKEHOLDERS

Achieving Enhanced Corporate Value

Fiscal 2015 was the first year under the new Medium-Term
Management Plan, which targets enhanced corporate value.
I am pleased to report steady progress on the Marunouchi
Redevelopment Project, which lies at the heart of our competitive advantage. Earnings have proved robust, as the officebuilding vacancy rate has gradually declined and our office rent
levels have risen. Net asset value (NAV)* and corporate value
have been enhanced along with continuing redevelopment andan expansion in office building rent revenues.
* NAV: Net asset value of a company, reflecting market value of owned real estate.
NAV will trend high if a company holds real estate with high asset value.

Marunouchi Redevelopment Business Model

Our core business is the Office Building business, centered in
the Marunouchi area, and developments in this business are
based on two main asset categories. First, there are the material
assets, comprising the land and approximately 30 office buildingsin Marunouchi, Tokyo’s traditional business center. We havebeen developing the Marunouchi area as a city center for
more than a century, and these material assets are at the heartof our business model.

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

NAV and CF Trends in Conjunction with Office Building Development

Enhancing Corporate Value andTo enhance the value of the Marunouchi area, we are continuing to
implement the redevelopment of existing office buildings. When
redeveloping buildings that are owned by the Group, costs are posted
in the period from the start of construction to immediately after
NAV
completion, so it is difficult to determine the impact on profitability
and cash flows.
Unlike the development of a new property with the acquisition of
a plot, the redevelopment of an existing building first involves its
Cash flow fromrental revenue
operational closure. In terms of profitability, revenue will decline duringTimethe period from closure until the renovation work is complete. Once
Decision of closing
Completion
the renovated building starts operation, initial costs will be posted anddepreciation will show a substantial increase.
On the other hand, the building’s NAV will rise in tandem withredevelopment, and once an operation has started rental revenue is expected to generate steady operating cash flow. Initial costs
are generally absorbed by the second year of operation, and the financial overview will show an easing of depreciation costs andrising profits.

Deepening the Foundations of Growth
for a Richer Future

12

To fully realize the potential of these material assets, werely on our second main category of assets—invisible assets.
Initially, these assets comprise the expertise and know-howthat we have built up in the course of urban development;
our stakeholder networks, including leaseholders, tenants,
and local authorities; and the real estate development functions
within the Group that range from planning and development
to property management. Invisible assets are reinforced by ourbrand value, which hinges on the confidence our customers
have in our quality, as well as the creativity and passion of ouremployees. Elements such as these do not appear directly on an
income statement but are essential to maximizing the value ofour material assets.
Evaluations of Mitsubishi Estate tend to incline to material
assets because of the prominence of our presence in the
Marunouchi area. However, to create the type of urban
environments that meet the needs of the age and to moveto the next stage of development we cannot rely simply on
the material assets that we have accumulated. We are creating
a dynamic business model based on a fusion of material andinvisible assets that transcends the current paradigm and thatwill sustain and enhance our corporate value.

MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2015

13

T O O U R STA K E H O L DE R S

Progress on Medium-Term Management Plan

The current Medium-Term Management Plan presents specificinitiatives to meet a series of new challenges for the Group.
Following, we summarize some of the challenges in fiscal
2015, the first year under the three-year plan.
In the Building Business, we are pursuing a number ofprojects. In the Marunouchi area, the Otemon Tower • JX
Building is scheduled for completion in November 2015, andplans call for the Otemachi Park Building to be finished in2017. Both of these projects were originally designated under
the former Otemachi 1-1 Project. OTEMACHI FINANCIAL
CITY GRAND CUBE, which was previously designated thethird phase of the Otemachi Chain Redevelopment Project, isscheduled for completion in 2016, and the tentatively named
Marunouchi 3-2 Project is expected to be completed in 2018.
We are continuing to develop the Marunouchi area withthe aim of making it an attractive location with “the world’s

Related Major News Releases in Fiscal 2015
Theme

Release date

Related major news releaseN ov. 2014	‌Start of Marunouchi 1-3 Project (tentative name) to redevelop Ginko Kaikan,

Building
Business

Investment &Development
Business

Lifestyle Property
Business

Tokyo Ginko Kyokai Building, and former Mizuho Bank Head Office Building.
Part of a move to strengthen the global financial infrastructure of the Otemachi,
Marunouchi, and Yurakucho districtsO ct. 2014	Opening of The Premier Floor Marunouchi on the 34th floor of
the Marunouchi BuildingA ug. 2014	‌Completion of Toyosu Foresia office building with 44% green area and highearthquake resistanceA ug. 2014	‌Continuing from Shiba Front Building, completion of Tamachi Front Building,a high-function office building in the Shinagawa/Tamachi areaA
 pril 2014 Start of construction work on Otemachi 1-1 Project Building B (tentative name).
A pril 2014	‌Start of the third phase of the Otemachi Chain Redevelopment Project (Marunouchi
Redevelopment Stage 2, Project No. 6)F eb. 2015	Completion of Logiport Hashimoto, a large-scale earthquake-resistant

distribution facilityN ov. 2014	‌Completion of Mitsubishi Estate’s logistics facility Logicross in Hisayama,

most interaction-inspiring neighborhood”. Outside of the
Marunouchi area, we have completed six buildings with a view
to future sales, including Toyosu Foresia.
The residential market was robust in fiscal 2015, principallyin urban areas, and although we sold fewer units, our underlying sales trend was solid. In July 2014, our condominium
management subsidiary was integrated with that of Marubeni
Corporation and, in April 2015 we transferred our residential
leasing business to Mitsubishi Jisho Residence Co., Ltd. We
reorganized our residential stock business to achieve expansion
and greater efficiencies.
We are steadily enhancing our overseas portfolio withnew building developments in the United States, Europe,and Asia as well as property acquisitions with a view to future
redevelopment. In January 2015 we acquired Boston-based
TA Realty LLC, a leading real estate fund management firm,
as part of our strategy to accelerate business in real estate
investment management.
Finally, we have established a new business creation
department that aims to open up opportunities for long-term
growth. Our first major initiative is to acquire the operatingrights for Sendai Airport, the first airport in Japan due to be
privatized in 2016. We will search for further opportunities
to utilize the synergies and know-how of Group businesses,
including property management and commercial facility
development. Further, in order to strengthen existing businessand develop new asset types we created the Lifestyle Property
Business Group from the former Retail & Logistics Property
Business Group.

Fiscal 2015 Earnings

Revenue from operations increased from the previous fiscal
year, as major office buildings completed in 2012 became fully
operational and rises were recorded in property sale income.
Operating income fell due to a number of factors, including
a decline in sales of built-for-sale condominium units. Net
income stepped up 14.1% year on year, despite impairment
losses posted on a marked margin deterioration in some fixed
assets as well as a fall in market value—we took a cautious
stance on impairment within reasonable limits. Dividends
per share rose ¥2 from the previous year, to ¥14 per share.
As noted above, we are implementing the Marunouchi
Redevelopment Project, under which existing buildings will berenovated. In the short term, we will not be able to generate
profits from the buildings that are included in the four redevelopment projects. Despite this, our earnings exceeded initialprojections, and we believe these results testify to the underlying strength of the Mitsubishi Estate Group. We regret theposting of impairment losses, but we intend to learn from thisexperience and apply the lessons in our investment strategy
and facility management.

Fukuoka PrefectureF eb. 2015	‌Residential Business transferred to Mitsubishi Jisho Residence.

Residential
BusinessN ov. 2014	Start of construction on The Parkhouse NishiShinjuku Tower 60, the tallest apart-

ment building in Japan based on number of stories (60)J une 2014	Start of Mitsubishi Jisho Community Holdings Co., Ltd., merger of Mitsubishi

Jisho Community Co., Ltd and condominium management subsidiaries ofMarubeni CorporationJ an. 2015

Completion of Singapore office development CapitaGreenJ an. 2015	‌Acquisition of office building in Paris, our first on the European continentD ec. 2014

International
Business

Grand opening of Group’s first development/commercial zone in TaiwanA ug. 2014	Acquisition of Los Angeles office building to expand and diversify

the U.S. business portfolio
Capital participation in China logistics facility development
M ay 2014	‌Start of participation in three major residential developments in Bangkok, Thailand,with more than 2,000 unitsA pril 2014	‌Acquisition of 28 State Street office building in Boston

14

¥200 billion markO
 ct. 2014 Acquisition of TA Realty LLC, a leading U.S. real estate fund management firmS
 ept. 2014	‌Start of operations of ROYAL PARK HOTEL THE HANEDA on September 30
at Haneda Airport International Passenger Terminal

MITSUBISHI ESTATE CO., LTD.

Millions of yen
Fiscal 2014 results

Initial forecast(Announced February 5, 2015)

Fiscal 2015 results

1,075,285

1,108,000

1,110,259

Operating income

161,271

150,000

156,332

Net income

64,29767,00073,338

EBITDA

246,332

231,500

239,934

1,973,042

1,970,000

1,929,355J uly 2014O
 ct. 2014	Mitsubishi Jisho Investment Advisors private REIT managed assets breakManagement &Services Business

Earnings Outline

Revenue from operations

Interest-bearing debt

ANNUAL REPORT 2015

15

T O O U R STA K E H O L DE R S

Improving Asset Efficiency andHarnessing Group Power

Our earnings attest to the Group’s underlying strength, but
this does not mean that we should be satisfied with our present
position. I believe our income and profits can accelerate if
the Group’s strengths are harnessed further, and I urge our
employees not to simply meet existing standards but to strive
for the next level of achievement. To enhance asset efficiency,
we must make more effective investments and manage ouroperations more efficiently.
We are re-focusing on strict income and expenditurecontrol in the core Building Business and scrutinizing investment and margins to raise asset value. Further, in April 2014
we reorganized our Building Business, merging the building
asset group, which primarily oversees our own assets, and theurban development group, which mostly handles turnoverbusiness. We believe these moves will strengthen asset portfolio
management and sourcing functions as well as facilitate thesharing of know-how across the Group.
In the Residential Business, efficiency is more important
than ever, as construction costs rise and competition for sites
becomes more severe. We intend to maintain our competitiveness in this difficult environment by drawing on our sourcing
capabilities to acquire sites and leveraging our Group strengths
to develop condominiums with higher added value.
Profit growth in such specialist services as property management and real estate investment management, for whichcustomers pay a fee, is also crucial in enhancing asset efficiency.
The integration of Mitsubishi Jisho Property Management
and Mitsubishi Jisho Building Management in April 2014 wasa step in this direction. Mitsubishi Jisho Building Management
has a wealth of experience in managing large-scale complexes
comprising office, commercial, and ancillary facilities and also
engages in leasing, sales, and promotion. Mitsubishi Jisho
Property Management’s strengths lie in the efficient management of office buildings for REITs and real estate investment
funds. We believe synergies between the two companies willallow our property management business to make more effective proposals while implementing consignment work efficiently
and also enhancing the management of our owned buildings.

Real estate investment management is a promising area toharness the collective power of the Group and achieve synergies.
The acquisition of TA Realty LLC has consolidated our local
sourcing functions in Japan, the United States, and Asia. The
hybrid model for investment management funds, which iscomposed of Group capital that is pooled with funding
from third parties, gives us scope to efficiently build up ouroverseas business.

BUSINESS REVIEW

Enhancing the Possibilitiesof Tomorrow

Sustaining Creative Development

The three-year mission under our Medium-Term Management
Plan is to enhance corporate value principally through theachievement of higher NAV. This goal is in line with ourbusiness model, which calls for the creation of value throughthe long-term development of urban areas. We also believe
this goal matches the needs of our stakeholders, including
shareholders, investors, and others, who require us to maximize value in the long term. We have significant assets in the
Marunouchi area, but we are not content to simply hold them;rather, we see them as an opportunity for further growth. We
are fortunate to be in possession of all the rich possibilities ofthe Marunouchi area, built up by our predecessors, and withthis at the center of our business we will focus our creativity to
improve asset efficiency and generate Group synergies in otherareas and segments. Working to create a richer future, we aredetermined to generate further value as we pursue our urban
development mission.

Beginning in fiscal 2015, the Mitsubishi Estate Group implemented a three-year Medium-Term
Management Plan with the theme of “3 years to realize an increase in company & asset value.”
Under the medium-term plan, the Mitsubishi Estate Group is making capital investments for growth
primarily in the redevelopment of its revenue base, the Marunouchi area. At the same time, it isendeavoring to increase future cash flow possibilities and the property values of its eight businesses
grouped around the core Building, Lifestyle Property, Residential, and International businesses.

Fiscal 2015

Building Business

Fiscal 2016

Building Business

NEW

Lifestyle Property BusinessResidential Business

International Business

July 2015

Overseas investment
management businesshas been moved to
the Investment
Management Business.

Residential Business

International Business
Investment Management
Business

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

Investment Management
Business
Architectural Design &Engineering Business

Hotel Business

Real Estate Services Business16

Domestic retail & logistics
property businesses now
feature in the newly createdLifestyle Property Business.

MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2015

Architectural Design &Engineering Business
Mitsubishi Jisho
House Net Co., Ltd.
has been moved to
the Residential
Business.

Hotel Business

Real Estate Services Business

17

BUSI NE SS R E V I E W

O F F ICE B UIL D IN G BUSIN ESS

1Enhancing the Possibilities of Tomorrow
Mitsubishi Estate-Owned Buildings in the Marunouchi Area

Continually Revitalizing Cities That
Represent the Source of Corporate Value

m2
150,000

OTEMACHI FINANCIAL CITY GRAND CUBE (Planned Opening April 2016)
Marunouchi Park Building

100,000

Otemachi Park
Building(Planned Opening
January 2017)

demolish and newly construct four buildings in the area, andwe are also pushing forward with planning for new projects.

Building Attractive Cities
to Meet the Needs of the Times

Marunouchi Eiraku Building
Otemon Tower JX
Building (Planned
Opening November 2015)•* Total operating floor space of Mitsubishi Estate (non-consolidated)

Marunouchi is the name of a 1.2 million square meter area
to the west of Tokyo station, which encompasses the
Marunouchi, Otemachi, and Yurakucho. Over 120 years ago,
the area became a business area representative of Tokyo.
Today, it is a bustling hub of the Japanese economy, boasting
4,000 offices, including the head offices of 92 companies listedon the Tokyo Stock Exchange. Approximately 230,000 businesspeople work in the area.
The Mitsubishi Estate Group owns approximately 30 officebuildings in the Marunouchi area. At the same time, we arecontinuously engaged in “urban development” in the area
through redevelopment to meets the needs of the times, andwe have realized a significant increase in the value of ourproperties there. Starting with the completion of the Marunouchi
Building in 2002, to date we have rebuilt a total of nine buildings in the area and redeveloped the space around them. In
comparison with the floor space prior to redevelopment, total
operating floor space* has been expanded by approximately
1.6 times. As of June 2015, we have commenced operations to

OTEMACHI FINANCIAL CITY North Tower / South Tower

50,0000Creating the Most Interaction-Inspiring
Neighborhood in the World

0

10

20

30

40

50

60

Years

Vertical Axis: Leasable Office Area (Entire Floor Area)
Horizontal Axis: Building Age

Rebuilding properties outfitted with the latest features is only
one aspect of our urban development operations, and, in recent
years, we have been working toward increasing Tokyo’s competitive strength as a major Asian business center by pouring
our efforts into the development of support infrastructure.
EGG JAPAN (Entrepreneur Group for Growing JAPAN),
established in 2007, is an prime example of these efforts. EGG
JAPAN is an innovation platform office that targets small andmedium-sized Japanese venture companies aspiring toward
global expansion and burgeoning foreign companies that plan
to enter the Japanese market. In addition to providing smallscale office space, EGG JAPAN offers business development
support tailored to the needs of its tenant firms and networking opportunities through its members-only business club,
Tokyo 21c Club.

Circle Size: Total Area (Entire Floor Area)

Moreover, the Group believes that the Marunouchi area
should be a place where talented people from countries allaround the world can meet and have positive interactions—a city where people not only work, but they live and live
comfortably. To this end, we are striving to boost the functionality of the area by appealing for hospitals that provide medicalcare in English, daycare centers, and serviced apartments.

Vacancy Rates for Offices in the Five Central Tokyo
Metropolitan Wards 1 and Marunouchi 2
Vacancy rates as of March 31 for each year%

Through positive interactions come opportunities to create
new value, which increases the city’s competitiveness. Creating“the world’s most interaction-inspiring neighborhood” is partof our initiative to add value to the city and, in turn, raise thecorporate value of the Group.

Projects Completed Outside
the Marunouchi Area

10

8

Expansion of total operating floor spaceof buildings owned by Mitsubishi Estatethrough redevelopment:

Approximately

1.6 times

Comparison of total operating floor spacein March 2002 and March 201518Number of top 50 companies in termsof market capitalization with
headquarters or head offices in the
Marunouchi area:

6

17 companies

13 companies

2

Indicated by U.S. Fortune magazine’s
annual ranking of global companies,
based on total corporate earnings

Based on Nikkei Net’s market
capitalization ranking as ofMarch 31, 2015

Number of Fortune Global 500
companies in 2014,
with headquarters or head officesin the Marunouchi area:

MITSUBISHI ESTATE CO., LTD.

4

0
2011

2012

2013

2014

2015

Vacancy Rates in the Five Central Tokyo Metropolitan Wards
Vacancy Rates in Marunouchi

For the fiscal year ended March 31, 2015, six incomegenerating buildings, including Toyosu Foresia, werecompleted in the Tokyo metropolitan area. Moreover,
the redevelopment of the Dai Nagoya Building, which
is currently underconstruc­tion in Nagoya,
Aichi Prefecture, isscheduled for completionin November 2015.
Toyosu Foresia

1. Minato-ku, Chiyoda-ku, Chuo-ku, Shinjuku-ku, and Shibuya-ku
Source: Miki Shoji Co., Ltd.
2. Building owned and master-leased by Mitsubishi Estate Co., Ltd.

ANNUAL REPORT 2015

19

BUSI NE SS R E V I E W

O F F ICE B UIL DIN G B US IN E S S

2Number of Top Companies*
Companies
50

Enhancing the Possibilities of Tomorrow umber of Top Company
N
Headquarters within 5km
of City Center

Adapting to
the Changing Needsof Growing Companies

40 umber of Top Company
N
Headquarters within 10km
of City Center(excluding those within 5 km)

30

20

K.K. Box Japan moved to EGG JAPAN in 2013.
Katsunori Furuichi, Box Japan’s president and representative director,
talks about the reasons for choosing Marunouchi andhow the business is developing.

100

The Premier Floor Marunouchi, situated on the 34th
floor of the Marunouchi Building, was opened in October 2014
to provide small-scale, high-grade office space for burgeoning
venture companies and global companies planning to expand
their business operations in Japan. Box Japan, the Japansubsidiary of Box Inc., of the United States, which provides
cloud collaboration services, has been a tenant since thefloor opened.
shimadaEGG JAPAN, an office space targeted at start-up
companies, endeavors to offer business development support
services and condenses all the functions required by an office
into exclusive areas with a compact design. You moved from
EGG JAPAN into The Premier Floor Marunouchi to increase
floor space. How do you rate its functionality?
furuichiIt has definitely been a jump in terms of officesophistication. Customers and partner companies often remarkthat they prefer to hold meetings here because of its comfort,
and, considering the benefits for business efficacy and recruitment, I think it is extremely reasonable. Actually, when we first
moved into EGG JAPAN, my only trepidation was that spaceota“We are leveraging the know-how
accumulated through our operations
and the networks we have built withcompanies over many years to support
office product planning and businessdevelopment.”
ota

20

Katsunori Furuichi

Kiyoshi Ota

Eiko Shimada

President & Representative Director
K.K. Box Japan

Deputy General Manager
Office Leasing and
Tenant Relations Department
Mitsubishi Estate Co., Ltd.

Deputy General Manager
Tokyo Client Business Development Office
Mitsubishi Estate Co., Ltd.

i

ha

ng

a
Sh

l

ng

ou

Se

Ho

ng

Ko

Si

re

po

a
ng

yo

k
To

ris

Pa

k

on

nd

Lo

ew

r
Yo

N

* Fortune Global 500, 2013
Source: SHINKENCHIKU, June 2015, Special Issue

Interviewed in The Premier Floor Marunouchi“Marunouchi is an ideal hub for businessbecause of a myriad of sophisticatedclients as well as numerous companies in
the area to collaborate with as partners
in the development of solutions.”
furuichi

was somewhat limited, and just under a year after we moved
in we had grown enough to fill capacity. We had already felt
the benefits of introduction to companies in the area throughMitsubishi Estate’s network at EGG JAPAN, but when weheard that a new floor was being developed as the next growth
step for EGG JAPAN, we really began to understand Mitsubishi
Estate’s capabilities.
ota
To build an environment where tenants can devote
themselves to business and to support their expansion,
including by leveraging the Group’s extensive network, is thecommon objective of both EGG JAPAN and The Premier Floor
Marunouchi, and the know-how we have accumulated throughour business operations, including the property management
and hotel businesses, is used in product development.

MITSUBISHI ESTATE CO., LTD.

Why did you choose to set up your operations
in EGG JAPAN in Marunouchi?
furuichiWe had also considered other areas outside
Marunouchi, but to market the services that Box Japan
provides to corporations, we decided Marunouchi was thebest. We were attracted by the large number of customers in
the area who could use Box’s services to increase productivity,
boost innovation, and drive the Japanese economy forward.
ota
Approximately 4,000 prestigious companies arelocated here in Marunouchi. Would you say that the close
proximity between you and your clients has earned you
positive evaluations?
furuichi
The concentration of businesses in the area isimportant not only for communication with clients but also tofoster innovation. Box Japan often engages in the collaborative
development of solutions with software vendors, systems
companies, and communications companies, and the processof ironing out the details face-to-face is a common practice.
ota
As you said, the Group is working toward increasing
the attractiveness of Marunouchi as a city by gathering large,
conventional corporations as well as global corporations,such as Box, and venture companies together in one area,
and we hope to build a city thriving with interaction. With thisshimadaANNUAL REPORT 2015

“We want to make Marunouchi a place
where large, conventional Japanese
corporations as well as global corporations
and up-and-coming businesses can cometogether, and companies engaged in new
challenges can interact with each other.”shimadain mind, what do you think is most important to the futureof Marunouchi?
furuichiThe “smart creative” employees desired by
growing companies also desire comfort outside of work, so
I would say cultural richness and, of course, English support.
The hurdle for foreigners living in Japan is higher than thatin Singapore or Hong Kong, and raising the bar is going to
be important in creating a more diverse city.
shimadaTo create a Marunouchi where people with adiverse range of values can interact freely, EGG JAPAN and
The Premier Floor Marunouchi listen carefully to the opinionsof tenants and continue to think about ways to create value
unique to the Group.

21

BUS I N E SS R E V I E W

L IF E S T YL E P R O P E RT Y BUSIN ESS

Enhancing the Possibilities of Tomorrow

Generating New Business
Opportunities by
Developing Diversified Assets

Hiroki Nabe
Logistics Facilities Development Department“By aggressively promoting the
Mitsubishi Estate Group’s logistics
property brand ‘Logicross,’ we willheighten awareness of our services in
the market.”

Area acquired in Nagoya for the new logistics facility

On April 1, 2015, the former Retail & Logistics Property Group
restructured to form the Lifestyle Property Business Group.
We plan to strengthen the existing retail properties andlogistics properties business and, to acquire new revenue
sources, we have reorganized to support the development ofasset types that include new business but exclude office andresidential properties in Japan. Our objective is to become areal estate business that improves the quality of our residents’
lives and supports a diverse range of lifestyles.
The Retail Properties Business develops a variety of commercial properties across Japan, suited to the particular featuresof their location. This business is continually engaged inproperty planning, development, tenant leasing, and management operations through its comprehensive business structure.

