Integrated Report 2018

Pioneering New Value,
Pioneering New Possibilities

CONTENTS“A Love for People.

A Love for the City ”

2

ABOUT THE MITSUBISHI ESTATE GROUP
2
4
6
10
11

Track Record of Mitsubishi Estate
Marunouchi Today
Mitsubishi Estate’s Value Creation Model
Business Segment Overview
Financial Highlights

12

MESSAGE FROM THE PRESIDENT

Forever Taking on New Challenges—The Mitsubishi Estate Group

20

SPECIAL FEATURE:
Urban Development of Mitsubishi Estatefor Improving Corporate ValueThe Spirit of Mitsubishi: Three Principles“Shoki Hoko”“Shoji Komei”“Ritsugyo Boeki”

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

Integrity and Fairness
Maintain principles of transparency
and openness,
conducting business withintegrity and fairness.

Global Understanding through Business
Expand business,based on an all-encompassing
global perspective.

22	
SPECIAL FEATURE 1
Utility Tunnel Development
26	
SPECIAL FEATURE 2
Large-Scale Renovation of
the Otemachi Building
30	
SPECIAL FEATURE 3
Headquarters Relocation and
New Value Creation

32

HUMAN RESOURCE DEVELOPMENT

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

The Mitsubishi Estate Group Code of Corporate Conduct

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

1

2

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

3

We will strive to earn
the trust of our clients

We will strive to createa vibrant workplace

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

While aiming at personal growth, wewill respect the human rights anddiversity of opinions of others andincrease our creativity and professionalism,
while displaying ourcollective strengths as a team.

36

BUSINESS REVIEW
38 Office Building Business
40 Lifestyle Property Business
42 Residential Business44 International Business46 Investment Management Business47 Hotel & Airport Business48	Architectural Design & Engineering
Business
49 Real Estate Services Business
50 Business Creation Department
51	Business Development,
Consulting & Solutions Group52

CORPORATE GOVERNANCE
53 Message from the Chairman of the Board
54 Directors
56	Overview of Corporate Governance
System57	Outside Directors / Overview of Activities
in Fiscal 201858	Evaluation of the Effectiveness of theBoard of Directors / Remuneration
60	An Outside Director Discusses
Mitsubishi Estate’s Governance62	Corporate Executive Officers, Executive
Officers, and Group Executive Officers

63

RISK MANAGEMENT

66

FINANCIAL SECTION
66	Eleven-Year Summary of Selected
Financial Data (Consolidated)
68 Japan’s Real Estate Market
69 Financial Review
74 Consolidated Balance Sheets76	Consolidated Statements of Income	Consolidated Statements ofComprehensive Income77	Consolidated Statements of Changes in
Net Assets
79 Consolidated Statements of Cash Flows
80	Notes to Consolidated
Financial Statements
101 Independent Auditor’s Report102

CORPORATE DATA
102	Principal Mitsubishi Estate Group
Companies
104 Corporate History
105 Organization
106 Corporate Information
107 About Our Website

A Word about Integrated Report 2018
We are adopting this integrated report format starting from fiscal 2018, having published annual reports through to fiscal 2017. With
this inaugural integrated report, we have expanded coverage of non-financial information centering on environmental, social, andgovernance (ESG) compared with prior annual reports. In doing so, we aim to increase readers’ awareness of our efforts to raise thecorporate value of the Mitsubishi Estate Group from a medium-to-long-term perspective. We hope that this report promotes a deeper
understanding of the Group among all our stakeholders, including shareholders and investors.

For