We are currently engaged in three key areas of development toincrease growth: integrated urban facilities, including a facility
in the Marunouchi area, shopping centers such as MARK IS andAQUA CITY ODAIBA, and the PREMIUM OUTLETS® chain
by Mitsubishi Estate • Simon Co., Ltd.
The Logistics Properties Business will continue to contributeto the improvement of social infrastructure by providing safe,
secure, andcutting-edge
logistics facilities.

MARK IS minatomirai

Market Growth through the Developmentof Logistics Facilities

Hiroki Nabe, who works in logistics property development,
points out that the domestic logistics market is growing rapidly
because of the expansion in e-commerce, and that there has
been a change in the logistics property functions in demand
along with that growth. “Tenants are not only looking forlocations based on access to highways, adequate space, andthe surrounding environment. They are also concerned aboutcommuting access for workers from residential areas anda good working environment for employees,” he says.
To meet these needs, Mitsubishi Estate completed theconstruction of a large-scale logistics facility in Fukuoka
Prefecture in October 2014. Logicross Fukuoka Hisayama
boasts 40,000 square meters of floor space and is the first
property to be independently developed by Mitsubishi Estate
under the Logicross brand.

Outlet Business Also Planning New Development
In addition to the expansion at TOKI PREMIUM OUTLETS® in November 2014, andat SHISUI PREMIUM OUTLETS® in April 2015, in March 2015 Mitsubishi Estate •Simon, which develops and operates PREMIUM OUTLETS® malls, settled on a basic
agreement with the city of Fukaya, in Saitama Prefecture, to construct a PREMIUM
OUTLETS® mall area. The new outlet will be the tenth built by the Group in Japan,
and it is expected to start commercial operation during the fiscal year ending March
31, 2019. We aim to make it the largest such facility in the country.

Logicross Fukuoka Hisayama
GOTEMBA PREMIUM OUTLETS®

22

MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2015

Reinforcing Our Presence through the Logicross Brand

Collection of information is extremely important in real estatedevelopment, particularly in the acquisition of commercial
development land, and a great deal of information is available
to market players with a strong reputation. Facilities that carry
the Logicross brand serve to strengthen our presence as amarket player in logistics facilities development. “To steadilybuild our portfolio of properties, I first want to aggressively
promote ‘Logicross’ in the market and raise market awarenessof Mitsubishi Estate’s activities in logistics facilities,” states
Mr. Nabe enthusiastically.
Mr. Nabe thinks that expanding the range of assets will bepositive in several ways. Such an expansion will raise the levelof the Mitsubishi Estate Group’s comprehensive capabilities
and create synergies between business segments or lead togreater business opportunities. “The locations of logistics
properties are quite different from those of our existing
portfolio of buildings, residences, and other properties.
These properties are expanding our contacts with landowners
and tenants that were difficult to approach in the past. The
expanded range of contacts is also enabling Mitsubishi Estate
to consider projects in industrial parks or suburban areas near
highway interchanges. By developing logistics properties, wewill widen the range of business options for the Mitsubishi
Estate Group as a whole. In addition, I want to contribute tostrengthening our total solutions capabilities as a comprehensive developer that can deal with all situations,” he explains.

23

BUSI NE SS R E V I E W

R E S IDEN TIAL BUSIN ESS

Enhancing the Possibilities of Tomorrow

Carefully Considering theUnique Synergies between
People and the Area in Which They LiveJun Shibata from Mitsubishi Jisho Residence Co., Ltd., and Kunihiko Ishii from Mitsubisi Jisho Sekkei Co., Ltd.
give valuable insight into the work that goes on behind the scenes in residential redevelopments.

shibata
The Mitsubishi Estate Group has been engaged indevelopment of The Parkhouse NishiShinjuku Tower 60 as thedesignated project representative since 2006. Mr. Ishii, you are
the design supervisor for this long-term project, which finallyentered development in 2014. Since then, the landscape has
been gradually changing.
ishii
The view has changed a little, but the unseen value ofthe area, such as its topography, history, and local community,
which make up its unique character, remains unchanged. We
have taken this unique character into account from a design
perspective and solidified our project policies while consideringvarious ideas and development requirements.
shibata
So, this area is characterized by its metropolitan
location flanked by the skyscrapers of Shinjuku, the redevelopment of urban areas interspersed with small wooden houses,
and the connections that the people who have lived and worked
here for years have built with the area. Moreover, the area
evokes an old-time tradition of warm personal interactions in
the bustling shopping streets frequented by local residents.
ishii
The theme of the project is “connection,” whichcame from our desire to reflect the area’s history, while leveraging the potential of the land. For example, we plan to connect
the bustling streets that intersperse the skyscrapers of Shinjuku
to the plot by building a green space open to the public.
Moreover, the provision of a communal area where residents
have the opportunity to connect with each other will further
serve to make this theme a reality.

24

“The strength of the Group is its ability
to engage in development from various
perspectives, while protecting the trustthat we cherish and staying
true to our core values.”
ishii

Mr. Shibata, I believe you are also engaged in groundbreaking initiatives to encourage interaction among residents?
shibata
We have been holding meetings and workshops
for people considering to purchase units and residents before
they move in. Expanding on your design philosophy of“connection,” we hope to support the area’s community, andwe plan to hold a total of 60 support programs between 2017and 2020. The shaping and invigoration of the community isimportant to building a safety network, and we are working
hard from the perspective of preventing and reducing disasters.
ishii
In order to make skyscraper residencies function likeorganic “cities,” do you also offer services?
shibata
We have come to understand the importance of
creating support infrastructure through communication withresidents who already live in the area. We hope to consolidate
our wisdom and consider what we can do as a Group to ensurethat local people can continue to live happily and comfortably,

MITSUBISHI ESTATE CO., LTD.

Kunihiko Ishii

Jun Shibata

Deputy General Manager
Residential & Living Environmental
Design Department
Mitsubishi Jisho Sekkei Inc.

LeaderUrban Development Department
Mitsubishi Jisho Residence Co., Ltd.

Development at The Parkhouse NishiShinjuku Tower 60

and the fact that we were chosen to be a partner in this project
demonstrates the expectation that people have of our ability.
ishii
While protecting the trust that we cherish and staying
true to our core values, we aspire to engage in developmentfrom various perspectives and build a living environment only
Mitsubishi Estate can provide.

“We hope to consolidate ourknowledge and consider what we cando as a Group to ensure that tenants
and local residents can continue tolive happily and comfortably.”
shibata

Pushing Forward
The Group aims to expand the property management, which forms part of the Residential
Business, and has established a base to leverage its comprehensive strengths. As one aspectof this, in April 2015, we transferred the residential leasing business, which develops The
Parkhabio brand, from Mitsubishi Estate to Mitsubishi Jisho Residence Co., Ltd., centralizing
land acquisition, product planning, and construction orders. Prior to this transfer, in July
2014 Mitsubishi Estate and Marubeni Corporation merged their condominium management
subsidiaries. Together, we are working toward improving our management services byeffectively leveraging our systems and know-how, and we are aiming to streamline ourbusiness by leveraging the scale merits of managing more than 300,000 residences.
From property management and renovation to removals and leasing management, we
endeavor to strengthen collaborations at Group companies to realize expansion and growth.
PARK HABIO AKASAKA TOWER

ANNUAL REPORT 2015

25

BUSI NE SS R E V I E W

IN T E R N AT IO N AL B US IN ESS

Enhancing the Possibilities of Tomorrow

Establishing a Landmark
in Singapore
Developing Office Buildings
Symbolic of Our Asian BusinessIn December 2014, the Mitsubishi Estate Group completed its
first office building project in Asia: CapitaGreen. Located in
Raffles Place, Singapore’s business center, CapitaGreen is a
40-story, state-of-the-art high-rise building. Designed aroundthe theme of harmony with the environment, the building
features an exterior that is covered approximately 55% withgreenery. Moreover, the floors boast many amenities and arehighly functional. Shojiro Kojima, president since 2014 of
Mitsubishi Estate Asia Pte. Ltd., tells us the reason for developing an office building that merits being a landmark in so many
ways. “It’s a symbol of the Mitsubishi Estate Group’s businessdevelopment in Asia,” he declares.
Mr. Kojima indicates that compared with Europe, thehurdles for conducting real estate business in Asia are highbecause of such factors as the importance of ownership rules
and business practices as well as from the perspective of
market liquidity and transparency. “By constructing a building
symbolic of our work in the business center of Singapore,
where many global companies have established bases, wehave substantially heightened awareness of the Group in
the market,” he stresses.

Forming Trusting Partnerships
while Expanding Projects across Asia

For development projects, such as CapitaGreen, it is importantto have a partner with access to abundant information. On thisproject, that partner was CapitaLand Limited, a Singaporean

26

Shojiro Kojima
Managing Director
Mitsubishi Estate Asia Pte. Ltd.

“The foundation for creating a
relationship of trust with essential
partners for business developmentin Asia is to share a common urban
development vision.”

CapitaGreen office, Singapore

company that is one of Asia’s largest real estate companies.
“The Group and CapitaLand share the same vision in our realestate development businesses—to build communities where
people can live, relax, and work—that is the foundation of ourmutual trust,” Mr. Kojima says.
Mr. Kojima believes that to expand operations in Asia, itwill be necessary to continue to seek out trustworthy partners
and develop projects in multiple countries. He explains, “Asiais going through a growth phase. While, a wealth of business
opportunities exists, the stability in individual markets is notnecessarily high. With that in mind, keeping a close eye on
conditions in each country’s market, I want to build an Asian
portfolio in stages diversified across multiple countries. I thinkthat is the key to taking part in Asia’s growth while constantly
controlling risk appropriately.”

MITSUBISHI ESTATE CO., LTD.

Expanding Our Portfolio to the European Continent
with Acquisition of a Paris Office Building
The Mitsubishi Estate Group began developing its Asian operations full scale,primarily in residential and commercial property development, following
the establishment of Mitsubishi Estate Asia in 2008 and Mitsubishi Estate(Shanghai) Ltd. in 2013. In the United States and Europe, however, the strategy
has been different. Since setting up local subsidiaries in the United States in1972 and in the United Kingdom in 1986, investments have been divided
between purchasing buildings based on the premise of earning rental revenues
and on the premise of turning them over for a profit. In fiscal 2015, the Groupacquired an office building in Paris as its first property on continental Europe.
The Group will continue to expand and diversify its European portfolio.

ANNUAL REPORT 2015

46 Rue La Boétie, Paris

27

BUSI NE SS R E V I E W

IN V E S T M E N T MAN AGEMEN T BUSIN ESS

Enhancing the Possibilities of Tomorrow

Strengthening Our Response
to Investor Needs

Ken Takanashi
Senior Vice President
TA Realty LLC

TA Realty LLC, which employs a hands-on
approach to investment fund management,
and the Mitsubishi Estate Group, which isengaged in long-term strategies to add
value to the Marunouchi area, share acommon investment philosophy.

Purchases to Swiftly Enhance
Our Investment Portfolio

Improving Our Response to Investor Needs
to Boost Future Growth

In addition to expanding its real estate development business—
one of its core business foundations—the Group is enhancing
its management services business, which provides services
based on specialist know-how. We are engaged in efforts tocreate synergies between this business and our core business.
In January 2015, through our U.S. subsidiary Rockefeller
Group International, Inc., we purchased TA Realty LLC,
a prominent real estate fund management company in the
United States. In doing so, we advanced toward reaching thegoal for total assets under management set forth in ourLong-Term Vision, BREAKTHROUGH 2020.
TA Realty’s total assets under management amounted
approximately ¥1.4 trillion as of March 31, 2015, but thebenefits of the purchase extend beyond this. Ken Takanashi,
who has rich experience in investment management in Japanand currently works for the company, emphasizes its trackrecord of over 30 years in business development. “Thisacquisition, with the proven track record that was gained,
represents a key resource to the growth of the Group’s
investment management business in the United States.”

Mr. Takanashi explains that the investment philosophies of the
Mitsubishi Estate Group and TA Realty share many common
traits. “Fund management companies differ in their investment
style, but the strength of TA Realty is its hands-on approach toraising value by leveraging its deep understanding of real estate
to seek out high-potential properties. I feel that this is something that we share with the Mitsubishi Estate Group, which
has been engaged in long-term initiatives to raise the value ofthe Marunouchi area.”
Going forward, we will continue to strengthen our global
real estate investment support system for institutional investors
in countries around the world through cooperation with ourthree bases in Japan, the United States, and Europe. Moreover,
we are pushing forward with our hybrid model scheme ofinvestment using a combination of our own capital and capitalprocured from outside investors. “We are confident that theGroup is the most active in pursuing business overseas, including its investment management operations, among its domestic
competitors. We are pursuing growth by providing attractive
investment opportunities to meet the needs of domestic andoverseas investors.”

Expansion of Investment Management
Business in Japan

Trend of Assets under Management by
Japan Real Estate Investment Corporation

In Japan, Mitsubishi Jisho Investment Advisors, Inc. (MJIA),
which manages products ranging from private funds to private
REITs, and Japan Real Estate Asset Management Co., Ltd. ( JREA),
which manages listed REITs with a focus on the investment andmanagement of office buildings, are helping to drive the Group’s
investment management business forward. Assets under management at MJIA’s open-ended unlisted REIT, Nippon Open Ended
Real Estate Investment Corporation, surpassed ¥230 billion in
October 2014 and, in addition to demonstrating the largest growthof any private REIT in Japan, MJIA managed a fund for specificinvestors inside and outside of Japan, with total assets undermanagement surpassing ¥600 billion. Moreover, we continue
to work toward strengthening our asset management business.
In November 2014, the Group increased its holdings in JREA toa 90% shareholder ratio. The assets under management at Japan
Real Estate Investment Corporation, managed by JREA, surpassed¥900 billion as of the end of May 2015.

1,000

Billions of yen

750

660.6

718.6

782.4

837.4

883.5

500

250

0
3/20113/20123/20133/20143/2015Month/Year

Trend of Assets under Management by Nippon
Open Ended Real Estate Investment Corporation
Billions of yen
300

238.1
192.5

200

103.8

100

27.0

50.9

0
3/20113/20123/20133/20143/2015Month/Year

28 State Street, Boston, Massachusetts, United States

28

MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2015

29

SUMMARY OF
MANAGEMENT & SERVICES BUSINESS GROUP
ARCH I T E C T U R A L DE S IGN & E N GIN E E R IN G BUSIN ESS

Business
Environment

HO TEL B USI NESS	Total construction investment in Japan for fiscal 2016 is expected to reach ¥46.23 trillion, according to the
Research Institute of Construction and Economy (RICE).

Business
Environment	Construction demand is on an upward trend against a backdrop of multiple positive factors. These factors
include low interest rates, continued recovery efforts after the Great East Japan Earthquake, the selectionof Tokyo as the host of the 2020 Summer Olympics and Paralympics, and the government’s designation of
National Strategic Special Zones. Conversely, there are negative factors, such as soaring labor costs becauseof the scarcity of construction workers.
Strategies	Take steps to strengthen design, technology, and proposal capabilities; expand sales power and win new
customers; reinforce competitiveness of core operations; and bolster overseas operations.

	The number of people from other countries visiting Japan is rising sharply. The reasons behind the upswing
in visitors include a substantial relaxation in tourist visa requirements, an improved consumption tax
exemption system, and the progressive depreciation of the yen. In 2014, the number of foreigners visiting
Japan increased 29%, to a record high of more than 13.41 million people, according to the Japan National
Tourist Organization ( JNTO).
	There has been an increase in plans to build hotels or expand existing facilities to add hotel rooms in preparation for hosting the 2020 Summer Olympics and Paralympics in Tokyo. Further, hotel operating rates continue
to rise because of growth in the number of Japanese and foreigners using existing hotel accommodations.

Strategies

	Proactively implement technologies that are environmentally friendly and reduce the impact of property
development on the environment.

	Expand revenues by boosting the overall brand power of the Royal Park Hotels group, pursuing further
development of “THE SERIES” brand of hotels, and increasing the degree of customer satisfaction by
improving the membership sharing system and other measures.
	Reinforce other business measures, such as those to actively take advantage of rising tourist demand driven by
the growing number of overseas tourists.

Fiscal 2015 Topics

Fiscal 2015 Topics

The following are the major architectural design and engineeringand construction management (CM) projects that Mitsubishi Jisho
Sekkei Inc. participated in during the fiscal year under review.
In October 2014, jointly with Tokyo Gas Co., Ltd., and Mitsui
Fudosan Co., Ltd., Mitsubishi Estate decided on an urban redevelopment plan for an area in Shibaura, situated in Minato-ku in Tokyo.
Provisionally called the TGMM Shibaura Project, plans call for theconstruction of a multipurpose business center with approximately
300,000 square meters of floor space. Mitsubishi Jisho Sekkei will be
responsible for the design and engineering. Mitsubishi Jisho Sekkei
will leverage its accumulated experience with developing urban
communities in not only constructing high-rise buildings but
installing a pedestrian deck for easy access and creating a pleasantenvironment filled with greenery.

The Chiyoda Campus Redevelopment Project at Otsuma
Women’s University has been ongoing since 2008. In December
2014, as part of the project, construction got under way on the H
Building at the Chiyoda Campus. Mitsubishi Jisho Sekkei is responsible
for the architectural design and engineering of the H Building andintends to employ its extensive experience in educational facilities on
the project. Also, the Mitsubishi Estate Group is providing overallreal estate solutions for other parts of the redevelopment project.
In February 2015, the T.S. Dream Mall—a multipurpose facility
for which Mitsubishi Jisho Sekkei was responsible for the basicarchitectural design and engineering—opened for business in the
Taiwanese city of Tainan. The T.S. Dream Mall is the first projectcompleted in Taiwan by Mitsubishi Jisho Sekkei.
In fiscal 2015, Mitsubishi Jisho Sekkei opened its Hiroshima
Office to expand its operations in the region. The office will beaiming to win orders in the Chugoku and Shikoku areas of Japan.

In September 2014, ROYAL PARK HOTEL THE HANEDA opened
at Haneda Airport, in Tokyo. Underpinned by such factors as thegreater number of landing slots allowed at the airport and theincrease in foreigners travelling to Japan, the number of users ofHaneda Airport exceeded 70 million in 2014. In the past, it had been
pointed out that a lack of hotel accommodations existed at the
airport. However, now that the hotel has opened, the entrance to
ROYAL PARK HOTEL THE HANEDA is conveniently located on
the same floor as the third-floor arrival lobby of Haneda Airport’s
international terminal. The hotel is providing customers fromaround the world with high quality and refined services unique tothe Royal Park Hotels chain.
The airport hotel has also set up Japan’s first transit hotel,
ROYAL PARK HOTEL THE HANEDA Transit, which is situatedwithin the security area* of the airport and contributes to the

Mitsubishi Estate Group’s Roles in the Otsuma Gakuin Educational Institution
Chiyoda Campus Redevelopment Project
Mitsubishi
EstateMitsubishi
Jisho Sekkei

Otsuma Gakuin Educational Institution,
Main Building (Construction began inAugust 2014)

Project management
supportConstruction
management

Otsuma Women’s University, H Building(Construction began in December 2014)

In charge of
construction

Architectural designand engineeringinternationalization of the airport. Like Singapore’s ChangiInternational Airport, which is highly rated as a hub for Asia, andKorea’s Incheon International Airport, this facility meets the needsof in-transit international passengers who want to stay at a hotel
without going through immigration.
The hotel is expanding business opportunities in response to
the increase in the number of international passengers. For example,
at Royal Park Hotel in Nihonbashi sales of duty-free goods commenced at its delicatessen bar. Moreover, the hotel is constantly
working to improve the degree of customer satisfaction.
*	The area of the airport where only in-transit and embarking passengers who havechecked in and completed the securities inspection and embarkation procedures
are allowed.

Trend in the Number of Visitors to Japan
Millions

Mitsubishi Jisho
Residence

15

10

5

Repair and maintenance of school buildingsof Otsuma Women’s University andrebuilding of the university’s annex
Otsuma Kugayama Dormitory

Construction
management
Architectural designand engineering0Computer graphic illustration of the completed
TGMM Shibaura Project

30

2010

Development

2011

2012

2013

2014

CY

Source: Japan National Tourist Organization (JNTO)ROYAL PARK HOTEL THE HANEDAMITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2015

31

SUMM A RY O F M AN AGE M E N T & S E R V ICE S BUSIN ESS GROUP

REA L E STAT E SE R V ICE S B US IN E S S

B USI NESS DEV ELO PMENT, CO NSULTI NG & SO LUTI ONSBusiness Environment

Value Drivers

	The worldwide deregulation of financial regulations has stimulated active real estate investment
by Japanese and international investors. Basedon the outlook for a continued robust real estatemarket, investment real estate transactions are
expected to expand.
Strategies

	As a CRE* strategy specialist, supply corporate
customers with a wide range of high-quality
services utilizing the comprehensive capabilitiesof the Mitsubishi Estate Group.

Fiscal 2015 Topics

Strategic sales organization comprisingAbility to recognize problems

Robust solutions using

Mitsubishi Real Estate Services Co., Ltd., employs a customer relations
management (CRM) system to pursue improvements in the quality of services
for customers and to enhance business efficiency.
Mitsubishi Real Estate Services is expanding its corporate solutions sales.
In July 2015, part of the residence leasing operationscommissioned by corporate
customers of Mitsubishi Jisho
House Net Co., Ltd., weretransferred to the subsidiary.

of horizontally integrated segments

through consulting

Groupwide resources* Corporate Real Estate: 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.

Scope of Activities

The Business Development, Consulting & Solutions Group
provides services, leveraging such Mitsubishi Estate Group
strengths as vast experience and comprehensive capabilities.
The Group provides services through two collaborating
departments: the Corporate Solutions Sales Department,
which develops proposal-based sales from the perspective of
the customer’s corporate real estate (CRE) strategy, and theReal Estate Solutions Department, which provides overallmanagement of project-based development and a varietyof consulting services.

Specifically, we consult with customers to ascertain theircurrent situation as well as their unique issues, concerns, andneeds to propose ideal solutions utilizing a wide variety ofbusiness services and resources developed by the Mitsubishi
Estate Group. In addition to offering consultation on individual
real estate projects, we provide comprehensive real estate
diagnostics for all related real estate properties to customers
who hold or lease multiple real estate properties, focusing on
CRE strategy support services to enhance corporate value.

Offering Consulting Services and Solutions

Consulting
Consult
Determine current status
Conduct research
and analysis

BUSI NE SS C R E ATIO N DE PART M E N T
Customers

Propose initiatives

Business Environment	Many external factors have combined to createa variety of new business opportunities. Suchfactors include the introduction of the private
finance initiative (PFI) and other measures being
pursued under the Japanese government’s
growth strategy and the selection of Tokyo
as the host of the 2020 Summer Olympics andParalympics. In addition, there has been an
expansion in inbound demand from overseas
generated by the increase in the number offoreigners visiting Japan.
Strategies

	Develop new businesses, such as airport
operation management, without restricting
development to current business domains.
Utilize the extensive achievements and knowhow accumulated by the Group related to officebuilding and commercial facilities, residences,and hotels in developing these new businesses.

Determine proposal

Fiscal 2015 Topics

In October 2014, Mitsubishi Estate established the Business Creation
Department within the Corporate Group to accelerate new businessdevelopment. The department was reorganized from the Business Creation
Office that was previously part of the Corporate Planning Department.
The Business Creation Department has set up an Airport Project
Promotion Office, which is starting up full-scale activities aimed at winning
operating contracts for Sendai Airport and other regional airports. In 2016,
we are aiming to be the first in the private sector to be commissioned by thegovernment to operate an airport facility through this project. By entering the
airport operations business, Mitsubishi Estate plans to utilize its past record in
office building and commercial property management to develop airport
building property and other airport-related businesses.
By July 2015, the Mitsubishi
Estate Group had already placedits bid for specific operations at
Sendai Airport. Going forward,
the Group will continue toconsider participation in theprivatization of other regional
airport operations.

Implement

Analyze and review

Solution
Real estate developmentnBusiness plan supportnProject management■

Market research and analysis■ ‌

Effective utilization / joint ventures(equivalent exchanges / term leasehold)■Due diligence

■ ‌

■

Acquisition support

■ ‌

n

n

Provisional usenReconstruction

Comprehensive building analysis■

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

ANNUAL REPORT 2015

■■Real estate investment strategy
formulation support

Real estate liquidity

Development method proposals■

MITSUBISHI ESTATE CO., LTD.

Real estate investment

n

■

32

Business
Development,
Consulting &Solutions Group■

Single-unit homes and rental andcorporate housing

Building operation and management■

Securitization■ ‌Specified real estate joint ventures■

Sales and leaseback■

Real estate brokerage

Asset management

Construction■

Real estate-backed financial support■ ‌

Design and supervision■■

Residential and office renovation
■

■
■

■

Environmental assessment and researchConsulting for urban development andprivate finance initiatives (PFIs)
Consulting, design, and supervision forenvironmental and civil-engineeringsolutionsOperation and management plan analysis
and proposals
Long-term maintenance plan consulting
Commissioned operation and managementof buildings, retail facilities, and hotels■

Subleasing■

Tenant marketing

CRE strategy support■

Organization of CRE information■

CRE valuation■

Support for strategy formulation andimplementation

Construction management
Design and supervision for buildings andstructures
Design and supervision for interiors
and exteriors

33

FINANCIAL HIGHLIGHTS BY SEGMENT
Years ended March 31

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

Building BusinessResidential BusinessBillions of yen%Billions of yen

%

600

60

600

60

500

50

500

50

400

40

400

40

300

30

300

30

200

20

200

20

100

10

100

10

0

0

0

0

2011

2012

2013

2014

2015

2011

2012

2013

2014

CORPORATE GOVERNANCE

The role of developers is gradually becoming more important, and we are now
expected to build environmentally friendly cities with advanced disaster management functions that cater to global urbanization and an aging demographic.
The Mitsubishi Estate Group aims to contribute to the creation of sustainable
cities to meet various individual needs. While developing our businesses froma long-term perspective, we are continually engaged in strengthening ouroperational management system.

2015*	As of April 2014, the Commercial Property Development & Investment Business has
been integrated into the Building Business.

Commercial Property Development & Investment Business

International BusinessBillions of yen%Billions of yen

%

60

60

90

60

50

50

75

50

40

40

60

40

30

30

45

30

20

20

30

20

10

10

15

10

0

0

0
2011

2012

2013

2014

2015*

0
2011

2012

2013

2014

2015

*	As of April 2014, the Commercial Property Development & Investment Business has
been integrated into the Building Business.

Investment Management BusinessArchitectural Design & Engineering BusinessBillions of yen%Billions of yen

%

12

60

30

12

10

50

25

10

8

40

20

8

6

30

15

6

4

20

10

4

2

10

5

2

0

0

0
2011

2012

2013

2014

0
2011

2015

Hotel Business

2012

2013

2014

2015

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

%

60

12

30

12

50

10

25

10

40

8

20

8

30

6

15

6

20

4

10

4

10

2

5

2

0

0

0

0

–2

–5

–10
2011

34

2012

2013

2014

2015

–2
2011

2012

2013

2014

Izumi Park Town, Sendai, Miyagi Prefecture

2015

MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2015

35

CORPORATE GOVERNANCE

Message from the Chairman of the Board

Outline of Corporate Governance

It is essential to approach urban development from two perspectives: constructing
infrastructure, such as buildings and roads and public spaces, and providing support services
for the local community. Urban development also must be approached from two time
perspectives—one that is contemporary to meet the requirements of today’s society andone that is visionary to anticipate the future. The Board of Directors of the Mitsubishi EstateGroup has the role of deliberating business strategies and management issues from theperspective of building long-term relationships with a wide range of stakeholders while atthe same time increasing corporate value.
To target growth in corporate value by taking these pluralistic perspectives into account,
it is indispensable for the Board of Directors to properly perform its governance function.
Since 2006, we have appointed multiple outside directors to the Board to aid us in that task.
Currently, our 13-member Board has four outside directors. They contribute significantly tothe enrichment of the Board’s discussions by giving advice or expressing opinions that utilize
their extensive individual business and management experience and expertise. In addition,
three out of the four statutory auditors participating in the Board meetings are outside
statutory auditors, who closely monitor business execution by directors. At the annual
meeting of shareholders held in June 2015, some new members were elected to the Board.
Of our four outside directors, we have two new outside directors, including one woman.
Also, one of the three outside statutory auditors is new. Based on their fresh points of view
and proactive participation in discussions, they are contributing substantially to the greater
diversity of the Board and to energetic debate.
Through the performance of its governance function with this myriad of perspectives inmind, the Board of Directors is pursuing the Mitsubishi Estate Group’s fundamental missionof “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.”

Basic Philosophy

Board of Directors

We are working toward realizing our mission as we aim
to foster the growth of true corporate value. We recognize
to achieve this goal, we need to establish a healthybalance between corporate growth and satisfying ourvarious stakeholders.
Based on this mission, the Mitsubishi Estate Group strives
to implement management initiatives that prioritize shareholder value, and to ensure efficient and sound Group management, it is working to build a management system based onvitality and flexibility. We consider corporate governance to be
one of our most important management themes, and weconstantly pursue the creation of systems that reflect thephilosophy and values of the Group.

The Board of Directors, which comprises the chairman andexecutives of the Board, convenes regularly to report on thestate of business operations and internal audit procedures.
Moreover, we appoint four outside directors from diverse
backgrounds to ensure the transparency and objectivity ofmanagement and secure the efficacy of management andsupervisory functions. Board meetings serve as a platform toshare accurate information and engage in effective discussions
to make business decisions.
Further, in cases related to the acquisition of assets throughan urgent bidding process, we have introduced a system underwhich special Board members elected in advance by the Board
can pass decisions through a majority vote.

Overview of the Corporate Governance System

Board of Statutory Auditors

The Mitsubishi Estate Group aims to strengthen its management,
audit, and business execution to increase the efficiency ofmanagement and speed up its decision-making processes.
To this end, we have a system of statutory auditors in placeand have introduced an executive officer system. Moreover,through the appointment of outside directors to the Boardof Directors, we are working toward the improvement ofbusiness execution, the separation and greater control ofsupervision and auditing, in addition to ensuring the greatertransparency and objectivity of management.

Each statutory auditor is present at meetings of the Board of
Directors. In addition to offering their opinions when required,
standing statutory auditors attend such important meetings
as management meetings, where they carefully inspect drafts
and other important documents; assess the state of businessexecution at related internal departments and Group companies; and share any important information with other auditorsof the Board of Statutory Auditors, where they assess thebusiness execution of directors by exchanging opinions anddiscussing important matters. Moreover, we have established
the Office of Statutory Auditors to support the statutory
auditors in performing their duties and secure the personnel
and structures that are required in the audit process.

July 2015

Chairman of the Board
Mitsubishi Estate Co., Ltd.

36MITSUBISHI ESTATE CO., LTD.

Corporate Governance Reports

ANNUAL REPORT 2015

http://www.mec.co.jp/e/investor/irlibrary/corp/

37

COR PO R AT E G O V E R N AN CE

Name
PositionAppointment year
Number of shares held
(As reported in Fiscal 2015 Financial
Report, available only in Japanese)

Directors and Statutory Auditors
Directors

Statutory Auditors

Keiji Kimura

Hirotaka Sugiyama

Jo KatoToshihiko Kazama

Masamichi Ono

Yutaka Yanagisawa

Representative Director
Chairman of the Board

Representative Director
President & Chief Executive Officer

Representative DirectorRepresentative DirectorRepresentative Director Standing Statutory Auditor








2015

2000

2007

2011

2013

2010

14,000 shares

27,000 shares

23,000 shares

50,213 shares

13,000 shares

8,000 shares

Naoto Aiba

Soichiro Hayashi

Toru Okusa

Junichi Tanisawa

Representative Director

Representative Director

Director

Director


2013

2015

2013

2014

19,000 shares

14,141 shares

19,000 shares

4,000 shares

Isao Matsuhashi

Shin Ebihara

Kazuhiko Hasegawa

Kenji Matsuo

Outside DirectorOutside DirectorOutside Standing Statutory AuditorOutside Statutory Auditor


2007

2015

– 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 INTERNATIONAL AIRPORTCORPORATION
Jun. 2004 Adviser, JTB Corp. (Current position)
Jun. 2007 Retired from the position of Chairman

and Director, NARITA INTERNATIONALAIRPORT CORPORATION
Jun. 2007 Director, Mitsubishi Estate Co., Ltd.

2008

Reason for the nomination– shares

The Company expects that
he would carry out thesupervision and check
functions regarding theCompany’s managementfrom an objective viewpoint
independent from management executives in chargeof business affairs byleveraging his management
experience in a lifestylerelated service company.

Apr. 1971 Joined the Ministry of Foreign Affairs

Born on February 16, 1948
of JapanJun. 2001 Director-General, Treaties Bureau,

the Ministry of Foreign Affairs of Japan
Sep. 2002 Director-General, North American Affairs

Bureau, the Ministry of Foreign Affairsof JapanJan. 2005 Assistant Chief Cabinet Secretary,

the Cabinet Secretariat
Mar. 2006 Ambassador Extraordinary andPlenipotentiary to the Republicof Indonesia
Apr. 2008 Ambassador Extraordinary andPlenipotentiary to the United Kingdom
Feb. 2011 Retired from the Ministry of Foreign(Current position)

2014

Reason for the nomination

14,000 shares

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

Apr. 1975 Joined Mitsubishi Bank, Ltd.

Born on June 5, 1952
Jun. 2002 Executive Officer,

Bank of Tokyo-Mitsubishi, Ltd.
Jun. 2005 Standing Statutory Auditor,

Bank of Tokyo-Mitsubishi, Ltd.
Jan. 2006 Standing Statutory Auditor,

The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Jun. 2008 Retired from The Bank ofReason for the nomination– shares

The Company expects that
he would ensure fairness andappropriateness in the Boardof Directors as a Statutory
Auditor by leveraging his
management experience ina city bank, etc.

Apr. 1973 Joined Meiji Life Insurance Company

Tokyo-Mitsubishi UFJ, Ltd.

Born on June 22, 1949
Dec. 2005 President and Representative Director,

Meiji Yasuda Life Insurance Company
Jul. 2006

Director, President,
Representative Executive Officer

Jul. 2013

Representative Executive Officer

Jul. 2013

Special Advisor, Meiji Yasuda Life
Insurance Company (Current position)

Reason for the nomination

The Company expects that
he would ensure fairness andappropriateness in the Boardof Directors by leveraging his
management experience ina life insurance company.

Jun. 2014 Standing Statutory Auditor, Mitsubishi

Jun. 2008 Standing Statutory Auditor,

Estate Co., Ltd. (Current position)

Mitsubishi Estate Co., Ltd.
(Current position)

Affairs of Japan
Jun. 2015 Director, Mitsubishi Estate Co., Ltd.

(Current position)

Shu Tomioka

Setsuko Egami

Iwao Taka

Outside DirectorOutside DirectorOutside Statutory Auditor


2006

2015

– shares
Born on April 15, 1948
Nov. 1975 Joined Morgan Guaranty Trust Company

of New YorkFeb. 1991 Branch Manager and Representative inJapan, 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)

2015

Reason for the nomination– shares

The Company expects that
he would carry out thesupervision and check
functions regarding theCompany’s managementfrom an objective viewpoint
independent from management executives in charge ofbusiness affairs by leveraging
his management experiencein a foreign-affiliatedinvestment bank.

Nov. 1983 Editor-in-Chief of “Travaille” magazine,

Born on July 16, 1950
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)

Reason for the nomination

The Company expects that
he would carry out thesupervision and check
functions regarding theCompany’s managementfrom an objective viewpoint
independent from management executives in charge ofbusiness affairs by leveraging
her abundant knowledge ofcorporate strategy, marketingstrategy and human resources
development.

– shares
Born on March 10, 1956
Apr. 1994 Full-Time Lecturer, Faculty of International

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)

Reason for the nomination

The Company expects that
he would conduct audit
duties for the Company byleveraging his extensive
knowledge regarding
corporate ethics
and compliance.

Apr. 2009 Dean, Faculty of Economics and Business

Administration, Reitaku University
Jun. 2015	Standing Statutory Auditor, Mitsubishi

Estate Co., Ltd. (Current position)

38

MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2015

39

COR PO R AT E G O V E R N AN CE

Corporate Governance Status

Executive Officers

Status of Board of Directors Meetings and Other Initiatives in Fiscal 2015
Items

Details

Number of directors (outside directors)

13 (4)

Frequency of Board of Directors(BOD) meetings

16

BOD attendance by outside directors

Isao Matsuhashi

Number of statutory auditors(outside statutory auditors)

4 (3)

16

Fumikatsu Tokiwa*116

Yasumasa Gomi*116

Frequency of Board of Statutory
Auditors (BOSA) meetings

14

BOSA attendance by statutory auditors(outside statutory auditors)

Kazuhiko Hasegawa 14

Akio Utsumi*113

Kenji Matsuo*210

BOD attendance by statutory auditors(outside statutory auditors)

Kazuhiko Hasegawa 16

Akio Utsumi*115

Kenji Matsuo*211

Accounting auditors

Ernst & Young ShinNihon LLC

Annual remuneration paid toindependent audit corporation¥136 million

Shu Tomioka

16*1 Retired as of the closing of the general meeting of shareholders on June 26, 2015.
*2 Outside statutory auditor Kenji Matsuo assumed his position on June 27, 2014. Therefore, the number of times he attended meetings of the Board of Directors andBoard of Statutory Auditors differs from that of other outside directors and statutory auditors.

Hirotaka Sugiyama

Jo KatoToshihiko Kazama

Masamichi Ono

President & Chief Executive Officer

Deputy President

Executive Vice President

Executive Vice President

Naoto Aiba

Soichiro Hayashi

Koji Kiyosawa

Kenichi Iwata

Executive Vice President

Executive Vice President

Senior Executive Officer

Senior Executive Officer

Atsuo Kyono

Toru Okusa

Yutaka Tajima

Tetsuji Arimori

Senior Executive Officer

Senior Executive Officer

Senior Executive Officer

Senior Executive Officer

Hidemi Waki

Junichi Tanisawa

Senior Executive Officer

Senior Executive Officer

Total Remuneration Paid to Directors and Statutory Auditors in Fiscal 2015
Category

Amount Paid

Total remuneration, etc., paid to directors(outside directors)¥651 million (¥40 million)

Total remuneration, etc., paid to statutory
auditors (outside statutory directors)¥88 million (¥53 million)

Notes:
1.	The above amounts include remuneration payments made to the four directors who retired their positions as of the end of the 115th general meeting of shareholders
held on June 27, 2014.
2.	The Company has not paid any employee-based compensation to its directors.
3.	The upper limit of remuneration paid to directors determined by general meeting of shareholders’ resolution is ¥800 million per fiscal year for ordinary remuneration(excluding employee-based compensation) and a separate upper limit of ¥200 million per fiscal year for deferred remuneration paid to directors based on the granting ofstock options. These remuneration upper limits were decided at the 92nd and 107th general meetings of shareholders, respectively, held on June 27, 1991, and June 29,
2006. Please note that stock options are not granted to outside directors.
4.	The upper limit of remuneration paid to statutory auditors determined by general meeting of shareholders’ resolution is ¥100 million per fiscal year. The upper limit was
decided at the 107th general meeting of shareholders held on June 29, 2006.
5.	The above amounts include stock option-based remuneration (¥86 million allotted to nine directors) paid in the fiscal year under review.
6.	The Company’s outside directors and auditors have not received any remuneration, etc., as directors or auditors of any of the Company’s subsidiaries.

Policy for
Determining
the Remunerationof Directors
and Auditors

40

The Company has decided on an upper limit for remuneration of ¥800 million per fiscal year and a separate upper limit of ¥200
million for remuneration by stock options per fiscal year as the total amount of remuneration for directors. Similarly, it has
decided on an upper limit of ¥100 million per fiscal year as the amount of remuneration for statutory auditors.
Looking at the composition of the remuneration, the Company has adopted a system that combines performance-linked
remuneration and deferred remuneration stock options for all corporate officers except outside directors and statutory auditors.
Outside directors only receive fixed remuneration because by definition they are not involved in business execution. Statutory
auditors also only receive fixed remuneration in accordance with their roles as standing or non-standing statutory auditors as
determined by discussion among the statutory auditors.
Performance-linked remuneration consists of fixed and variable portions paid on an annual basis. Directors receive a fixedmonetary portion for the discharge of their duties. The variable portion of their remuneration reflects corporate performanceand the performances of the businesses for which they are responsible. Accounting for 30% of the annual monetary remuneration, the variable portion is calculated based on performance evaluations of corporate results and by-sector results as well as oncomparisons with past results and fiscal year targets.
In fiscal 2007, the Company introduced a deferred remuneration stock options system to inspire greater enthusiasm andmotivation among directors to improve the Company’s stock price and business performance, thereby encouraging a common
interest with shareholders. In the same fiscal year, the Company abolished the retirement benefits system for directors based ona resolution by the general meeting of shareholders.
The Board of Directors approves the final decisions regarding remuneration for the Company’s corporate officers.

MITSUBISHI ESTATE CO., LTD.

Executive Officers
Junichi Yoshida

Tetsuo Yuasa

Senior Executive Officer

Senior Executive Officer

ANNUAL REPORT 2015

Masami Amano

Hisashi Komada

Hiroshi Katayama

Kenji Hosokane

Shinichi Takeuchi

Keiji Takano

Akinori Nakajo

Ikuo Ono

Noboru Nishigai

Masaki Yamagishi

Futoshi Chiba

Atsushi Nakajima

Akihiko Watanabe

41

RISK MANAGEMENT

In accordance with the Mitsubishi Estate Group Risk Management Regulations, the Group has formed a risk management system.
Based on that organization and system, the Group thoroughly implements a Plan-Do-Check-Act (PDCA) cycle to identify risk
exposures and to plan and implement mitigation measures and monitor risks.

Risks of Fluctuationsin the Real Estate Market

The real estate market is closely correlated with movement in the economy.
Deterioration in the economy has a strong impact on declines in real estate prices andrental fees and the increase in vacancy rates. In view of this correlation, the basic
policy of the Group is to conclude relative 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.

Interest-Bearing Debt (Mitsubishi Estate; Non-Consolidated)
Billions of yen

100

2,000

80

1,500

60

1,000

40

500

20

0

0
2006

Risks of Increases
in Interest Rates

Risks of Fluctuations
in Exchange Rates

Risks of Natural and
Man-Made Disasters, Etc.

42As an expert in large-scale urban development, the Group must comply with various
laws and regulations in its Japanese and overseas operations. Should there be anychanges in these laws and regulations, such changes could have an impact on theGroup’s operations in terms of additional costs arising from adapting to the new
systems and of substantial changes to the competitive environment. Therefore, theGroup constantly monitors trends in revisions of its related legal systems.
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 quantitative and qualitative
monetary easing in response to the credit crunch in financial markets and the slowdown in the global economy. Should interest rates rise, however, because of a change
in BOJ 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 affectthe 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 by 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 andits outstanding corporate bond balances.
In addition to those held in Japan, the Group is developing and holding assets in the
United States, Europe, and Asia, for which the book values and income are accounted
for in local currencies. Consequently, any fluctuation in exchange rates would affectthe 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 procuringassets overseas.
The occurrence of an earthquake, flood, other natural disaster, or climate change oran accident, fire, or other man-made disaster would impact the performance, financial
position, or other aspect of the Group’s business. The Group is redeveloping its
properties to install advanced disaster management functions and has establisheddisaster response measures through area management.

MITSUBISHI ESTATE CO., LTD.

2007

2008

2009

2010

2011

2012

2013

2014

2015

Fixed Interest Ratio (right scale)

475.0
13.5
201.2
171.7
—
80.0

465.0
—
221.0
152.2
—
81.8

540.0
—
290.2
212.2
—
79.6

575.0
—
285.6
389.2
—
68.9

560.0
—
329.1
401.2
—
68.9

550.0
—
324.0
365.7
—
70.5

620.0
—
306.8
453.7
—
67.1

715.0
—
319.8
640.7
35.0
60.5

685.0
—
314.3
615.7
—
61.9

665.0
—
420.1
601.7
28.0
63.3

Interest-Bearing Debt Ratio(right scale)

44.0

42.4

48.0

53.4

53.3

51.7

53.4

59.2

57.8

57.1

Straight Bond
Convertible Bond

Risks of Changes
in Laws and Regulations

%

2,500

Bank Loan (fixed interest)
Bank Loan (adjustable interest)
Commercial Paper

Years ended March 31

Interest and Residual Terms of Straight Bonds (Mitsubishi Estate; Non-Consolidated)
Years%
12

3.0

10

2.5

8

2.0

6

1.5

4

1.0

2

0.5

0

0
2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Straight Bond / Duration

8.38

8.23

9.47

9.04

8.89

8.22

7.71

7.52

6.82

6.31

 traight Bond / Average InterestS(right scale)

1.92

1.94

1.93

1.90

1.88

1.88

1.72

1.54

1.55

1.52

 ank Loans / Average InterestB(right scale)

0.99

1.25

1.33

1.29

1.05

1.01

0.87

0.72

0.70

0.62

 otal / Average InterestT(right scale)

1.52

1.65

1.66

1.58

1.42

1.40

1.27

1.05

1.07

0.96
Years ended March 31

Mitsubishi Estate’s Ratings(As of July 31, 2014)

Rating agency

Long-term bonds

Short-term bonds

Moody’s

A2

P-1

Standard and Poor’s (S&P)

A+

A-1

Rating & Investment Information, Inc. (R&I)

AA–

a-1+

ANNUAL REPORT 2015

43

FINANCIAL SECTION
Years ended March 31

Eleven-Year Summary of Selected Financial Data (Consolidated)

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015
¥1,110,259

Financial Results (Millions of yen)¥  775,381¥  844,217¥  947,641¥  787,652¥  942,626¥1,013,415¥  988,447¥1,013,069¥  927,157¥1,075,285

Operating income

Revenue from operations

118,233

137,614

166,165

177,983

138,567

148,972

158,258

146,299

118,349

161,271

156,332

Ordinary income

93,675

121,236

151,674

162,061

108,624

117,381130,830

120,665

92,381

139,638

133,113

Net income

36,24555,82597,662

86,96345,423

11,90064,21956,51245,50764,29773,338Financial Position (Millions of yen)

Total assets

3,124,514

3,280,209

3,447,272

4,327,137

4,429,070

4,355,065

4,245,209

4,387,015

4,711,521

4,765,368

4,901,526

Total equity 1

920,930

1,133,623

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

Interest-bearing debt

1,198,371

1,007,761

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

Capital expenditures

79,79362,204

138,169

270,798

201,088

114,085

76,332

282,171

208,135

159,677

177,331

Depreciation and amortization

55,54553,65554,25756,86760,36473,92670,62867,46573,36474,80572,696200,078

Cash Flows (Millions of yen)

Cash flows from operating activities

88,900169,744

150,710(16,248)

45,824

212,668

259,263203,243

122,286

336,489

Cash flows from investing activities(92,409)29,883(85,389)(212,207)(214,500)(112,639)(67,223)(272,009)(217,992)(133,537)(46,568)

Cash flows from financing activities(33,485)(132,463)(34,093)

238,942

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

57,18927,150(177,514)(189,109)

Cash and cash equivalents at end of year

97,324

167,090

206,089

219,712

184,552

177,825

229,062

215,771

191,837

224,739

198,489

Net income¥27.93¥42.60¥70.95¥62.99¥32.90¥ 8.58¥46.27¥40.72¥32.79¥46.34¥52.85

Cash dividends

8.00

10.00

14.00

16.00

16.00

12.00

12.00

12.00

12.00

12.00

14.00

¥178,386¥200,928¥233,406¥245,911¥209,522¥230,730¥237,109¥222,885¥200,587¥246,332¥239,934

4.0%

4.6%

5.3%

4.9%

3.3%

3.5%

3.8%

3.5%

2.7%

3.5%

3.4%

4.7

7.4

9.5

8.5

4.7

5.2

6.6

6.5

5.0

7.5

7.7

ROE

4.0%

5.4%

8.3%

7.1%

3.8%

1.0%

5.4%

4.6%

3.6%

5.0%

5.2%

Payout ratio

28.6%

23.5%

19.7%

25.4%

48.6%

139.9%

25.9%

29.5%

36.6%

25.9%

26.5%

Per Share Amounts (Yen)

Principal Financial Indicators

EBITDA2 (Millions of yen)
ROA
Interest coverage ratio 3 (Times)

Stock Information

Stock price4 (Yen)
Number of shares issued and outstanding (Thousands of shares)
Mitsubishi Estate’s Stock
Price Changes on theTokyo Stock Exchange¥1,246¥2,790¥3,870¥2,420¥1,102¥1,530¥1,407¥1,476¥2,596¥2,446¥2,787

1,299,185

1,371,189

1,382,518

1,382,518

1,382,518

1,390,397

1,390,397

1,390,397

1,390,397

1,390,397

1,390,397

Yen
5,000

4,000

3,000

2,000

1,000

0
4/20044/20054/20064/20074/20074/20084/20094/20104/20114/20124/20134/20144/2015

Notes:
1. Total equity is calculated by deducting minority 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. ‌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.
4. As of March 31

44

MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2015

45

F INANC I A L SE C TIO N

Financial Review
Revenue from Operations / Operating IncomeIn fiscal 2015, the fiscal year ended March 31, 2015, consolidated
revenue from operations amounted to ¥1,110,259 million, increasing¥34,974 million, or 3.3%, year on year. However, consolidated
operating income declined ¥4,938 million, or 3.1%, from theprevious fiscal year, to ¥156,332 million. Results for each businesssegment are as follows.
In line with its business reorganization during the fiscal year underreview, Mitsubishi Estate has made changes in its reporting segments.
The operations of the former Commercial Property Development &Investment segment were folded into the Building Business segment.
In conjunction with that change, the international operations of the
Building Business and the Commercial Property Development &Investment Business segments were integrated into the International
Business segment. Segment revenue from operations and operating
figures have been adjusted to reflect these changes.
In the Building Business segment, various sources contributed
to the increase in revenue from operations. In addition to a fullyear of rental revenue contributed by the buildings completed in
the previous fiscal year, rental revenue increased from the existing
portfolio, as did revenue from the sale of property. As of March 31,
2015, the vacancy rate for all properties nationwide declined to
2.80%, compared with 5.29% as of the end of the previous fiscal
year. The lower vacancy rate resulted from smooth progress withconcluding rental agreements with tenants in both redevelopedand existing buildings. Taking these factors into account, revenue
from operations rose ¥61,831 million compared with fiscal 2014,
to ¥587,660 million. Operating income grew ¥12,705 million, to¥128,982 million.
In the Residential Business segment, Mitsubishi Estate’s revenue
in the condominium business decreased year on year because of
the decrease in condominium units sold, among other factors. As
a result, revenue from operations fell to ¥337,736 million, down
¥25,523 from a year earlier. Operating income in this segment
declined ¥16,172 million, to ¥11,605 million compared with theprevious fiscal year.
In the International Business segment, revenue from operations
decreased ¥2,571 million from fiscal 2014, to ¥77,794 million.
However, operating income increased ¥489 million year on year, to¥26,068 million. This increase can be attributed to revenue from thesales of property at the same level as that recorded in the previous
fiscal year and other non-recurring income.

Revenue in the Investment Management Business segment rose
based on the sale of an equity investment and other income.
Accordingly, revenue from operations increased ¥1,762 million froma year earlier, to ¥8,050 million. Operating income also increased,rising ¥1,017 million year on year, to ¥4,064 million.
In the Architectural Design & Engineering Business segment,
Mitsubishi Estate recorded revenue in connection with such projects
as the Marunouchi 3-2 Project (the tentative name for a project inChiyoda-ku, Tokyo). While the earnings of the architectural designand engineering business were similar to earnings in the previous
fiscal year, the earnings of the interior design and construction
business fell due to a decline in the average amount received per
project and in the number of projects. As a result, segment revenue
from operations edged down ¥479 million year on year, to ¥19,467
million. Operating income fell ¥589 million from a year earlier, to¥663 million.
With a central role played by the Royal Park Hotels and Resorts
Co., Ltd., which oversees the Group’s Hotel Business activities, steps
were taken to reinforce the management structure at each hotel
under the Royal Park Hotel brand. At the same time, particularemphasis was placed on further promoting and developing a newhotel business under “THE SERIES” brand of Royal Park Hotels,with Royal Park Hotel THE Haneda opening on September 30,
2014. In the fiscal year ended March 31, 2015, many factors
contributed to growth in the revenue from the accommodations
department. These factors included higher revenue from hotel
rooms as a result of a greater number of foreigners visiting Japan,
a full year of operations by the new Royal Park Hotel THE Nagoya,and the start of operations of Royal Park Hotel THE Haneda. As
a result, revenue from operations in the Hotel Business segment
climbed ¥1,608 million, to ¥30,827 million. Operating income edgedup ¥16 million, to ¥754 million, from a year earlier.
In the Real Estate Services segment, real estate brokeragerevenue dropped year on year despite an increase in the commission
fee per sale because of a decline in the number of transactions.
As a result, revenue from operations rose ¥198 million, to ¥27,295
million. However, operating income decreased ¥433 million froma year earlier, to ¥1,111 million.
Revenue from operations in the Other segment increased ¥72
million year on year, to ¥3,747 million. Consequently, operating lossof the Other segment improved ¥262 million from the previous
fiscal year, to operating income of ¥16 million.

Revenue from Operations

Operating Income /Operating Income Ratio

Operating Income / EBITDA

Trillions of yen

Billions of yen%Billions of yen

Billions of yen

%

1.2

200

20

300

80

8

150

15

60

6

40

4

Other Income (Expenses)

Other income decreased ¥235 million year on year, to ¥9,087
million. Despite increases in both interest and dividend income,other income declined overall because of a decrease in equity inearnings of unconsolidated subsidiaries and affiliates and otherfactors. Other expenses rose ¥1,350 million from fiscal 2014, to¥32,306 million. Although interest expenses decreased, otherexpenses increased in total because of greater loss on retirementof fixed assets, among other factors.
Looking at extraordinary items, Mitsubishi Estate booked
extraordinary gains of ¥48,807 million, consisting of a gain on salesof fixed assets totaling ¥36,551 million and a gain on negative
goodwill amounting to ¥12,256 million.
On the other hand, the Company registered an extraordinary lossof ¥81,719 million. The breakdown consisted of ¥6,190 million inloss related to retirement of fixed assets, ¥73,725 million in impairment loss, and a ¥1,804 million provision for loss on obligations ofadditional investments.

Millions of yen

Revenue from Operations

3/2014YOY Change

1,110,259

1,075,285

34,974

Building Business

587,660

484,229

61,831

Residential Business

377,736

403,259(25,523)

International Business

77,79480,366(2,571)

	Investment Management
Business

8,050

6,288

1,762

	Architectural Design& Engineering Business

19,467

19,946(479)

Hotel Business

30,827

29,2191,608

Real Estate Services Business

27,29527,097198

Other

Net IncomeCompared with a year earlier, income before income taxes andminority interests declined ¥8,484 million, to ¥100,201 million.
However, because income taxes and other deductions decreased¥27,352 million compared with fiscal 2014, net income increased¥9,040 million, or 14.1% year on year, to ¥73,338 million. Net
income per share amounted to ¥52.85.

3/2015

3,747

3,674

72

Adjustments(22,321)(26,825)(1,925)

Operating Income

156,332

161,271(4,938)

Building Business

128,982

108,172

12,705Residential Business

11,60527,778(16,172)

International Business

26,06825,579489

	Investment Management
Business

4,064

3,046

1,017
(589)

	Architectural Design& Engineering Business

663

1,252

Hotel Business

754

737

16

Real Estate Services Business

1,111

1,544

(433)

Other
Adjustments

16

(246)

262

(16,934)(14,724)(2,236)Comparison of Fiscal 2015 and Fiscal 2014 Revenue from Operations
Millions of yen

1,110,259
Residential
Business(25,523)

International
Business(2,571)

1,075,285

Investment
Management
Business

1,762

Architectural
Design &Engineering
Business

Hotel
Business

1,608

Real Estate
Services
Business

Other

72

Adjustments(1,925)

198

(479)

Building
Business

61,8313/2014Net Income / ROE

1.0

3/2015Comparison of Fiscal 2015 and Fiscal 2014 Operating Income
Millions of yen

0.8

200
100

0.6

10

161,271
0.4

Building
Business

100
5

50

20

2

12,7050.2
0002011 2012 2013 2014 20152011 2012 2013 2014 2015

Operating Income (left scale)Operating Income Ratio (right scale)002011 2012 2013 2014 2015

Operating Income (left scale)
EBITDA (right scale)0

Residential
Business

International
Business(16,172)

489

Investment
Management
Business

1,017

Architectural
Design &Engineering
Business

(589)

Hotel
Business

16

Real Estate
Services
Business

(433)

Other

262

156,332
Adjustments(2,236)2011 2012 2013 2014 2015

Net Income (left scale)ROE (right scale)

3/20143/2015

Years ended March 31

46

MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2015

47

F INANC I A L SE C TIO N(1) Consolidated Cash Flow

On a consolidated basis, cash and cash equivalents at the end of the
fiscal year decreased ¥26,249 million compared with the previous
fiscal year-end, to ¥198,489 million. Major cash inflows included
income before income taxes and minority interests, gain on sales
or disposal of property and equipment, and increase in long-termborrowings. Major cash outflows included purchases of property
and equipment and the repayment of long-term borrowings.
Cash Flows from Operating Activities
Net cash provided by operating activities was ¥200,078 million,
down ¥136,410 million year on year. Income before income taxes
and minority interests amounted to ¥100,201 million, while depreciation and amortization—a non-cash item—totaled ¥72,696 million.
These and other cash inflows were adjusted to reflect movements ininventories, notes and accounts payable, and other items.
Cash Flows from Investing Activities
Net cash used in investing activities totaled ¥46,568 million, up from¥133,537 million recorded in the previous fiscal year. The change
in net cash used was primarily due to fewer purchases of property
and equipment.
Cash Flows from Financing Activities
Net cash used in financing activities amounted to ¥189,109 million,
compared with net cash used in financing activities of ¥177,514 million
recorded in the previous fiscal year . The increase can mainly be
attributed to repayment of long-term borrowings and corporate bonds.

Cash Flow

Compared with March 31, 2014, total assets as of March 31, 2015,
increased ¥136,158 million, to ¥4,901,526 million, principally as aresult of the operating, investing, and financing activities previously
identified, which led to movements in assets and liabilities.
Total liabilities declined ¥56,912 million, to ¥3,261,362 million.
The balance of interest-bearing debt as of March 31, 2015,
contracted ¥43,687 million compared with the year-end balancein fiscal 2014, to ¥1,929,355 million. Deducting cash and cash
equivalents, the balance of net interest-bearing debt as of March 31,
2015, decreased ¥17,437 million year on year, to ¥1,730,866 million.
Total net assets expanded ¥193,070 million year on year, to¥1,640,163 million. The growth in net assets can be attributed toincreases in such items as retained earnings, unrealized holding gain
on securities, foreign currency translation adjustments, and land
revaluation reserve.

Total Assets /EBITDA/Total Assets*
Trillions of yen 

%

400

6

6

5

5

300
200
100

 Millions of yen

44(April 1, 2014, to
March 31, 2015)

3

3

2

2

1

1

–200

Balance as of the beginning of the period

0

–400
2011

2012

Cash Flows from Operating Activities
Cash Flows from Financing Activities

2013

2014

2015

Cash Flows from Investing Activities

02011 2012 2013 2014 2015

Total Assets (left scale)
EBITDA/Total Assets (right scale)*E
 BITDA/Total assets is calculated based on
the average total assets from the beginningto the end of the period(April 1, 2014, to
March 31, 2015)(April 1, 2013, to
March 31, 2014)

Rental Properties

3,074,645

2,965,396

Rental revenue

395,188

373,047

60,767109,249

Rental costs

263,237

256,935

Balance as of the end of the period

3,135,413

3,074,645

Difference

131,950

116,111

Market value as of the end of the period

5,220,983

5,060,986

Other income (loss)(1,525)(30,873)

Increase during the period

Rental Properties Containing Self-Use Space

Rental Properties Containing Self-Use Space

Amounts recorded on consolidated balance sheets

Rental revenue

15,166

17,074

Balance as of the beginning of the period

224,577

227,564

Rental costs

15,408

16,227

Decrease during the period(41,798)(2,987)

Difference

(242)

847

Balance as of the end of the period

182,779

224,577(44,605)(1,474)Market value as of the end of the period

277,955

334,700

Notes:
1.	The amount included in 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.
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.

Other income (loss)

Notes:
1.	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, suchas depreciation costs, building management costs, and taxes, have been included inrental costs.
2.	Other losses for the fiscal year under review included gain on sale of fixed assets of¥36,376 million and impairment losses of ¥71,592 million.

Total Equity / Total Equity Ratio

Interest-Bearing Debt / Net
Interest-Bearing Debt/EBITDA

Interest Coverage Ratio

Net Income per Share

Unrealized Gain on Rental
Properties

Trillions of yen %

Trillions of yen

Times

Yen

Trillions of yen

1.6

40

2.5

10

8

60

2.5

30

2.0

8

50

1.2

2.0

Times

6
40

0.8

1.5

6

20

4

30
1.0

4
20

0.4

–300

(April 1, 2013, to
March 31, 2014)

Amounts recorded on consolidated balance sheets

1.0

–100

 Millions of yen

Fiscal Year
Fiscal Year
Ended
Ended
March 31, 2015 March 31, 2014

Rental Properties

1.5

0

Also, the following table shows profit and loss related to realestate, including the rental properties containing self-use space foreach fiscal year.

Fiscal Year
Fiscal Year
Ended
Ended
March 31, 2015 March 31, 2014

Matters Related to Rental Properties
Mitsubishi Estate and some of its consolidated subsidiaries own
certain office buildings and retail facilities in Tokyo and other major
cities in Japan as well as in the United States and the United
Kingdom, with the aim of obtaining rental revenue from thesebuildings and facilities. Because certain leased office buildings
among these are used by the Company or some of its consolidated
subsidiaries, the Company has classified such buildings as rental
properties containing self-use space.
The following table shows the year-end amounts, changes inthese amounts during the period under review, and the fair values ofBillions of yen

48

investment and rental properties and other real estate that includes
portions used as investment and rental properties.

(2) Consolidated Balance Sheets

Analysis of Financial Position


10

0

0
2011 2012 2013 2014 2015

Total Equity (left scale)
Total Equity Ratio (right scale)

0.5

2

0

0
2011 2012 2013 2014 2015

0.5

10
0

0

0
2011 2012 2013 2014 20152011 2012 2013 2014 20152011 2012 2013 2014 2015

Interest-Bearing Debt (left scale)Net Interest-Bearing Debt/EBITDA(right scale)Years ended March 31

MITSUBISHI ESTATE CO., LTD.

2

Years ended March 31

ANNUAL REPORT 2015

49

F INANC I A L SE C TIO N

Consolidated Balance Sheets
Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
March 31, 2015 and 2014

2015

Millions of yen

Thousands of
U.S. dollars (Note 3)

2014

2015

AssetsLiabilities and net assets

Current assets:

Current liabilities:¥    197,169¥   224,121$   1,640,756

Notes and accounts receivable – trade (Notes 6 and 14)

Cash on hand and in banks (Notes 6, 14 and 16)

35,87328,539298,520

Marketable securities (Notes 14 and 15)

2,179

1,333

18,135

Allowance for doubtful receivables

(571)

(208)

(4,757)

Inventories (Note 4)

382,651

402,658

3,184,250

Equity investments (Notes 14 and 15)

251,249

223,9112,090,785

Deferred income taxes (Note 8)

17,01021,152

141,555

Other current assets
Total current assets

65,24445,014542,935

950,806

946,522

7,912,181

Investments:
	Investments in and advances to unconsolidated subsidiaries
and affiliates (Note 14)

19,167

17,730159,501

261,792

196,076

2,178,517

Asset for retirement benefits (Note 7)

23,194

6,320

193,011

Other investments (Notes 5 and 14)

169,814

163,909

1,413,122

473,968

384,037

3,944,152

Property and equipment (Note 6):Land

Notes and accounts payable – trade (Note 14)
Accrued income taxes (Note 8)

1,839,707

1,897,116

15,309,211¥ 463,486$ 1,936,625

95,632

105,271795,81082,672874,209

Accrued expenses and other current liabilities

76,36265,406

635,451

519,707

767,747

4,324,770

Long-term debt (Notes 6 and 14)

1,689,387

1,500,052

14,058,310

Lease deposits received (Note 14)

381,605

383,083

3,175,549

Liability for retirement benefits (Note 7)

23,06820,380191,966

Deferred income taxes (Note 8)

486,752

512,028

4,050,529

Negative goodwill

77,172

92,356642,191

Total current liabilities
Long-term liabilities:

83,66942,625696,258

Total long-term liabilities

2,741,655

2,550,527

22,814,806

Total liabilities

3,261,362

3,318,275

27,139,576

			 Issued – 1,390,397,097 shares in 2015 and 2014

141,373

141,373

1,176,443

		 Capital surplus (Note 2)

162,638

170,485

1,353,400

		Retained earnings

538,687465,757

4,482,716

		 Less treasury stock, at cost

(5,259)(4,811)(43,763)

Total shareholders’ equity

837,440

772,805

6,968,796

127,60975,971

1,061,904

(5)

125

(42)

Net assets:
Shareholders’ equity (Note 9):
		 Common stock, without par value:
			 Authorized – 1,980,000,000 shares;

440,852

4,433,506

2,148,557

17,941,057

		 Unrealized holding gain on securities

Machinery and equipment and other

135,985

140,336

1,131,609

		 Deferred gain (loss) on hedging instruments

Accumulated other comprehensive income:90,69453,657754,720

		 Land revaluation reserve504,756

493,153

4,200,356

4,755,139

4,680,520

39,570,105

		 Foreign currency translation adjustments

20,798(8,249)173,079(1,409,125)(1,351,915)(11,726,103)

		 Retirement benefits liability adjustments (Note 7)

5,238(4,748)43,592

3,346,013

3,328,605

27,844,002

Total accumulated other comprehensive income

658,398556,2525,478,890

500

494

4,162

143,825

117,540

1,196,846

Stock acquisition rights
Minority interests

Total assets¥   232,724

14,423532,774

Intangible and other assets

2015

119,160

2,155,976

Property and equipment, net

2014

9,934

Buildings and structures

Less accumulated depreciation

2015

105,053

Land in trust

Construction in progressThousands of
U.S. dollars (Note 3)

Advances and deposits

Other non-current liabilities

Investment securities (Notes 6, 14 and 15)

Total investments

	Short-term borrowings and current portion of long-term debt
(Notes 6 and 14)

Millions of yen

130,737

106,203

1,087,936¥ 4,901,526¥ 4,765,368$ 40,788,272

Contingent liabilities (Note 12)
Total net assets

1,640,163

1,447,093

13,648,695

Total liabilities and net assets¥4,901,526¥4,765,368$40,788,272

See accompanying notes to consolidated financial statements.

50

MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2015

51

F INANC I A L SE C TIO N

Consolidated Statements of Income

Consolidated Statements of Changes in Net Assets

Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2015 and 2014

Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2015 and 2014
Millions of yen

Thousands of
U.S. dollars (Note 3)

2015

2014

2015

¥1,110,259¥1,075,285$ 9,239,077

Cost of revenue from operations(869,318)(836,249)(7,234,068)

Selling, general and administrative expenses(84,609)(77,764)(704,080)

Operating income

156,332

161,271

1,300,928

Revenue from operations

Other income (expenses):
Interest and dividend income
Interest expenses
Equity in earnings of unconsolidated subsidiaries and affiliates
Other, net (Note 13)
Income before income taxes and minority interests

4,865

4,109

40,484(21,099)(22,176)(175,579)

1,372

1,547

11,419(41,269)(36,065)(343,423)(56,131)(52,585)(467,099)

100,201

108,685

833,828

Millions of yen

Balance at April 1, 2013

Cumulative effect of changes
in accounting policy
Restated balance at April 1, 2013
Changes in the year:
Cash dividends paid
Net income
Purchase of treasury stock
Disposal of treasury stock
Land revaluation reserve (Note 1-h)Changes in the scope of consolidation
Changes in equity interest	Net change in items other than thosein shareholders’ equity
Total of changes in the year

Commonstock

Capitalsurplus(Note 2)Retainedearnings¥141,373¥170,485¥413,392¥(4,585)¥720,666¥70,608¥(221)

141,373

170,485—
413,392(4,585)—
720,666

70,608(221)(16,651)
64,297——

Balance at April 1, 2014

Income taxes (Note 8):
Current(23,190)(22,403)(192,976)

Deferred

9,814

2,359

81,670(13,375)(40,728)(111,306)

Income before minority interests

86,82567,957

722,522

Minority interests(13,487)(3,660)(112,234)¥   73,338¥   64,297$    610,287

Net income
See accompanying notes to consolidated financial statements.

Cumulative effect of changes
in accounting policy
Restated balance at April 1, 2014
Changes in the year:
Cash dividends paid
Net income
Purchase of treasury stock
Disposal of treasury stock
Land revaluation reserve (Note 1-h)Changes in the scope of consolidation
Changes in equity interest	Net change in items other than thosein shareholders’ equity
Total of changes in the year

Balance at March 31, 2015

Shareholders’ equity
Total
Treasuryshareholders’stockequityAccumulated othercomprehensive income
Unrealized
Deferred gain
holding gain (loss) on hedging
on securities
instruments

(37)
4,870
(114)

(411)
185

(16,651)
64,297
(411)
147
4,870
(114)
—

—
141,373—
170,485

52,365465,757(226)(4,811)

52,138772,805

5,363
5,363
75,971

346
346
125

141,373

170,485(889)
464,868(4,811)(889)
771,91575,971

125

51,637
51,637¥127,609

(130)
(130)
¥  (5)(16,651)
73,3383(7,850)—¥141,373(7,847)¥162,638—
17,272(139)

73,819¥538,687

(556)
109

(447)
¥(5,259)(16,651)
73,338(556)
112
17,272(139)(7,850)65,524¥837,440

Millions of yen

Landrevaluation
reserve

Balance at April 1, 2013

Consolidated Statements of Comprehensive Income
Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2015 and 2014
Millions of yen

Income before minority interests

Thousands of
U.S. dollars (Note 3)

2015

2014

2015

¥ 86,825¥ 67,957$   722,522

51,636

5,364

429,692

Other comprehensive income (Note 22):
Unrealized holding gain (loss) on securities
Deferred gain (loss) on hedging instruments

(46)

426

(384)

Land revaluation reserve

28,832(79)

239,929

Foreign currency translation adjustments

28,25541,754

235,132

Retirement benefits liability adjustments

9,866

—

82,106

1,279

1,405

10,648	Share of other comprehensive income of companies
accounted for by the equity method
Total other comprehensive income

119,824

48,870997,126

Comprehensive income (Note 22)¥206,650¥116,827$1,719,648

Shareholders of Mitsubishi Estate Co., Ltd.

¥192,734¥111,287$1,603,850

Minority interests¥ 13,915¥  5,540$   115,798

Total comprehensive income attributable to:Balance at March 31, 2015

Minority
interests

Total
net assets¥498,103¥(49,608)—¥518,881¥500¥125,963¥1,366,011

498,103(49,608)—

518,881500

125,963—
1,366,011(16,651)
64,297
(411)
147
4,870
(114)

Balance at April 1, 2014

Cumulative effect of changes
in accounting policy
Restated balance at April 1, 2014
Changes in the year:
Cash dividends paid
Net income
Purchase of treasury stock
Disposal of treasury stock
Land revaluation reserve (Note 1-h)Changes in the scope of consolidation
Changes in equity interest	Net change in items other than thosein shareholders’ equity
Total of changes in the year

Stock acquisitionrights(4,949)(4,949)493,153

41,35941,359(8,249)¥(4,748)(4,748)(4,748)37,37137,371
556,252

(5)
(5)
494

(8,423)(8,423)
117,540

28,942
81,081
1,447,093

493,153(8,249)(4,748)556,252494

117,540(889)
1,446,203(16,651)
73,338(556)
112
17,272(139)(7,850)11,603
11,603¥504,756

29,04829,048¥20,798

9,986
9,986
¥ 5,238

102,145
102,145¥658,39855¥500

26,284
26,284¥143,825

128,435

193,960¥1,640,163

See accompanying notes to consolidated financial statements.

See accompanying notes to consolidated financial statements.

52

Cumulative effect of changes
in accounting policy
Restated balance at April 1, 2013
Changes in the year:
Cash dividends paid
Net income
Purchase of treasury stock
Disposal of treasury stock
Land revaluation reserve (Note 1-h)Changes in the scope of consolidation
Changes in equity interest	Net change in items other than thosein shareholders’ equity
Total of changes in the year

Accumulated other comprehensive income
Retirement
Total
Foreign currency
benefits liability
accumulatedtranslation
adjustments
other compreadjustments(Note 7)
hensive income

MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2015

53

F INANC I A L SE C TIO N

Consolidated Statements of Changes in Net Assets (continued)

Consolidated Statements of Cash Flows

Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2015 and 2014

Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2015 and 2014
Millions of yen

Thousands of
U.S. dollars (Note 3)

2015

2014

2015

¥ 100,201
72,696(31,727)(81)—
73,725(1,372)317
309(4,865)21,099(5,957)110,219(35,973)(9,708)(1,729)(36,567)
250,585
5,120(21,267)(34,360)
200,078¥ 108,685
74,805(3,131)(314)
7,648
32,644(1,547)(7,180)(2,746)(4,109)22,176(1,143)93,854(18,180)
49,165
3,995
28,593
383,216
4,530(22,154)(29,102)336,489$    833,828
604,950(264,024)(682)—
613,510(11,419)
2,640
2,572
(40,484)
175,579(49,579)
917,200(299,355)(80,788)(14,390)(304,298)
2,085,260
42,612(176,976)(285,930)
1,664,965

110
165,888(176,877)
514
(832)

—
32,440(159,366)
1,034(1,401)915
1,380,447(1,471,894)
4,278(6,930)(34,441)(928)(46,568)—(6,243)(133,537)(286,610)(7,727)(387,521)

10,21928,000286,762(446,958)
41,290(58,068)(20,905)(35,000)
165,587(207,047)
15,761(68,207)

85,043233,0032,386,305(3,719,384)
343,602(483,220)(32,570)(16,656)(1,128)(189,109)
1,235(34,363)
224,739
6,658
—
1,455
¥ 198,489—(16,658)(11,044)(177,514)
8,321
33,758
191,837—(856)—¥ 224,739(271,036)(138,605)(9,388)(1,573,681)
10,278(285,958)
1,870,181
55,408—
12,112$ 1,651,743

Thousands of U.S. dollars (Note 3)

Balance at April 1, 2013

Cumulative effect of changes
in accounting policy
Restated balance at April 1, 2013
Changes in the year:
Cash dividends paid
Net income
Purchase of treasury stock
Disposal of treasury stock
Land revaluation reserve (Note 1-h)Changes in the scope of consolidation
Changes in equity interest	Net change in items other than thosein shareholders’ equity
Total of changes in the year

Balance at April 1, 2014

Cumulative effect of changes
in accounting policy
Restated balance at April 1, 2014
Changes in the year:
Cash dividends paid
Net income
Purchase of treasury stock
Disposal of treasury stock
Land revaluation reserve (Note 1-h)Changes in the scope of consolidation
Changes in equity interest	Net change in items other than thosein shareholders’ equity
Total of changes in the year
Balance at March 31, 2015

Shareholders’ equity
Total
Treasuryshareholders’stockequityAccumulated othercomprehensive income
Unrealized
Deferred gain
holding gain (loss) on hedging
on securities
instruments$3,440,067$(38,156)$5,997,058$   587,568$(1,844)—
3,440,067(38,156)—
5,997,058

587,568(1,844)

Commonstock

Capitalsurplus(Note 2)Retainedearnings$1,176,443$1,418,703

1,176,443

1,418,703(138,567)
535,053——(310)
40,533(950)(3,423)
1,541(138,567)
535,053(3,423)
1,230
40,533(950)——
1,176,443—
1,418,703

435,757
3,875,825(1,882)(40,038)

433,875
6,430,933

44,633
44,633
632,201

2,884
2,884
1,040

1,176,443

1,418,703(7,405)
3,868,420(40,038)(7,405)
6,423,528

632,201

1,040

429,703429,703$1,061,904(1,082)(1,082)$   (42)(138,564)
610,28726(65,329)—$1,176,443(65,302)$1,353,400—
143,729(1,157)614,296$4,482,716(4,634)908(3,725)$(43,763)(138,564)
610,287(4,634)935
143,729(1,157)(65,329)545,268$6,968,796

Thousands of U.S. dollars (Note 3)Landrevaluation
reserve

Balance at April 1, 2013

Cumulative effect of changes
in accounting policy
Restated balance at April 1, 2013
Changes in the year:
Cash dividends paid
Net income
Purchase of treasury stock
Disposal of treasury stock
Land revaluation reserve (Note 1-h)Changes in the scope of consolidation
Changes in equity interest	Net change in items other than thosein shareholders’ equity
Total of changes in the year

Balance at April 1, 2014

Cumulative effect of changes
in accounting policy
Restated balance at April 1, 2014
Changes in the year:
Cash dividends paid
Net income
Purchase of treasury stock
Disposal of treasury stock
Land revaluation reserve (Note 1-h)Changes in the scope of consolidation
Changes in equity interest	Net change in items other than thosein shareholders’ equity
Total of changes in the year

Balance at March 31, 2015

$4,144,991
4,144,991

Accumulated other comprehensive income
Retirement
Total
Foreign currency
benefits liability
accumulatedtranslation
adjustments
other compreadjustments(Note 7)
hensive income$(412,822)(412,822)——$4,317,892
4,317,892

Stock acquisitionrightsMinority
interests

Total
net assets$4,166$1,048,211$11,367,328

1,048,211—
11,367,328

4,166(138,567)
535,053(3,423)
1,230
40,533(950)—(41,191)(41,191)
4,103,799
4,103,799

344,172
344,172(68,649)(68,649)$(39,512)(39,512)(39,512)(39,512)

310,986
310,986
4,628,879
4,628,879

(47)
(47)
4,118
4,118

(70,092)(70,092)
978,118

240,846674,722
12,042,050

978,118(7,405)
12,034,645(138,564)
610,287(4,634)935
143,729(1,157)(65,329)

96,55696,556$4,200,356

241,728
241,728$ 173,079

83,105
83,105$ 43,592

850,011850,011$5,478,890

43
43$4,162

218,727
218,727$1,196,846

1,068,781
1,614,149$13,648,695

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 loss on equity investments
Impairment loss
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
Proceeds from sales of property and equipment
Purchases of property and equipment
Proceeds from sales of investment securities
Purchases of investment securities
Purchase of investments in subsidiaries resulting in change in scopeof consolidation (Note 16)
Other
Net cash used in investing activities
Cash flows from financing activities

Net increase and decrease in short-term borrowings
Net increase and 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
Increase in cash and cash equivalents arising from newly consolidated subsidiaries
Cash and cash equivalents of subsidiaries excluded from consolidation
Increase in cash and cash equivalents resulting from share transfer
Cash and cash equivalents at end of year (Note 16)
See accompanying notes to consolidated financial statements.

See accompanying notes to consolidated financial statements.

54

Cash flows from operating activities

MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2015

55

F INANC I A L SE C TIO N

Notes to Consolidated Financial Statements
Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2015 and 2014

1

a. Basis of preparationg. Inventories

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 application anddisclosure requirements of International Financial Reporting Standards,
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 which 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 of Japan,
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.

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

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 onan equity basis.
All significant intercompany balances and transactions have been
eliminated in consolidation.

Property and equipment, except for land as discussed below, is stated atcost less accumulated depreciation. Depreciation is calculated principallyby the declining-balance method, except for buildings acquired in Japan
subsequent to March 31, 1998 and property and equipment of foreignsubsidiaries on which depreciation is calculated by the straight-line
method at rates determined based on the estimated useful lives of therespective assets. The Company and its consolidated subsidiaries havecapitalized the costs incurred for significant renewals and additions;however, costs for maintenance and repairs are charged 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 their property
and equipment (including land) for impairment whenever events orchanges in its business circumstances indicate that the carrying amountof the assets may not be fully recoverable. They perform cash flow
analyses to determine if impairment exits. 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

c. Use of estimatesi. Intangible and other assets

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 thefinancial statements and accompanying notes. The actual results could
differ from those estimates.

Intangible and other assets primarily consist of goodwill and land use
rights. Goodwill is stated on the basis of cost and is being amortized overa period of 5 years or an estimated economical period on a straight-line
basis. A loss is recognized if the fair value falls below the carrying
amount. Land use rights are stated on a cost basis.

d. Foreign currency translation

j. Retirement benefits

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 also translated
into yen at the rates of exchange in effect at the balance sheet date.
The components of shareholders’ equity are translated at their historicalexchange rates.
The Company and its consolidated subsidiaries consider all highly liquid
investments that are readily convertible into cash and have an original
maturity of three months or less to be cash equivalents. Reconciliation
between cash in the balance sheets and cash equivalents at March 31,
2015 and 2014 is presented in Note 16.

Accrued retirement benefits and prepaid pension cost 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 balance sheet date.
The retirement benefit obligation for employees is attributed to eachperiod by the benefit formula method.
Actuarial gain or loss is amortized in the year following the year inwhich the gain or loss is recognized primarily by the straight-line method
over periods (mainly 1 year through 15 years), which are shorter than the
average remaining years of service of employees.
Certain foreign consolidated subsidiaries have adopted the corridor
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 are shorter
than the average remaining years of service of the employees.

f. Marketable securities and investment securities

k. Income taxes

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 arecarried at amortized cost. Marketable securities classified as othersecurities are carried at fair value with any changes in unrealized holding
gain or loss, net of the applicable income taxes, included directly inshareholders’ equity. Non-marketable securities classified as othersecurities are carried at cost. Cost of securities sold is determined by themoving average method.

Deferred tax assets and liabilities are determined based on the financial
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 theestimated future tax effects attributable to operating loss carry forwards.
Valuation allowances are established to reduce deferred tax assets if it ismore likely than not that the some portion or all of the deferred tax
assets will not be realized.

b. Principles of consolidatione. Cash equivalents

56

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.

(c)	Revenue from real estate brokerage is recognized when an underlying
lease agreement goes into force or the underlying units are delivered.
(d)	Revenue of construction contracts, of which the percentage ofcompletion can be reliably estimated, is recognized by the percentage-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 other contracts for which thepercentage of completion cannot be reliably estimated.
(e)	Other operating revenue is recognized on an accrual basis.

m. Revenue recognition

n. Appropriation of retained earnings

The consolidated statements of income reflect revenue from operationsin 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 and land
is recognized when the units are delivered and accepted by thecustomers. Revenue from consignment commissions for residential
sales earned by the real estate service business segment is recognizedat the time of contract conclusion for services provided up to theconclusion and at the time of ownership transfer for services
provided up to the transfer.

Under the Companies Act of Japan, the appropriation of retained
earnings with respect to a given financial year is made by resolution of
the shareholders at a general meeting held subsequent to the close ofsuch financial year. The accounts for that year do not, therefore, reflect
such appropriations. See Note 9 for more information.

l. Derivative financial instruments

S I G N I F I C A NT ACCO UN T IN G P O L ICIE S

MITSUBISHI ESTATE CO., LTD.

2

CHANG ES I N ACCOUNTI NG PO LI CY(“Accounting Standard for Retirement Benefits”)

The Company and its domestic subsidiaries adopted Section 35 of“Accounting Standard for Retirement Benefits” (ASBJ Statement No. 26
of May 17, 2012) and Section 67 of “Guidance on Accounting Standard
for Retirement Benefits” (ASBJ Guidance No. 25 of March 26, 2015). As aresult, the methods for calculating the retirement benefit obligation andservice cost have been revised in the following respects: the method for
attributing projected benefits to each period has been changed from thestraight-line method to the benefit formula method.
The cumulative effect of changing the methods for calculating theretirement benefit obligation and service cost was recognized byadjusting retained earnings at April 1, 2014, in accordance with thetransitional treatment provided in Section 37 of Accounting Standard for
Retirement Benefits.
The effect of this change on the consolidated financial statements forthe year ended March 31, 2015 was immaterial.
(“Revised Accounting Standard for Business Combinations”)

The Company early adopted “Revised Accounting Standard for Business
Combinations” (ASBJ Statement No. 21 of September 13, 2013) and“Revised Accounting Standard for Consolidated Financial Statements”(ASBJ Statement No. 22 of September 13, 2013), “Revised AccountingStandard for Business Divestitures” (ASBJ Statement No. 7 of September
13, 2013) and other related accounting standards from April 1, 2014,
except for Section 39 of “Revised Accounting Standard for Consolidated

ANNUAL REPORT 2015

Financial Statements.” Under the revised accounting standards, thedifference between the fair value of the consideration received or paid
and the change in minority interests shall be accounted for as capitalsurplus as long as the parent retains control over its subsidiary and thecorresponding acquisition-related costs shall be accounted for as
expenses in the periods in which the costs are incurred. The revised
standards also require that the adjustments to provisional amounts for abusiness combination shall be recognized as if the accounting for thebusiness combination had been completed at the acquisition date. The
Company adopted this provisional accounting treatment for businesscombinations completed on or after April 1, 2014. These revised
accounting standards are applied prospectively in accordance with
Section 58-2 (4) of “Revised Accounting Standard for Business
Combinations,” Section 44-5 (4) of “Revised Accounting Standard forConsolidated Financial Statements” and Section 57-4 (4) of “Revised
Accounting Standard for Business Divestitures.”
As a result of the application of the revised accounting standards,
income before income taxes and minority interests increased by ¥6,672
million ($55,525 thousand) and capital surplus decreased by ¥7,850
million ($65,329 thousand) as of and for the year ended March 31, 2015.
The impact on operating income was immaterial.
Also, net assets per share as of March 31, 2015 decreased by ¥5.66($0.05), while basic and diluted net income per share for the year ended
March 31, 2015 increased by ¥4.81 ($0.04), respectively.

57

F INANC I A L SE C TIO N

At March 31, 2015 and 2014, long-term debt consisted of the following:

U. S. D O LLA R A M O UN T S

3Translation of yen amounts into U.S. dollar amounts is included solely
for convenience, as a matter of arithmetic computation only, at the rateof ¥120.17 = U.S.$1.00, the approximate rate of exchange prevailing on

March 31, 2015. 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.

IN VE NT O R I E S

4Inventories at March 31, 2015 and 2014 are summarized as follows:
Millions of yen

Real estate for sale

Thousands of U.S. dollars

Millions of yen

Thousands of U.S. dollars

2014

2015

10,000—2015

1.65% unsecured bonds due 2014—

1.75% unsecured bonds due 2014—

10,000—0.42% secured bonds due 2014

—

4,647

—

1.655% unsecured bonds due 2014—

10,000—1.409% unsecured bonds due 2015—

10,00010,00010,000

¥

¥

—

2015

2014

2015

1.295% unsecured bonds due 2015$

83,215¥ 52,102¥ 66,484$   433,574

1.572% unsecured bonds due 2015

10,00010,00083,21515,00015,000124,823
83,215314,305

319,355

2,615,508

1.443% unsecured bonds due 2016

Land held for development

8,646

8,609

71,952

1.985% unsecured bonds due 2016

10,00010,000

Other

7,596

8,208

63,215

1.88% unsecured bonds due 2016

10,00010,00083,215$3,184,250

0.553% unsecured bonds due 2016

15,00015,000124,8230.459% unsecured bonds due 2016

10,00010,00083,215

1.79% unsecured bonds due 2017

10,00010,00083,215Land and housing projects in progress

Total¥382,651¥402,658

O T H E R I N VE ST M E N T S

5Other investments at March 31, 2015 and 2014 were as follows:

Lease deposits
Long-term prepaid expenses and otherTotal

20,000166,430

10,00083,215

10,00010,00083,215

Thousands of U.S. dollars

2015

2014

2015

1.825% unsecured bonds due 2017¥112,397¥113,015$  935,323

3.125% unsecured bonds due 2017

10,00010,00083,215

1.77% unsecured bonds due 2017

20,00020,000166,430

57,41750,894

477,799¥169,814¥163,909$1,413,122

At March 31, 2015 and 2014, short-term borrowings and the current portion of long-term debt consisted of the following:

Loans, principally from banks

20,00010,000Millions of yen

S H O RT- T E R M B O R R O W IN GS AN D L O N G - TERM D EBT

6

0.428% unsecured bonds due 20172.045% unsecured bonds due 20170.187% unsecured bonds due 2018

15,00015,000124,823

1.65% unsecured bonds due 2018

10,00010,00083,2152.005% unsecured bonds due 2018

10,00010,00083,2150.811% unsecured bonds due 2018

10,00010,00083,215

3% unsecured bonds due 2018

10,00010,00083,215

1.84% unsecured bonds due 2018

15,00015,000124,823

10,00010,00083,215

Millions of yen

Thousands of U.S. dollars

2015

2014

2015

¥ 77,881¥ 63,762$   648,093

1.72% unsecured bonds due 2018

10,00010,00083,215

Commercial paper

28,000—233,003

0.631% unsecured bonds due 2019

Current portion of long-term debt

126,842399,723

1,055,529

1.87% unsecured bonds due 201915,00015,000124,823$1,936,625

1.62% unsecured bonds due 201910,00010,00083,2150.571% unsecured bonds due 201910,00010,00083,215

1.53% unsecured bonds due 201910,00010,00083,2151.975% unsecured bonds due 201910,00010,00083,2151.805% unsecured bonds due 201910,00010,00083,215

2.5% unsecured bonds due 2020

10,00010,00083,215

1.165% unsecured bonds due 2020

10,00010,00083,2150.577% unsecured bonds due 2020

15,00015,000124,823

0.54% unsecured bonds due 2021

15,00015,000124,823

1.262% unsecured bonds due 2021

15,00015,000124,823

1.103% unsecured bonds due 2021

20,00020,000166,430

1.095% unsecured bonds due 2021

10,00010,00083,2151.178% unsecured bonds due 2022

20,00020,000166,430

1.087% unsecured bonds due 2022

20,00020,000166,430

1.026% unsecured bonds due 2022

30,00030,000249,646

2.42% unsecured bonds due 2022

10,00010,00083,2150.929% unsecured bonds due 2022

10,00010,00083,215

1.5% unsecured bonds due 2022

10,00010,00083,215

Total¥232,724¥463,486

The weighted-average interest rates per annum on short-term borrowings outstanding at March 31, 2015 and 2014 were 0.53% and 0.54%,
respectively. Short-term borrowings are principally unsecured.

58

MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2015

59

F INANC I A L SE C TIO N

Millions of yen

Thousands of U.S. dollars

2015

2014

2015

2.075% unsecured bonds due 2023¥   10,000¥   10,000$    83,215

0.643% unsecured bonds due 2024

20,000—166,430

2.28% unsecured bonds due 2024

10,00010,00083,215

1.067% unsecured bonds due 2024

10,00010,00083,2152.305% unsecured bonds due 2027

10,00010,00083,2152.385% unsecured bonds due 2027

10,00015,00083,215

2.52% unsecured bonds due 2027

15,00010,000124,8232.425% unsecured bonds due 2027

10,00010,00083,2152.555% unsecured bonds due 2028

10,00010,00083,215

2.9% unsecured bonds due 2032

10,00010,00083,2152.615% unsecured bonds due 2032

10,00020,00083,215

2.04% unsecured bonds due 2032

20,00010,000166,430

1.72% unsecured bonds due 2033

10,000—83,215

Floating rate bonds due 2014 (payable in U.S. dollars)—

11,948—Floating rate bonds due 2015 (payable in U.S. dollars)

20,225—

168,307

Loans from banks and insurance companies:
Secured

51,886

221,849

431,779

Unsecured

1,079,117

976,330

8,979,926

1,816,230

1,899,775

15,113,840(126,842)(399,723)(1,055,529)¥1,689,387¥1,500,052$14,058,310

Less current portion

7

RETI REMENT B ENEFI T PLANS

The Company and most of its domestic consolidated subsidiaries have either funded or unfunded defined benefit plans, defined contribution plans andlump-sum payment plans in the form of a defined benefit plan. The Company has adopted a retirement benefit trust for the lump-sum payment planand 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 theCompany’s executive officers.
The changes in the retirement benefit obligation during the years ended March 31, 2015 and 2014 are as follows:
Millions of yen

Retirement benefit obligation at the beginning of the year
Cumulative effect of changes in accounting principle

The aggregate annual maturities of long-term debt subsequent to March 31, 2015 are summarized as follows:
Millions of yen

Thousands of U.S. dollars

2016¥   126,817$ 1,055,317

2017

243,328

2,024,870

2018

221,473

1,843,000

2019

205,369

1,708,987

2020

228,360

1,900,313

2021 and thereafter
Total

790,855

6,581,137¥1,816,204$15,113,627

Millions of yen

Thousands of U.S. dollars¥133,660$1,112,257

1,910

15,901

167,536

1,394,160

Other property and equipment

07Investment securities

68

572

¥303,176$2,522,899

Machinery and equipment
Land

Total

2015

¥109,844¥108,134$914,079

1,370—

11,402

108,134

925,481

Service cost

4,627

4,735

38,511

Interest cost

1,742

1,621

14,501

Actuarial gain and loss

2,877

(1,651)

23,943Retirement benefits paid

(4,704)(4,387)(39,146)—30—
21,001

Prior service cost
Translation adjustments

2,523

2,902

Other

1,001

(1,541)

8,336¥119,284¥109,844$992,630

Millions of yen

Thousands of U.S. dollars

Retirement benefit obligation at the end of the year
The changes in plan assets during the year ended March 31, 2015 and 2014 are as follows:

2015

2014

2015

¥ 95,509¥80,940$794,785

Expected return on plan assets

2,560

1,933

21,309Actuarial gain and loss

17,251

9,966

143,556

Contributions by the Company

4,300

4,489

35,783Retirement benefits paid

(3,003)(3,059)(24,991)

Translation adjustments

1,688

1,801

14,048

Other
Plan assets at the end of the year

793

(563)

6,603

¥119,099¥95,509$991,093

The following table sets forth the funded status of the plans and the amounts recognized in the consolidated balance sheet as of March 31, 2015 and2014 for the Company’s and the consolidated subsidiaries’ defined benefit plans:Millions of yen

Thousands of U.S. dollars

2015

2014

2015

Funded retirement benefit obligation¥ 104,451¥ 96,033$ 869,197

Plan assets at fair value(119,099)(95,509)(991,093)(14,648)524(121,895)

14,832

13,810123,433

184

14,335

1,537

Liability for retirement benefits

23,06820,380191,966

Asset for retirement benefits(23,194)(6,320)(193,011)

310

276

2,581

¥     184

¥ 14,335$   1,537

The assets pledged as collateral for short-term borrowings of ¥100 million ($832 thousand) and long-term debt of ¥51,886 million($431,779 thousand) at March 31, 2015 were as follows:

Buildings and structures2014

111,215

Restated balance at the beginning of the year

Plan assets at the beginning of the year
Year ending March 31,

Thousands of U.S. dollars

2015

Unfunded retirement benefit obligation
Net liability for retirement benefits in the balance sheet

Other current liabilities
Net liability for retirement benefits in the balance sheet(*) The accrued employees’ retirement benefits recognized by Rockefeller Group, Inc., a consolidated subsidiary, were included in “Other current liabilities.”

60

MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2015

61

F INANC I A L SE C TIO N

The components of retirement benefit expense for the years ended March 31, 2015 and 2014 are as follows:
Millions of yen

Thousands of U.S. dollars

2015

2014

2015

Service cost

¥ 4,627¥ 4,735$ 38,511

Interest cost

1,742

1,621

14,501

Expected return on plan assets(2,560)(1,933)(21,309)

Amortization of actuarial loss

712

729

5,932

Amortization of prior service cost

(77)

(61)

(645)

Amortization of net retirement benefit obligation at transition

—

(116)

—

Other

231

442

1,926

¥ 4,676¥ 5,417$ 38,917

Retirement benefit expense(*) 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, 2015 and 2014 are as follows:
Millions of yen

Thousands of U.S. dollars

2015

2014

2015

Prior service cost¥   (77)—$   (645)

Actuarial gain and loss

15,086—

125,545¥15,009—$124,899

Total

The components of retirement benefits liability adjustments included in accumulated other comprehensive income (before tax effect) as of March 31,
2015 and 2014 are as follows:
Millions of yen

Thousands of U.S. dollars

8

I NCOME TAXESThe effective tax rates reflected in the consolidated statements of income for the years ended March 31, 2015 and 2014 differ from the statutory tax
rates for the following reasons:
2015

2014

35.64%—

Different tax rates applied(0.23)—

Expenses not deductible for income tax purposes

0.41

—

Revenues deductible for income tax purposes(0.63)—

Change in valuation allowance

2.18

—

Undistributed earnings of affiliates

0.19

—

Equity income(0.45)—

Gain on negative goodwill(4.36)—

Reversal of temporary differences associated with investment in affiliates(7.42)—

Effect of enacted changes in tax laws and rates on Japanese tax(12.26)

—

0.28

—

13.35%—

Statutory tax rate
Increase (decrease) in income taxes resulting from:

Other
Effective tax rate(*) Disclosure of the reconciliation between the statutory tax rate and the effective tax rate for the year ended March 31, 2014 has been omitted since the difference is less than 5%of the statutory tax rate.

The significant components of deferred tax assets and liabilities as of March 31, 2015 and 2014 were as follows:
Millions of yen

Thousands of U.S. dollars

2014

2015

3,111

$    19,972

2015

Deferred tax assets:

2015

2014

2015

Unrecognized prior service cost¥   386¥   328$ 3,212

Net operating loss carry forwards¥   2,400

Unrecognized actuarial gain and loss

6,206

(8,097)51,649Liability for retirement benefits

10,122

15,952

84,233$54,862

Valuation loss on inventories

15,422

14,362

128,342

Unrealized loss on property and equipment

93,27286,280776,172

Total¥6,592¥(7,768)¥

Unrealized loss on property and equipment by consolidation

11,326

11,56894,2492015

2014

Land revaluation reserve

27,00529,755

224,724

Bonds

20%

20%

Loss on valuation of equity investments

5,155

8,031

42,902

Stocks

58%

56%

Other

43,462

29,553361,678

General accounts

10%

14%

208,167

198,614

1,732,278

Other

12%

10%

Valuation allowance(73,652)(77,589)(612,900)

Total

100%

100%

Total deferred tax assets

134,515

121,025

1,119,377

Reserves under Special Taxation Measures Law(66,084)(51,707)(549,920)

Land revaluation reserve(280,866)(319,090)(2,337,242)

Unrealized gain on property and equipment by consolidation(116,852)(123,472)(972,394)

Unrealized gain on property and equipment(38,727)(42,679)(322,276)

The fair values of plan assets, by major category, as a percentage of total plan assets as of March 31, 2015 and 2014 are as follows:

Total gross deferred tax assets

Deferred tax liabilities:(*) Approximately 44% and 40% of total plan assets are held in the retirement benefit trust as of March 31, 2015 and 2014, respectively.

The expected return 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:
2015

2014

Discount rates

0.7~4.65%

1.0~3.95%

Expected rates of return on plan assets

1.0~7.0%

0.5~7.5%

Rates of salary increase

0.4~4.0%

0.4~5.0%

Unrealized gain on securities(56,481)(39,307)(470,010)

Other(34,946)(26,439)(290,806)

Total deferred tax liabilities(593,958)(602,697)(4,942,651)

Net deferred tax liabilities¥(459,442)¥(481,672)$(3,823,273)

The required contribution to defined contribution plans by the consolidated subsidiaries for the years ended March 31, 2015 and 2014 are ¥240
million ($1,999 thousand) and ¥237 million, respectively.

62

MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2015

63

F INANC I A L SE C TIO N

The “Act for Partial Amendment of the Income Tax Act, etc.” (Act No. 9
of 2015) and the “Act for Partial Amendment of the Local Tax Act, etc.”(Act No. 2 of 2015) were promulgated on March 31, 2015. As a result,the effective statutory tax rate used to measure the Company’s deferred
tax assets and liabilities was changed from 35.64% to 33.10% for the
temporary differences expected to be realized or settled in the fiscal
year beginning April 1, 2015, and to 32.34% for the temporary differences expected to be realized or settled from the fiscal year beginning
April 1, 2016.
The effect of the announced reduction of the effective statutory tax
rate was to decrease deferred tax liabilities, after offsetting deferred tax

assets, and deferred income tax expense by ¥12,282 million ($102,206
thousand) and increase minority interests by ¥2,888 million ($24,038
thousand) as of March 31, 2015.
Furthermore, deferred tax liabilities for land revaluation reserve,
unrealized gain on securities and retirement benefits liability adjustments decreased by ¥28,644 million ($238,366 thousand), ¥5,762 million($47,956 thousand) and ¥403 million ($3,358 thousand), respectively,
while land revaluation reserve, unrealized gain on securities andretirement benefits liability adjustments in net assets increased bysame amount, respectively.

S H A R E H O L D E RS ’ E Q UIT Y

9The Companies Act of Japan provides that an amount equal to 10% of
the amount to be disbursed as distributions of capital surplus (other thanthe 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 to ¥162,638

12

CO NTI NG ENT LI AB I LI TI ES

At March 31, 2015, the Company and its consolidated subsidiaries had the following contingent liabilities:(1) Guarantee of loans

Guarantees of affiliates’ loans from banks
Guarantees of house purchasers’ loans from banks
Other
Total

Millions of yen

Thousands of U.S. dollars¥ 120
55,86130¥56,011$998
464,853252$466,105Millions of yen

Thousands of U.S. dollars¥22,408$186,475(2) Guarantee for business undertakings

million ($1,353,400 thousand), and the legal reserve amounted to¥21,663 million ($180,276 thousand) at March 31, 2015. Such distributions can be made at any time by resolution of the shareholders or by
the Board of Directors if certain conditions are met, but neither thecapital reserve nor the legal reserve is available for distributions.

Business undertaking guarantees

Rockefeller Group International Inc. provides business undertaking guarantees for property development projects in proportion to its share.
Mitsubishi Estate Asia Pte. Ltd. provides business undertaking guarantees for residential development projects in proportion to its share.
(3) Obligation of additional investment

AM O U NT S PE R S HAR E

10

Yen

U.S. dollars

Obligation of additional investment

Millions of yen

Thousands of U.S. dollars¥27,691$230,438

2015

2014

2015

Net income:Basic¥52.85¥46.34$0.43

Diluted

52.84

46.32

0.43

13

14.00

12.00

0.11

The components of “Other, net” in “Other income (expenses)” for the years ended March 31, 2015 and 2014 were as follows:

Yen

U.S. dollars

2015

2014

2015

¥1,078.11¥957.80$8.97

Year ended March 31,

Cash dividends applicable to the year
As of March 31,

Net assets
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 basedon the net income available for distribution to the shareholders and theweighted average number of shares of common stock outstanding
during each year after giving effect to the dilutive potential of shares ofcommon stock to be issued upon the exercise of warrants and stock
subscription rights.
11

Amounts per share of net assets are computed based on net assets
available for distribution to the shareholders and the number of sharesof common stock outstanding at the year end.
Cash dividends per share represent the cash dividends proposed by the
Board of Directors as applicable to the respective years together with theinterim cash dividends paid.

OTHER I NCO ME ( EXPENSES)
Millions of yen

Year ending March 31,

20162017 and thereafter
Total

Millions of yen

Thousands of U.S. dollars¥ 5,058
51,449¥56,508$ 42,097
428,142$470,240

The Company and its consolidated subsidiaries lease office buildings and commercial properties and earn income on these leases. Future minimum
lease income subsequent to March 31, 2015 from noncancelable operating leases is summarized as follows:Year ending March 31,

Millions of yen

Thousands of U.S. dollars

20162017 and thereafter
Total¥  244,839
863,259¥1,108,098$2,037,440
7,183,649$9,221,090

MITSUBISHI ESTATE CO., LTD.

Thousands of U.S. dollars

2015

2014

2015

Gain on sales of fixed assets¥ 36,551¥ 6,702$ 304,165

Gain on negative goodwill

12,256

4,942

101,991

Loss on disposal of fixed assets(4,780)(4,029)(39,782)

Loss related to retirement of fixed assets(6,190)(2,303)(51,512)

Impairment loss *(73,725)(32,644)(613,510)

(173)

—

(1,445)

Loss on valuation of equity investments(381)(7,648)(3,170)

Provision for additional investment obligation(1,804)—(15,012)

Other, net(3,021)(1,083)(25,145)¥(41,269)¥(36,065)$(343,423)( 1)

Loss on valuation of investment securities

L E A SE S

Future minimum lease payments subsequent to March 31, 2015 on noncancelable operating leases are summarized as follows:64

The Company’s additional contribution obligation for the special purpose company is 50% as its stake.

(*1) Impairment loss
The Company recorded consolidated impairment losses for the following asset groups
for the fiscal year ended March 31, 2015:

The Company recorded consolidated impairment losses for the following asset groups
for the fiscal year ended March 31, 2014:

Major Application

Category

Location

Major Application

Category

Location

Leased assets, etc.
(total 23 groups)

Land, Buildings, etc.

Yokohama, Kanagawa Prefecture,
New York, U.S.A, etc.

Leased assets, etc.
(total 24 groups)

Land, Buildings, etc.

Osaka, Osaka Prefecture,
Nagoya, Aichi Prefecture, 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 is substantially independent fromcash flows of other assets or asset groups. Company condominiums are regarded as shared assets.
As a result, for the fiscal year ended March 31, 2015, the book values of 23 asset groups, consistingof those for which the market prices fell considerably compared with the book values due to thedecline 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 ¥73,725 million($613,510 thousand).
The breakdown of such impairment losses was ¥14,084 million ($117,203 thousand) in land and,
¥59,641 million ($496,307 thousand) in buildings and structures.
		 The collectible amounts of asset groups are measured using net sale value or use value, andthe net sale value is principally expressed as an appraised value by a real estate appraiser. Future cash
flows mainly discounted at a rate of 5% are used to compute the use value.

ANNUAL REPORT 2015

Asset grouping for the Company and its consolidated subsidiaries (collectively, the “Group”) was
made based on a minimum unit that generates cash flows, which is substantially independent fromcash flows of other assets or asset groups. Company condominiums are regarded as shared assets.
As a result, for the fiscal year ended March 31, 2014, the book values of 24 asset groups, consistingof those for which the market prices fell considerably compared with the book values due to thedecline 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 reduced amounts were recorded as impairment losses in the amount of ¥32,644 million.
The breakdown of such impairment losses was ¥18,418 million in land and, ¥14,226 million inbuildings and structures.
		 The collectible amounts of asset groups are measured using net sale value or use value, andthe net sale value is principally expressed as an appraised value by a real estate appraiser. Future cash
flows mainly discounted at a rate of 5% are used to compute the use value.

65

F INANC I A L SE C TIO N

14

Estimated Fair Value of Financial Instruments

FI N A N C I A L I N S T R UM E N T S

OVERVIEW(3) Risk management for financial instruments(1) Policy for financial instruments(a)	Monitoring of credit risk (the risk that customers or counterparties
may default)

In consideration of plans for capital investment, the Group raises funds
mainly through bank borrowings and bond issues. In terms of fundmanagement, the Group makes every effort to avoid market risks byemphasizing liquidity and shortening the fund management period.
The Group uses derivatives for the purpose of hedging exposure tointerest rate, reducing interest expenses, and hedging the risk offluctuations in foreign exchange rates and do not enter into derivatives
for speculative purpose.
(2) Types of financial instruments and related risk

Trade receivables – notes and accounts receivable – are exposed to credit
risk in relation to customers. Trade receivables denominated in foreign
currencies, which arise from overseas operation, are exposed to foreign
currency exchange risk.
Marketable securities and investment securities are exposed to market
risk. Those securities are composed of mainly held-to-maturity debt
securities and the shares of common stock of other companies withwhich 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 trust andinvestments in silent partnerships for special purpose companies. They
are exposed to credit risks of issuers, risks of fluctuations in interest rates
and market prices, respectively.
Lease and guarantee deposits for leased assets are exposed to credit
risks of customers.
Substantially all trade payables – accounts and notes payable – havepayment due dates within one year. Some of them denominated inforeign currencies are exposed to foreign currency exchange risk.
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 20 years from the balance sheet date. Certain longterm debt with variable interest rates is exposed to interest rate fluctuation risk. However, to reduce such risk 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
risk. Some of the consolidated subsidiaries enter into interest swap andcurrency swap transactions in accordance with the same policies andpurposes adopted by the Company.

	In accordance with the internal policies for managing credit risk of
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 risks of bad debts
from customers who are having financial difficulties.
(b)	Monitoring of market risks (the risks arising from fluctuations in foreignexchange rates, interest rates and others)	In order to mitigate the interest rate risk for loans payable and bonds
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 andthe financial position of the issuers (business partners). In addition, theGroup continuously evaluates whether securities other than thoseclassified as held-to-maturity should be maintained taking into accounttheir fair values and relationships with the issuers (business partners).
(c)	Monitoring of liquidity risk (the risk that the Group may not be able tomeet its obligations on scheduled due dates)	Based on the report from each division, the Group prepares andupdates its cash flow plans on a timely basis and stabilizes liquidity to
manage liquidity risk.

Carrying value of financial instruments on the consolidated balance sheets as of March 31, 2015 and unrealized gains (losses) are shown in thefollowing table. The following table does not include financial instruments for which it is extremely difficult to determine the fair value. (Please refer
to Note B below).
Millions of yen

20151) Cash on hand and in banks2) Notes and accounts receivable – trade
		 Allowance for doubtful receivables (*1)3) Securities and Investment securities
		 (i) Held-to-maturity debt securities
		 (ii) Other securities
		 (iii) Investments in subsidiaries and affiliates
4) Equity investments
Total assets
1) Notes and accounts payable – trade2) Short-term borrowings
3) Current portion of long-term borrowings
4) Commercial paper5) Current portion of long-term bonds6) Long-term bonds7) Long-term borrowings
Total liabilities

Carrying
Value

Estimated
Fair Value

Difference¥  197,169
35,873(571)
35,301¥  197,169—

35,301—

624
257,50260
9,673¥  500,332¥   95,632
77,881
86,61728,00040,225645,000
1,044,387¥2,017,744

636
257,502665
9,673¥  500,949¥   95,632
77,881
86,61728,00040,225675,272
1,054,830¥2,058,459¥    12—604—¥   617—————¥30,272
10,443¥40,715

Carrying
Value

Estimated
Fair Value$ 1,640,756 $ 1,640,756
298,520(4,757)
293,762
293,762
5,192
2,142,815
507
80,502$ 4,163,536$   795,810
648,093
720,791
233,003334,738
5,367,396
8,690,914$16,790,747

5,294
2,142,815
5,541
80,502$ 4,168,672$   795,810
648,093
720,791
233,003334,738
5,619,308
8,777,819$17,129,565

Difference——$    101—
5,034—$  5,135—————$251,912
86,905$338,817

Millions of yen

2014(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, fairvalue is reasonably estimated. Since various assumptions and factors arereflected in estimating the fair value, different assumptions and factors
could result in different fair value.

Thousands of U.S. dollars

1) Cash on hand and in banks2) Notes and accounts receivable – trade
		 Allowance for doubtful receivables (*1)3) Securities and Investment securities
		 (i) Held-to-maturity debt securities
		 (ii) Other securities
		 (iii) Investments in subsidiaries and affiliates
4) Equity investments
Total assets
1) Notes and accounts payable – trade2) Short-term borrowings
3) Current portion of long-term borrowings
4) Commercial paper5) Current portion of long-term bonds6) Long-term bonds7) Long-term borrowings
Total liabilities

Carrying
Value

Estimated
Fair Value

Difference¥   224,121
28,539(208)
28,331¥   224,121—

28,331—

622
190,91460
10,526¥   454,578¥   105,271
63,762
343,127—
56,595645,000
855,052¥2,068,810

635
190,914226
10,526¥   454,756¥   105,271
63,762
343,127—
56,595685,169
865,951¥2,119,879¥    12—165—¥   178—————
40,16910,898¥51,068(*1) The value of notes and account receivable-trade is shown at net value, after deducting allowance for doubtful accounts.

66

MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2015

67

F INANC I A L SE C TIO N

Note A: Methods to determine the estimated fair value of financial instruments andother matters related to securities and derivative transactions
AssetsCash on hand and in banks	Since these items are settled in a short period of time, their carrying value approximatesfair value.
Notes and accounts receivable – trade	Since these items are settled in a short period of time, their carrying value approximatesfair 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 15. “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 approximatesfair value.
Short-term borrowings	Since these items are settled in a short period of time, their carrying value approximatesfair value.
Current portion of long-term borrowings	Since these items are settled in a short period of time, their carrying value approximatesfair value.
Commercial paper	Since these items are settled in a short period of time, their carrying value approximatesfair value.
Current portion of bonds	Since these items are settled in a short period of time, their carrying value approximatesfair 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 based on
current interest rates in a short period of time, their carrying value approximates fairvalue. The fair value of long-term borrowings with fixed interest rate is based on thepresent value of the total of principal and interest discounted by the interest rate to be
applied if similar new borrowings were entered into.
Derivatives Transactions
Please refer to Note 17. “Derivatives and Hedging Activities.”
Note B: Financial instruments for which it is extremely difficult to determine the fair value
Millions of yen

Thousands of
U.S. dollars

2015(i) Unlisted stocks (*1)

¥ 24,801$   206,390(ii) Equity investments (*2)

241,575

2,010,283(iii) Lease and guarantee deposit receivables (*3)

112,397

935,323(iv) Lease and guarantee deposit payables (*4)

381,605

3,175,549
Millions of yen

2014(i) Unlisted stocks (*1)

¥ 23,391(ii) Equity investments (*2)

213,384(iii) Lease and guarantee deposit receivables (*3)

113,015(iv) Lease and guarantee deposit payables (*4)

383,083(*1) Because no quoted market price is available and it is extremely difficult to determine thefair value, unlisted stocks are not included in the above table.
(*2) Because it is extremely difficult to determine the fair value for equity investments which
are not listed and have no quoted market price, they are not included in the above 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.

Note C: Redemption schedule for receivables and marketable securities with maturities
Millions of yen

As of March 31, 2015
Cash on hand and in banks
Notes and accounts receivable – tradeMarketable securities and investment securities:
Held-to-maturity debt securities
National and local government bonds
Corporate bonds
Other
Other marketable securities with maturities:
Other
Total

Thousands of U.S. dollars

Due in One
Year or Less

Due after One Yearthrough Five Years

Due after Five Years
through Ten Years

Due after
Ten Years

Due in One
Year or Less

Due after One Yearthrough Five Years

Due after Five Years
through Ten Years

Due after
Ten Years¥197,169
35,873

—
—

—
—

—
—

$1,640,756
298,520

—
—

—
—

—
—

25
—
—

¥170
243
—

¥184
—
—

—
—
—

208
—
—

$1,4142,029—$1,531
—
—

—
—
—

—
¥233,067

54
¥468

41
¥225

—
—

—
$1,939,484

454$3,898343$1,874——15

MARKETAB LE SECURI TI ES AND I NV ESTMENT SECURI TI ES

Marketable and investment securities classified as other securities at March 31, 2015 and 2014 are summarized as follows:

Due in One
Year or Less

Due after One Yearthrough Five Years

Due after Five Years
through Ten Years

Due after
Ten Years¥224,121
28,539

—
—

—
—

—
—

110
—
25

¥ 35
223
—

¥234
—
—

—
—
—

1,200
¥253,995

—
¥258

119
¥353

—
—

Thousands of U.S. dollars

Cost

Fair Value

Unrealized
Gain (Loss)

2015
Cost

Fair Value

Unrealized
Gain (Loss)

Securities whose fair value exceeds their cost:
Equity securities
Other
		Subtotal¥80,318
4,491
84,810¥255,360
9,675
265,036¥175,042
5,183
180,225$668,372
37,379705,751$2,124,997
80,512
2,205,509$1,456,625
43,132
1,499,757

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

268
10
2,042
2,321
¥87,131

220
10
1,909
2,139
¥267,176

(48)
—
(133)
(181)
¥180,044

2,236
83
16,99919,319$725,071

1,836
83
15,887
17,807$2,223,317(400)—(1,111)(1,511)$1,498,246

Millions of yen

2014
Cost

Fair Value

Unrealized
Gain (Loss)

Securities whose fair value exceeds their cost:
Equity securities
Other
		Subtotal¥72,565
5,331
77,896¥182,304
10,527
192,832¥109,739
5,196
114,935

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

8,004
10
1,342
9,357
¥87,254

7,389
10
1,209
8,609
¥201,441

(614)
—
(133)
(748)
¥114,187

Proceeds from sales of securities classified as other securities totaled ¥89 million ($742 thousand) and ¥377 million for the years ended March
31, 2015 and 2014, respectively. Gross realized gains were ¥82 million ($689 thousand) and ¥345 million for the years ended March 31, 2015 and2014, respectively.
Marketable debt securities classified as held-to-maturity securities at March 31, 2015 and 2014 are summarized as follows:
Millions of yen

Thousands of U.S. dollars

Amortized Cost

Fair Value

Unrealized
Gain (Loss)

2015

Millions of yen

As of March 31, 2014
Cash on hand and in banks
Notes and accounts receivable – tradeMarketable securities and investment securities:
Held-to-maturity debt securities
National and local government bonds
Corporate bonds
Other
Other marketable securities with maturities:
Other
Total

Millions of yen

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

Amortized Cost

Fair Value

Unrealized
Gain (Loss)

¥320
—
320

¥333
—
333

¥12
—
12

$2,666—
2,666$2,772
—
2,772

$106
—
106

59
243
—
303
¥624

59
243
—
303
¥636

—
(0)
—
(0)
¥12

497
2,029
—
2,526
$5,192

497
2,024
—
2,521
$5,294

—
(5)
—
(5)
$101

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

As of March 31, 2015
Corporate bonds
Long-term borrowings
Total

Due in One
Year or Less

Due after One
Year throughTwo Years

Due after Two
Years throughThree Years

Due afterThree Years
through FourYears

Due after FourYears throughFive Years

Due after
Five Years¥ 40,200
86,617¥126,817¥ 70,000
173,328¥243,328¥ 85,000
136,473¥221,473¥ 65,000
140,369¥205,369¥ 75,000
153,360¥228,360¥350,000
440,855¥790,855

2014

Due in One
Year or Less

Due after Two
Years throughThree Years

Due afterThree Years
through FourYears

Due after FourYears throughFive Years

Due after
Five Years$  334,526
720,791$1,055,317$  582,508
1,442,362$2,024,870$  707,331
1,135,669$1,843,000$  540,900
1,168,086$1,708,987$  624,115
1,276,197$1,900,313$2,912,540
3,668,597$6,581,137

Millions of yen

As of March 31, 2014
Corporate bonds
Long-term borrowings
Total

68

Due in One
Year or Less

Due after One
Year throughTwo Years

Due after Two
Years throughThree Years

Due afterThree Years
through FourYears

Due after FourYears throughFive Years

Due after
Five Years¥ 56,647
343,127¥399,774¥ 20,000
109,681¥129,681¥ 70,000
171,574¥241,574¥ 85,000
133,459¥218,459¥ 65,000
128,818¥193,818¥405,000
311,517¥716,517

Millions of yen

Thousands of U.S. dollars

Due after One
Year throughTwo Years

MITSUBISHI ESTATE CO., LTD.

Debt securities whose fair value exceeds their cost:
Government bonds
Corporate bonds
		Subtotal
Debt securities whose cost exceeds their fair value:
Government bonds
Corporate bonds
Other
		Subtotal
Total
ANNUAL REPORT 2015

Amortized Cost

Fair Value

Unrealized
Gain (Loss)

¥399
—
399

¥413
—
413

¥13
—
13

—
223
—
223
¥622

—
222
—
223
¥635

—
(0)
—
(0)
¥12

69

F INANC I A L SE C TIO N

Millions of yen

S U PPL E M E NTAL CAS H F L O W IN F O R M ATION

16

2014

The following table represents a reconciliation of cash and cash equivalents as of March 31, 2015 and 2014:
Millions of yen

Thousands of U.S. dollars

2015

2014

2015

¥197,169¥224,121$1,640,756

Time deposits with maturities of more than three months

(605)

(605)

(5,035)Marketable securities with maturities of three months or less

1,925

1,223

16,022¥198,489¥224,739$1,651,743

Cash on hand and in banks

Cash and cash equivalents

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 are as follows:
Millions of yen

Thousands of U.S. dollars

2015

Current assets
Fixed assets
Goodwill
Current liabilities
Fixed liabilities
Minority interests
Translation adjustments
Acquisition cost
UnpaidCash and cash equivalents of subsidiary
Payment for acquisition¥   948
36,33814,459(781)(4,127)(7,486)(1,129)38,221(3,628)(151)¥34,441$  7,896
302,392
120,329(6,506)(34,348)(62,300)(9,397)
318,065(30,195)(1,259)$286,610

DE R I VAT I V E S A N D HE DGIN G ACT IV IT IE S

17

1. Derivatives to which hedge accounting has not been applied(1) Currency related transactions
Millions of yen

Thousands of U.S. dollars

2015Class of Transactions

Notional
AmountDue after
One Year

Forward foreign exchange contracts¥16,311—

Total¥16,311—

Fair Value

Unrealized
Gain (Loss)

Notional
AmountDue after
One Year

Fair Value

Unrealized
Gain (Loss)

¥245

¥245

$135,740—$2,045$2,045¥245¥245$135,740—$2,045$2,045Class of Transactions

Subject to hedged accounting

Interest rate swap contracts
Fixed rate payment andfloating rate receipt

Long-term borrowings

Interest rate swap contracts by
short-cut method
Fixed rate payment andfloating rate receipt

Long-term borrowings andCorporate bonds

Total

Notional
AmountDue after
One Year

Fair Value¥ 23,818¥23,818¥52

142,099

74,402( )¥165,917¥98,220¥52*

Calculation method of fair value is based on the data obtained from financial institutions.
(*) T he 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 short-cut method are handled together with long-term borrowings and corporate bonds that are subject to hedged accounting.

(2) Interest and currency related transactions
Millions of yen

Thousands of U.S. dollars

2015Class of Transactions

Subject to hedged accounting

Interest rate and currency swap
contracts	Payment in JPY and receipt
in USD
Floating rate payment andfixed rate receipt

Long-term borrowings

Interest rate and currency swap
contracts	Payment in USD and receipt
in JPY
Floating rate payment andfixed rate receipt

Corporate bonds

Interest rate and currency swap
contracts	Payment in GBP and receipt
in JPY
Floating rate payment andfixed rate receipt

Corporate bonds

Total

Notional
AmountDue after
One Year

Fair Value

Notional
AmountDue after
One Year

Fair Value¥25,000¥25,000¥ 1,985$208,038$208,038$ 16,520

7,600—(1,370)63,243—(11,405)

12,600—(1,105)

104,851—(9,196)¥45,200¥25,000¥   (490)$376,133$208,038$ (4,080)

Millions of yen

2014

Calculation method of fair value is based on the data obtained from financial institutions.
2. Derivatives to which hedge accounting has been applied(1) Interest related transactions
Millions of yen

Thousands of U.S. dollars

2015Class of Transactions

Subject to hedged accounting

Long-term borrowings

Interest rate swap contracts by
short-cut method
Fixed rate payment andfloating rate receipt

Long-term borrowings70

Due after
One Year

Fair Value

Notional
AmountDue after
One Year

Fair Value

Subject to hedged accounting

Interest rate and currency swap
contracts	Payment in GBP and receipt
in JPY
Floating rate payment andfixed rate receipt

Corporate bonds

TotalInterest rate swap contracts
Fixed rate payment andfloating rate receipt

Total

Notional
AmountClass of Transactions¥ 27,244¥ 27,244

168,390

163,900¥195,634¥191,145¥(53) $  226,714 $  226,714*( )$(444)

Due after
One Year

Fair Value¥12,000—¥(719)¥12,000—¥(719)

Calculation method of fair value is based on the data obtained from financial institutions.

*

1,363,906( )¥(53) $1,627,982 $1,590,621$(444)

1,401,268

Notional
AmountMITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2015

71

F INANC I A L SE C TIO N

18

Millions of yen

S E G M E NT I NF O R M AT IO N

2015

The 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 tomake decisions about resource allocation and to assess performance.
Business performances are aggregated according to business areas thatconsist 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 asreportable segments.
The Company and its consolidated subsidiaries are primarily engaged
in the real estate business. Their business segments are classified in termsof the nature of each operation or service and consist of following
segments: (1) Building Business; (2) Residential Business; (3) International

Business; (4) Investment Management; (5) Architectural Design andEngineering; (6) Hotel Business; (7) Real Estate Services; and(8) Other businesses.
The Group’s reportable segments were changed due to a structural
reorganization from the year ended March 31, 2015 as follows: theCommercial Property Development and Investment segment has been
consolidated into the Building Business segment. In addition, overseas
operations of the Commercial Property Development and Investment
segment and the Building Business segment have been consolidated into
the International Business segment.
Segment information for the year ended March 31, 2014 has been
restated to reflect these changes.

Reportable Segments

Impairment loss

Building
Business

Residential
Business

International
Business

Investment
Management¥49,973¥571¥22,663—

Impairment loss

$415,855$4,752$188,593

Investment
Management

Real Estate
Services

Subtotal

Other

Eliminations or
Total
Corporate

Intersegment ortransfers
Total revenue
Segment income (loss)
Segment assets¥   580,177¥375,520¥ 77,752¥ 8,024¥11,628¥30,341¥25,877¥1,109,322¥   937¥1,110,259—

Capital expenditures

Consolidated¥1,110,259

7,483

2,215

42

26

7,839

486

1,418

19,511

2,809

22,321¥ (22,321)—

587,660

377,736

77,7948,050

19,46730,827

27,295

1,128,833

3,747

1,132,581(22,321)

1,110,259

128,982

11,605

26,068

4,064

663

754

1,111

173,250

16

173,266(16,934)

156,332¥3,416,285¥597,587¥595,293¥31,030¥24,985¥28,034¥27,505¥4,720,723¥27,696¥4,748,419¥153,106¥4,901,526

59,960

2,728

7,378

55

103

1,322

333

71,883

159

72,042654

72,696¥   120,704¥ 22,108¥ 45,947¥   242¥   677¥ 3,290¥   408¥  193,379¥   382¥  193,762¥   (2,304)¥  191,457

Thousands of U.S. dollars

2015
Reportable Segments

Building
Business

Residential
Business

International
Business

Investment
Management

Architectural
Design andEngineering Hotel Business

Real Estate
Services

Subtotal

Other

Total

Eliminations or
Corporate—

Impairment loss

Building
Business

Residential
Business

International
Business

Investment
Management¥24,613¥5,507¥2,430—

Amortization of
goodwill—$4,309$613,510—$613,510

Architectural
Design andEngineering Hotel Business——

Real Estate
Services

Subtotal

Other

Total

Eliminations or
Corporate

Consolidated—¥32,552—¥32,552¥92¥32,644

Consolidated

Building
Business

Residential
Business

International
Business

Investment
Management

Architectural
Design andEngineering Hotel Business

Real Estate
Services

Subtotal

Other

Total

Eliminations or
Corporate

Consolidated

—

—

—

—

¥  4,667—¥  4,667—¥  4,667¥20,003

—

—

—

—

¥ 33,1280¥ 33,128—¥ 33,128

Amortization ofnegative goodwill

—

—

—

—

—

—

—

—

—

—

—

—

Balance of negative
goodwill¥110,301

—

—

—

—

—

—

¥110,301—¥110,301—¥110,301

Thousands of U.S. dollars

2015
Reportable Segments

Amortization of
goodwill

Building
Business

Residential
Business

International
Business

Investment
Management

Architectural
Design andEngineering Hotel Business

Real Estate
Services

Subtotal

Other

Total

Eliminations or
Corporate

Consolidated$  3,987$ 27,563$  7,286

—

—

—

—

$ 38,836—$ 38,836—$ 38,836

Balance of goodwill—$109,211$166,462

—

—

—

—

$275,684$ 0$275,684—$275,684

Amortization ofnegative goodwill

—

—

—

—

—

—

—

—

—

—

—

—

Balance of negative
goodwill$917,875

—

—

—

—

—

—

$917,875—$917,875—$917,875
Millions of yen

2014
Reportable Segments$ 9,231,274$  7,803$ 9,239,077—$ 9,239,077

62,273

18,435353

219

65,232

4,050

11,802

162,367

23,382

185,750$  (185,750)—

Total revenue

4,890,246

3,143,349

647,373

66,996

161,996

256,536

227,142

9,393,642

31,1859,424,827(185,750)

9,239,077

Amortization of
goodwill

Segment income (loss)

1,073,334

96,573

216,934

33,824

5,519

6,276

9,249

1,441,711

136

1,441,848(140,920)

1,300,928

Balance of goodwill$28,428,773$4,972,851$4,953,757$258,225$207,922$233,292$228,888$39,283,710$230,475$39,514,186$1,274,086$40,788,272

Architectural
Design andEngineering Hotel Business

Building
Business

Residential
Business

International
Business

Investment
Management¥    501¥ 3,126¥  899¥70——¥11,471¥5,993——

Other items

Amortization ofnegative goodwill

—

—

—

—

Depreciation andamortization

Balance of negative
goodwill¥109,821———

498,961

22,706

61,399463

862

11,0072,778

598,178

1,326

599,505

5,445

604,950$ 1,004,450$  183,977$  382,350$  2,018$  5,638$ 27,381$  3,398$ 1,609,216$  3,186$ 1,612,402$   (19,180)$ 1,593,221
Millions of yen

2014
Reportable Segments

Building
Business

Residential
Business

International
Business

Investment
Management

Architectural
Design andEngineering Hotel Business

Real Estate
Services

Subtotal

Other

Total

Eliminations or
Corporate

Consolidated

Real Estate
Services

Subtotal

Other

Total

Eliminations or
Corporate

Consolidated——¥  4,598¥0¥  4,598—¥  4,598——¥ 17,465¥0¥ 17,465—¥ 17,465

—

—

—

—

—

—

—

—

—

—

—

¥109,821—¥109,821—¥109,821

Gain on Negative Goodwill

The Company recorded a gain on negative goodwill of ¥12,256 million ($101,991 thousand) in the Building Business segment for the year ended
March 31, 2015.
Products and Service Information

Refer to reportable segment information.

Revenue, operating
income and assets byreportable segment¥  519,252¥401,037¥ 80,366¥ 6,264¥12,981¥28,772¥25,956¥1,074,630¥   654¥1,075,285—¥1,075,285

6,576

2,222

—

24

6,964

447

1,140

17,3753,020

20,396¥(20,396)—

Total revenue

525,829403,259

80,366

6,288

19,946

29,21927,097

1,092,006

3,674

1,095,681(20,396)

1,075,285

Segment income (loss)

116,277

27,77825,579

3,046

1,252

737

1,544

176,215-246

175,969(14,698)

161,271¥3,433,585¥662,350¥455,358¥30,035¥24,246¥24,636¥24,781¥4,654,995¥28,025¥4,683,020¥ 82,347¥4,765,368

Other items

Capital expenditures$609,201¥   875$215,340

Depreciation andamortization—¥13,125$252,485

Segment assets—¥ 3,312$ 96,764Intersegment ortransfers¥73,725—$ 66,777

Revenue from:
External customers—¥    479$  647,019

Capital expenditures¥73,725

Balance of goodwill$3,124,913

Segment assets

¥517

2015

$ 4,827,973

Intersegment ortransfers¥73,207

Reportable Segments

Revenue, operating
income and assets byreportable segment

Revenue from:
External customers

Consolidated

—

2014

Other items

Depreciation andamortization

Eliminations or
Corporate

Millions of yen

Revenue, operating
income and assets byreportable segment

Revenue from:
External customers

Total

Reportable Segments

Reportable Segments

International
Business

Other

Millions of yen

2015
Residential
Business—

SubtotalThousands of U.S. dollars

Millions of yen

Building
Business—

Real Estate
Services

The following table presents the amortization and balance of goodwill as of and for the years ended March 31, 2015 and 2014 by reportable segment:

The reportable segment information of the Company and its consolidated subsidiaries for the years ended March 31, 2015 and 2014 is summarized
as follows:

Architectural
Design andEngineering Hotel BusinessArchitectural
Design andEngineering Hotel Business

62,485

3,032

6,748

43

72

1,162

407

73,953

223

74,176629

74,805¥   96,149¥ 18,380¥ 48,394¥    35¥    53¥ 2,040¥   294¥  165,349¥   869¥ 166,218¥   6,360¥  172,579

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 on the consolidated income statement and property and equipment on the consolidatedbalance 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 from operations
shown on the consolidated income statement. Accordingly major customer information has been omitted.

Impairment losses of the Company and its consolidated subsidiaries on fixed assets by reportable segments for the years ended March 31, 2015 and2014 are summarized as follows:

72

MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2015

73

F INANC I A L SE C TIO N

19

RE NTA L PR O PE RT IE S

20

The Company and some of its consolidated subsidiaries own office buildings for lease, commercial facilities for lease and others in Tokyo and otherareas including overseas countries (the United States and the United Kingdom) 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 the Company andsome of its consolidated subsidiaries.
The carrying value on the consolidated balance sheet as of March 31, 2015 and the fair value of these rental properties and real estate including
space used as rental properties are as follows:
Millions of yen

Thousands of U.S. dollars

2015
Carrying Value

Rental properties
Real estate including spaces used asrental properties

Fair Value

As of April 1,
2014

Net Change

As of March 31, As of March 31,
2015
2015

¥3,074,645¥60,767¥3,135,413

224,577(41,798)

182,779

Carrying Value
As of April 1,
2014¥5,220,983 $25,585,799
277,955

1,868,833

Net Change

Fair Value

As of March 31, As of March 31,
2015
2015

$505,681 $26,091,481 $43,446,646(347,826)

1,521,006

2,313,018

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.

Millions of yen

2014

Rental properties
Real estate including spaces used asrental properties

Fair Value

As of April 1,
2013

Net Change

As of March 31, As of March 31,
2014
2014

¥2,965,396¥109,249¥3,074,645¥5,060,986

227,564(2,987)

224,577

334,700

Rental properties

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
0.3% and 2.6%.
3.	Changes in asset retirement obligations during the years ended March
31, 2015 and 2014 are as follows:
Millions of yen

Thousands of
U.S. dollars

2015

2014

2015

¥1,316¥ 490$10,955

Increase due to the acquisitionof property and equipment

279

819

2,322

Adjustments due to the elapseof time

22

10

187

Decrease due to the fulfillmentof asset retirement obligations

(175)

(3)

(1,456)(320)—(2,665)¥1,122¥1,316$ 9,343(2) Asset retirement obligations not recognized in the consolidatedbalance sheet

Millions of yen

Real estate including
space used as rental
properties	Asset retirement obligations include obligations of restoration related
to leasehold and rental contracts.

Balance at the end of the year

As stated below, certain obligations are excluded from recognition ofasset retirement obligations.

21

The income or loss from rental properties and real estate including space used as rental properties for the years ended March 31, 2015 and 2014 wereas follows:
2015

1. Outline of asset retirement obligations

Other

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.

Lease
income(*1)(1) Asset retirement obligations presented in the consolidatedbalance sheet

Balance at the beginningof the year

The carrying value on the consolidated balance sheet as of March 31, 2014 and the fair value of these rental properties and real estate including
space used as rental properties are as follows:

Carrying ValueASSET RETI REMENT O B LI G ATI O NS

Thousands of U.S. dollars

2014

Lease cost

Lease
income, net Other, net(*2)

Leaseincome(*1)

Lease cost

Lease
income, net Other, net(*2)¥395,188¥263,237¥131,950¥(1,525)¥373,047¥256,935¥116,111

15,166

15,408(242)(44,605)

17,074

16,2278472) Obligation of restoration based on some real estate rental agreements		 For some commercial facilities, the Company has an obligation ofrestoration 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 businessstrategies and the current business environment, the Company
intends to continue its operation and not to fulfill the obligation.
Although the Company made the best estimation taking into accountall the evidence available as of March 31, 2015, these obligations are
excluded from recognition of asset retirement obligations since theprobability of the obligations in terms of scope and amount could not
be reasonably estimated.

RELATED PARTY TRANSACTI O NS

The Company has related party transactions with key management personnel of the Company and major individual shareholders.
The corresponding balances as of March 31, 2015 and 2014 and the amounts of these transactions for the years then ended are summarized as follows:
Millions of yen

Thousands of U.S. dollars

Transaction
amountBalanceoutstandingat year end

Transaction
amountBalanceoutstandingat year end

¥26

—

$220

—

2015
Lease
income(*1)

Lease cost

126,207

128,224

2015

Lease
income, net Other, net(*2)¥(30,873) $3,288,579 $2,190,544 $1,098,034(1,474)1)	Obligation to remove asbestos that is used for some properties andequipments 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 orother projects involving many other business associates. It is therefore
difficult to reasonably estimate the timing to fulfill such obligation
based on the physical useful life of the assets caused by aging and it is
impossible to estimate the timing without specific business plans.
Although the Company has been voluntarily conducting asbestos
removal work when that is feasible due to such as termination oftenancy, it is impractical to make a reasonable estimation of progressof such voluntary removal work based on the actual record of thetenancy termination and of the remaining amount of asbestos atdemolition. Moreover, it is difficult to distinguish costs of asbestos
removal from total costs of demolition. Although the Company madethe best estimation taking into account all the evidence available as ofMarch 31, 2015, these obligations are excluded from recognition ofasset retirement obligations since the probability of obligations interms of scope and amount was not reasonably estimated.

(2,017)$(12,694)(371,184)

Type

Name

Father-in-law of
Tetsuji Arimori,
Officer’s close Senior Executive
relatives
OfficerOccupation—

Ownership ratioof voting shares

Relationship withthe related party

Nature oftransaction

0.00%

Contract for
construction ofhouse building
and other

Construction ofhouse building(*1)	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.
(*2)	Other, net includes gain on sales of fixed assets, in the amount of ¥36,376 million ($302,709 thousand), and impairment loss, in the amount of ¥71,592 million ($595,758 thousand)for the year ended March 31, 2015, and impairment loss, in the amount of ¥32,365 million for the year ended March 31, 2014.

Millions of yen

2014
Type

Name

Occupation

Ownership ratioof voting shares

Relationship withthe related party

Nature oftransaction

Officer

Yutaka Yanagisawa

Executive Officer

0.00%

Sales ofcondominium
and other

Sales ofcondominium

Transaction
amountBalanceoutstandingat year end¥26—

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

74

MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2015

75

(6) 	Assets acquired and the liabilities assumed at the acquisition date

O T H E R C O M P R E HE N S IV E IN CO M E

22

The following table presents reclassification and tax effects allocated to each component of other comprehensive income for the years ended March 31,
2015 and 2014:
Millions of yen

Thousands of U.S. dollars

2015

2014

2015

¥ 68,920¥ 8,042$ 573,525

Current assets
Fixed assets
Total

Unrealized holding gain (loss) on securities:
Amount arising during the year
Reclassification adjustments for gains and losses included in net income

(27)

—

(231)

Amount before tax effects

68,892

8,042

573,293

Tax effects(17,256)(2,678)(143,601)

Unrealized holding gain (loss) on securities

51,636

5,364

429,692

Deferred gain (loss) on hedging instruments:
(286)

929

Reclassification adjustments for gains and losses included in net income

133

(237)

1,109

Amount before tax effects

(152)

692

(1,272)

Tax effects

106

(266)

888

Deferred gain (loss) on hedging instruments

(46)

426

(384)

28,832(79)

239,929

Amount arising during the year

(2,382)

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

27,98841,806

232,908

Amount before tax effects

27,98841,806

232,908

267

(52)

2,224

28,25541,754

235,132

14,373—

119,612

Tax effects
Foreign currency translation adjustments
Retirement benefits liability adjustments:
Amount arising during the year
Reclassification adjustments for gains and losses included in net income

635

—

5,286

Amount before tax effects

15,009—124,899

Tax effects(5,142)—(42,792)

Retirement benefits liability adjustments

9,866

—

82,106

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

23

1,405

10,648¥48,870$ 997,126

B U SI N E SS C O M B IN AT IO N

1. ACQUISITION
Consolidation of Tokumei Kumiai First M(1)		 Outline of the acquisition

i. Name and business of acquired entity
		 Name: Tokumei Kumiai First M
		 Business:	Holding and operation of Former Mizuho Bank Head
Office Building
ii. Objective of acquisition		Decisions by management on implementing an operational
strategy for the rental office building owned by Tokumei Kumiai
First M are necessary since the sole lessee will vacate the property.
iii. Date of acquisition
		 April 7, 2014
iv. Legal form of acquisition		 —v. Name of acquired entity subsequent to acquisition
		 Tokumei Kumiai First M
vi. Change in ownership ratio
		 No change from the existing 51%

76

1,279
¥119,824

vii. Determination of acquirer		In the course of undertaking managerial decision making on theimplementation of an operational strategy for the rental officebuilding owned by Tokumei Kumiai First M, the Company
obtained substantial control of the acquired entity.
(2) 	Period for which operating results of acquiree were included inconsolidated financial statements of the Company

From February 1, 2014 to November 13, 2014
(3) Breakdown of cost and consideration transferred for acquisition

Cash on hand and in banks of ¥1,883 million ($15,673 thousand).
(4) Major acquisition related cost

Omitted due to immateriality(5) Amount of gain on negative goodwill and its cause

Amount: ¥12,256 million ($101,991 thousand)Cause:	The consideration transferred was less than the fair valueof the net assets acquired.

MITSUBISHI ESTATE CO., LTD.

Current liabilities
Fixed liabilities
Total liabilities

Millions of yen

Thousands of U.S. dollars¥  7,317
118,403¥125,720$   60,888
985,295$1,046,184

Millions of yen

Thousands of U.S. dollars¥   698
84,000¥84,698$  5,808
699,009$704,818

Integration of residence management business(1)		 Outline of business combinationi. Name and business of acquired entity
		 Name: Marubeni Community (*)
		 Business: Management of residence and other real estate		 (*) Effective July 1, 2014, the name of the acquired entity has beenchanged to Mitsubishi Jisho Marubeni Residence Services.
ii. Objective of business combination
		The objective is to increase value of the services to customers by(i) effectively integrating the systems and expertise of Mitsubishi
Jisho Community and Marubeni Community; (ii) cutting theoperating costs by leveraging the benefits of scale of more than
300,000 units when combined; and (iii) developing alliances withresidential-related companies under the Mitsubishi group and the
Marubeni group.
iii. Date of business combination
		 July 1, 2014
iv. Legal form of business combination
		Establishment of a holding company by means of joint stocktransferv. Name of the acquiring entity after the acquisition		Mitsubishi Jisho Community Holdings Co., Ltd. (hereinafter“Mitsubishi Jisho Community Holdings”)
vi. Change in ownership ratio		The ownership ratio of Mitsubishi Jisho Community Holdings is
as follows:			 The Company:
60.4%
			 Mitsubishi Real Estate Services: 11.1%
			Marubeni:
28.5%
vii. Major rationale for determining the acquirer		The Company, the former parent company of Mitsubishi Jisho
Community, acquired more than half of the voting rights of
Mitsubishi Jisho Community Holdings.
(2)		Period for which operating results of acquiree were included inconsolidated financial statements of the Company

	From July 1, 2014 through March 31, 2015(3)		 Consideration transferred for the acquisition

ANNUAL REPORT 2015

i. Stock transfer ratio by stock type		One share of common stock of Mitsubishi Jisho Community
Holdings was allotted for one share of common stock ofMitsubishi Jisho Community, and 3.3 shares of common stock ofMitsubishi Jisho Community Holdings were allotted for one shareof common stock of Marubeni Community.
ii. Calculation method of stock transfer ratio		Discounted cash flow method was used to calculate stock transfer
ratio.
iii. Number of stocks allotted		 1,320,000 shares(5)		Major acquisition related cost

Effective March 28, 2014, the Company and Marubeni Corporation(hereinafter, “Marubeni”) entered into an agreement on the integrationof their respective residence management businesses whereby a holding
parent company was newly established by means of joint stock transfer
involving Mitsubishi Jisho Community Co., Ltd. (hereinafter, “Mitsubishi
Jisho Community”), a subsidiary of the Company, and Marubeni
Community Co., Ltd. (hereinafter, “Marubeni Community”), a subsidiary of Marubeni. The Company and Marubeni established a holding
company on July 1, 2014, which holds all shares of Mitsubishi Jisho
Community and Marubeni Community.

Fair value of Marubeni
Community’s common stock on
the business combination date
Acquisition cost(4)		Stock transfer ratio by stock type, calculation method and numberof stocks allotted

Millions of yen

Thousands of U.S. dollars¥8,760¥8,760$72,896$72,896

Omitted due to immateriality(6)		Amount of goodwill recorded, its cause and method and period ofamortizationi. Amount: ¥4,965 million ($41,323 thousand)ii. Cause: 	The consideration transferred exceeded the fair valueof the net assets acquired.
iii.	Method and period of amortization: Straight-line method over
20 years(7)		Assets acquired and liabilities assumed at acquisition dateCurrent assets
Fixed assets
Total
Current liabilities
Fixed liabilities
Total liabilities

Millions of yen

Thousands of U.S. dollars¥3,307
1,144¥4,452$27,5199,519$37,047

Millions of yen

Thousands of U.S. dollars¥2,407232¥2,640$20,029
1,930$21,968(8)		Pro forma impact on consolidated statement 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 TA Realty LLC(1)		 Outline of business combinationi. Name and business of acquired entity
		 Name: TA Realty LLC
		 Business: Real estate fund managementii. Objective of business combination
		The Group aspires to leverage its real estate investment expertise,hand in hand with that of TA Realty’s 30 plus years of experience,
to solidify and to further enhance TA Realty’s reputation in bothits flagship value-add funds and core separate accounts. In
addition, the Group strives to strengthen its fund managementbusiness in the United States by pursuing further synergies with
its principal investment arm in order to ultimately provide
optimum real estate investment opportunities on a global scale toits current and future international client base.
iii. Date of business combination
		 January 2, 2015
iv. Legal form of business combination
		 Purchase of equity interests for cash consideration.
v. Name of acquired entity subsequent to acquisition
		 TA Realty LLC
vi. Acquired ownership ratio
		 70%
vii. Major rationale for determining acquirer		As a result of the purchase of the equity interests in return for acash consideration from consolidated subsidiary, Rockefeller
Group International Inc.

77

F INANC I A L SE C TIO N

Independent Auditor’s Report(2) 	Period for which operating results of acquiree were included inconsolidated financial statements of the Company

2. Common control transactions

	The accounting closing date of the acquiree is December 31, which isthree months prior to that of the Company. Since the acquisition wascompleted on January 2, 2015, only the balance sheet of the acquiree
has been consolidated in the consolidated balance sheet as of March
31, 2015.

Additional acquisition of equity in Tokumei Kumiai First M(3) 	Breakdown of cost and consideration transferred for the acquisition	Cash on hand and in banks of ¥38,221 million ($318,065 thousand)(4) Major acquisition related cost	Advisory fees, etc.: ¥831 million ($6,915 thousand)(5)		Amount of goodwill recorded, its cause and method and period ofamortizationi. Amount: ¥14,485 million ($120,539 thousand)ii. Cause:	The consideration transferred was greater than the fairvalue of the net assets acquired.
iii.	Method and period of amortization: Straight-line method over
10 years(6)		Assets acquired and the liabilities assumed at acquisition dateCurrent assets
Fixed assets
Total
Current liabilities
Fixed liabilities
Total liabilities

Millions of yen

Thousands of U.S. dollars¥   950
36,401¥37,352$  7,910
302,919$310,830

Millions of yen

Thousands of U.S. dollars¥   783
4,134¥4,918$ 6,517
34,408$40,926(7)		Amount and weighted-average amortization period of intangible
assets other than goodwill recognized by purchase price allocationand their major categories

	Investment contracts: ¥9,969 million ($82,957 thousand), amortizedover 4 years
Customer related assets: ¥ 13,730 million ($114,254 thousand),amortized over 11 years
Trademark right: ¥1,109 million ($9,228 thousand), not amortizedTotal: ¥24,809 million ($206,449 thousand), weighted-averageamortization period of 8 years(8)		Pro forma impact on consolidated statement 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.

(1)		 Outline of transaction

i. Name and business of combined entity
		 Name: Tokumei Kumiai First M
		 Business:	Holding and operation of Former Mizuho Bank Head
Office Building
ii. Date of transaction
		 September 26, 2014
iii. Legal form of transaction
		 Stock purchase from minority stockholders
iv. Name of combined entity subsequent to business combination
		 Tokumei Kumiai First M
v. Other matters with regard to the transaction		The transaction is intended to increase the flexibility and theswiftness of managerial decision making by purchasing all stocks
owned by minority stockholders(2)		 Outline of accounting treatment

	The transaction was treated as a transaction under common control
in accordance with the “Revised Accounting Standard for Business
Combinations” (ASBJ Statement No. 21 of September 13, 2013) andthe “Revised Implementation Guidance on Accounting Standard forBusiness Combinations and Accounting Standard for Business
Divestitures” (ASBJ Guidance No. 10 of September 13, 2013).
(3)		 Information relating to additional acquisition

	Consideration transferred for the acquisition
Cash on hand and in banks of ¥30,875 million ($256,927 thousand)(4)		 Information relating to change in equity interest

i. Major cause of changes in capital surplus
		 Additional acquisitionii.	Decrease in capital surplus due to transaction with minority
stockholders ¥11,974 million ($ 99,648 thousand)Absorption of First M, Ltd.
(1)		 Outline of merger

i.
		
		
		

Name and business(Surviving company)
Name: Mitsubishi Estate Co., Ltd.
Business:	Development and leasing of offices and commercial
complex, etc.
		 (Absorbed company)
		 Name: First M, Ltd.
		 Business:	Holding and operation of Former Mizuho Bank Head
Office Building
ii. Date of merger
		 November 14, 2014
iii. Legal form of merger
		Absorption-type merger, with the Company as the surviving
company
iv. Name of the company subsequent to merger		 Mitsubishi Estate Co., Ltd.
v. Additional information relating to merger
		First M, Ltd. had held trust beneficiary rights in Former Mizuho
Bank Head Office Building, and managed the building as the
management company of the silent partnership Tokumei Kumiai
First M. Mitsubishi Estate Co., Ltd. merged with First M, Ltd. forthe purpose of redeveloping the building.
(2)		 Outline of accounting treatment

	The transaction was treated as a transaction under common control
in accordance with the “Revised Accounting Standard for Business
Combinations” (ASBJ Statement No. 21 of September 13, 2013) andthe “Revised Guidance on Accounting Standard for Business
Combinations and Accounting Standard for Business Divestitures”(ASBJ Guidance No. 10 of September 13, 2013).

78

MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2015

79

CORPORATE DATA

Principal Mitsubishi Estate Group Companies New Segment since April 1, 2015
Consolidated Subsidiary

Affiliate Accounted for by the Equity Method

BUILDING BUSINESS

Address

Phone

Share ofvotingrights (%)

Business activities

Address

Phone

Business activities

Share ofvotingrights (%)

Recreational Facilities

Building 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

Towa Nasu Resort Co.

3376 Osoyama, Takakuotsu, Nasu-machi,
Nasu-gun, Tochigi Prefecture 325-0398+81-287-78-2700

Operation of leisure facilities and hotels, real estate
sales and management, and engineering contracting

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

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

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

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 Club49.0

Sunshine 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

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

MEC Eco LIFE Co., Ltd.

6-1, Otemachi 1-chome, Chiyoda-ku, Tokyo 100-0004+81-3-5222-9671

Research and creation of environmental
design proposals

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

100.0Grand Parking Center Co., Ltd.

Nihon Building, 6-2, Otemachi 2-chome,
Chiyoda-ku, Tokyo 100-0004+81-3-3270-5048

Management of the Japan Parking Center

97.0

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

Tokyo Garage Co., Ltd.

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

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

20.0

Kishimoto Building, 2-1, Marunouchi 2-chome,
Chiyoda-ku, Tokyo 100-0005+81-3-3287-2288

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

64.2

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

Ikebukuro District Heating
and Cooling Co., Ltd.

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

Cooling and heating supply businessin the Higashi-Ikebukuro district

68.0

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

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

35.0

Mitsubishi Estate London Limited

88 Wood Street, London EC2V 7DA, U.K.

+44-20-7776-6900

Real estate operations in Europe

100.0

Mitsubishi Estate Asia Pte. Ltd.

+65-6576-5790

Real estate operations in Asia

100.0

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

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

Cooling and heating supply businessin the Yokohama Minato Mirai district

29.6

138 Market Street, #27-03 CapitaGreen, Singapore
048946

Mitsubishi Estate (Shanghai) Ltd.

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

+86-21-6340-3000

Real estate business in China

100.0

Marunouchi Direct Access Limited

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

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

51.0

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

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

IMS Co., Ltd.

Tenjin MM Building, 7-11, Tenjin 1-chome, Chuo-ku,
Fukuoka, Fukuoka Prefecture 810-0001+81-92-733-2006

Operation and management of
the Tenjin MM Building

92.0

Mitsubishi Estate·Simon Co., Ltd.

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

Management of outlet malls

60.0

Yokohama Sky Building Co., Ltd.

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

Management of the Sky Building
and the Yokohama Shintoshi Building

54.4

Building Leasing Business

Parking BusinessDistrict Heating and Cooling Business
Marunouchi Heat Supply Co., Ltd.

INTERNATIONAL BUSINESS(Outside the scope of consolidation)

OthersLIFESTYLE PROPERTY BUSINESSINVESTMENT MANAGEMENT BUSINESS
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

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

TA Realty LLC

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

+1-617-476-2700

Investment management business in the United States

Europa Capital LLP

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

+44 -0- 20-7881-6800 Investment management business in Europe

75.0

70.0

ARCHITECTURAL DESIGN & ENGINEERING BUSINESS
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 management and management
support of hotels

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 “THE SERIES” brand of hotels

100.0Royal Park Hotel Co., Ltd.

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

Management of Royal Park Hotels

55.7

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

Corporate brokerage, office leasing brokerage andmanagement, real estate appraisal, and parking business

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

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

Keiyo Tochi Kaihatsu Co., Ltd.

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

Management of the Minoria Inage Kaigan
commercial facility

66.7

Tokyo Ryutsu Center Inc.

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

Leasing and operating management of logistics andoffice buildings

33.3

HOTEL BUSINESSRESIDENTIAL BUSINESSReal Estate Sales
Mitsubishi Jisho Residence Co., Ltd.

Others

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

Real estate development, sales, leasing,and management

100.0

Mitsubishi Estate Home Co., Ltd.

Kokusai-Shin-Akasaka Building Higashi-kan,
14-27, Akasaka 2-chome, Minato-ku, Tokyo 107-0052+81-3-6887-8200

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

100.0

Mitsubishi Estate Housing
Components Co., Ltd.

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

Manufacture, processing,and sale of construction materials

91.7

Prime Truss Co., Ltd.

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 Community
Holdings Co., Ltd.

Otemachi Building, 6-1, Otemachi 1-chome,
Chiyoda-ku, Tokyo 100-0004+81-3-5208-5740

Business management and operations related
to the condominium management business

71.5

Mitsubishi Jisho Community Co., Ltd.

Mitsubishi Jisho Community Headquarters Building,
3-13, Yaesu 2-chome, Chuo-ku, Tokyo 104-0028+81-3-6895-3800

Overall condominium and building management,
renovations, and related businesses

100.0

Mitsubishi Jisho Marubeni
Residence Services Co., Ltd.

Shiba 520 Building, 20-6, Shiba 5-chome,
Minato-ku, Tokyo 108-0014+81-3-5418-7233

Condominium management
and real estate businesses

100.0

Hokkaido Benny Estate Co., Ltd.

4F Odori Bus Center Building, 5-1, Minami 1-jouHigashi 1-chome, Chuo-ku, Sapporo, Hokkaido 060-0051+81-11-212-2114

Condominium management business,real estate agency, and leasing

100.0

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

Custom-Built Housing

Residence Management Business

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

OTHERS

Note: Percentage of voting rights held is as of March 31, 2015

80

MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2015

81

COR PO R AT E D ATA

Corporate History

Organization

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

As of April 1, 2015
History

Major properties

The Marunouchi site purchased by Mitsubishi Company fromthe Japanese government.

1890

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

1893
1894

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, transferred from
Mitsubishi Goshi Kaisha.
Mitsubishi Estate’s shares listed on the Tokyo Stock Exchange andthe Osaka Securities Exchange.
Marunouchi Remodeling Plan formulated. Met demand for offices in the yearsof high economic growth.
Akasaka Park House offered for sale in lots, marking the launch of
the Condominium Business.
Mitsubishi Estate New York Inc. established. Began expansion of business overseas.
Mitsubishi Real Estate Services Co., Ltd., established.

Shin-Marunouchi Building completed.

1962
1969
1972

Tokiwabashi Development OfficeUrban Development Promotion Department

Hokkaido Building completed.

Urban Planning Office
Value Creation Office

The first phase of the Izumi Park Town Project launched.

Executive Committee
Strategic Investment Committee(Leasing)
Office Leasing and Tenant Relations
Department

Relocation Management OfficeTenant Improvements Management OfficeLifestyle Property Business Group
Lifestyle Property Business Planning Department
Retail Property Improvements
Management Office

Retail Property Management Department
Retail Property Development Department
Retail Property Leasing Department
Logistics Facilities Development Department

Residential Business Group

Yokohama Landmark Tower completed. Yokohama Royal Park Hotel opened.

Residential Business Planning Department

Residential Value Chain Management Office

Residential Land & Recreational Facilities Management OfficeOsaka Amenity Park (OAP) completed.
Internal Audit OfficeChelsea Japan Co., Ltd., becomes a Mitsubishi Estate consolidated subsidiary(renamed Mitsubishi Estate·Simon Co., Ltd., in February 2013).

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

President & Chief Executive Officer

2008

GOTEMBA PREMIUM OUTLETS® opened.
Marunouchi Building opened.
Mitsubishi Trust and Banking Building completed (renamed Mitsubishi UFJ
Trust and Banking Building in October 2005).
Paternoster Square completed in the City of London.

International Business GroupCSR Committee

International Business Planning Department
Americas & Europe Business Department

Compliance Subcommittee
CSR & Environmental Sustainability
Subcommittee

Asia Business Department

Investment Management Group
Investment Management Business Department

Corporate Group

Marunouchi OAZO opened.

Corporate Planning Department

Board of Statutory Auditors

Tokyo Building opened.

Corporate Planning Department Affiliated Group Office

Research & Strategy Office

Statutory Auditors

Shin-Marunouchi Building opened.
The Peninsula Tokyo opened.

Structured Finance OfficeFinance & Accounting Department

Office of Statutory Auditors

Corporate Communications Department

Investor Relations Office

2009

Marunouchi Park Building and Mitsubishi Ichigokan completed.

Human Resources Development

Human Resource Compliance Office

General Affairs Department

Secretary Office

2010
2011

Mitsubishi Ichigokan Museum opened.

Legal & Compliance Department

2012

Marunouchi Eiraku Building completed.
OTEMACHI FINANCIAL CITY opened.

2013

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

Risk Management Committee
Risk Management Subcommittee

CSR & Environmental Sustainability Department
Business Creation Department

Airport Project Promotion Office

Sapporo Branch
Tohoku Branch
Yokohama Branch

2014

Minato Mirai 21 Office

Nagoya Branch
Osaka Branch

2015

82

Marunouchi Development Department

Strategic Planning Committee

Chairman of the Board

2003

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

Mitsubishi Estate Building Management and Mitsubishi Estate
Property Management integrated.
TA Realty LLC acquired.

Toyosu Development Office

Office Building Development Department 2

Board of Directors

1993
1995
1996
1998
2000
2001
2002

2004
2005
2007

Mitsubishi Estate (Shanghai) Ltd. established.

Office Building Development Department 1

Meeting of Shareholders

1990

Mitsubishi Jisho Residence Co., Ltd., established.
Keiji Kimura and Hirotaka Sugiyama appointed chairman and president, respectively.

Tokyo Client Business Development Office

Museum Management Office

Master Lease Planning and Management Office

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

Head Office relocated to Otemachi Building.

Area Brand Management Department

Urban Coordination Office

1989

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

Building Safety Management Office
Building Renewal Management Office

1959

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

Mitsubishi Jisho Investment Advisors, Inc., established.

Group Companies Management Office

Office Building Management Department(Development)

1983
1984
1986

Began first stage of Marunouchi redevelopment.

Completed Mitsubishi Ichigokan, offering the first Western-style office architecturein Marunouchi.

1952
1953

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

Reconstruction of Marunouchi Building announced.

(Asset Management)
Office Building Planning Department

Marunouchi Building completed in front of Tokyo Station.

1973

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

Office Building Group

1923
1937

Branches established in Sapporo, Sendai, Nagoya, and Osaka. Strengthened businessin major Japanese cities.
Mitsubishi Estate Home Co., Ltd., established.

Project Consulting & Solutions Department

Singapore CapitaGreen completed.
Dai Nagoya Building scheduled for completion
Otemon Tower • JX Building scheduled for completion

MITSUBISHI ESTATE CO., LTD.

GRAND FRONT OSAKA Office

Chugoku Branch
Kyushu Branch

ANNUAL REPORT 2015

83

COR PO R AT E D ATA

Corporate Information

The Spirit of Mitsubishi: Three Principles

As of March 31, 2015


Stock Information
Stock Details

Number of authorized shares: 1,980,000,000 shares
Number of shares issued and outstanding: 1,390,397,097(No change from the end of the previous fiscal year)
Number of shareholders: 	59,434(Decrease of 4,983 shareholders compared withthe end of the previous fiscal year)

6.83%“Shoki Hoko”

May 7, 1937

Paid-in Capital

Government and local public authorities

所期奉公

処事光明

立業貿易

Integrity and Fairness

Global Understanding through Business

Strive to enrich society, both materiallyand spiritually, while contributing towards
the preservation of the global environment.

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

Business Activities
Development, leasing, and management of office buildings,
commercial, and other facilities

The Mission of the Mitsubishi Estate GroupWe contribute to society through urban development

Sale and brokerage of real estate and related consulting services

34.01%

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: 711
Consolidated: 8,388
Financial instruments
business operators

1.13%

The Mitsubishi Estate Group Code of Corporate Conduct

URL

Operating and other companies

http://www.mec.co.jp/index_e.html


11.46%

Head Office
Otemachi Building, 6-1, Otemachi 1-chome, Chiyoda-ku,
Tokyo 100-8133
Phone: +81-3-3287-5100
Number ofshares held(Thousands of shares)

Percentage
shareholding(%)

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

85,011

6.11

Meiji Yasuda Life Insurance Company

46,882

3.37

Japan Trustee Service Bank, Ltd.
(Trust Account)

46,286

3.32

THE BANK OF NEW YORK MELLON SA/
NV 1035,405

2.54

STATE STREET BANK AND TRUSTCOMPANY

31,9482.29

Tokio Marine & Nichido Fire Insurance Co., Ltd.

26,865

1.93

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

25,963

1.86

Asahi Glass Co., Ltd.

22,714

1.63

CBLDN-STICHTING PGGM DEPOSITARY- LISTED REAL ESTATE PF FUND

22,528

1.62

STATE STREET BANK WEST CLIENT- TREATY 505234

19,391

1.39

Major Shareholders

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

¥141,373 million

Management of leisure and other facilities
Financial institutions

46.57%“Ritsugyo Boeki”

Corporate Responsibility to Society

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

0.00%

Foreign individuals
and companies“Shoji Komei”

Development of real estate for investment purposes andasset management

Shareholder Composition (Shareholding Percentage)
Individuals and otherCompany Name
Mitsubishi Estate Co., Ltd.
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Date of Establishment

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

In order to carry out the Group Mission,
we pledge to observe the following Code of Conduct:1
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We will act with integrity

We will base our conduct on laws andethics and always reflect with humility
upon our behavior, valuing our communication with society and placing priority in
our corporate activities on earning trust
through fairness and transparency.

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

2
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We will strive to earn
the trust of our clients

We will approach all objectives from ourclients’ point of view, providing safe andreliable products and services, and makeinformation available as appropriate.

3

We will strive to createa vibrant workplace

While aiming at personal growth, we will
respect the human rights and diversity ofopinions of others and increase our creativity
and professionalism, while displaying ourcollective strengths as a team.

For details on the Mitsubishi Estate Group Guidelines for Conduct:
http://www.mec.co.jp/e/company/charter/index.html

Osaka 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.

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MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2015

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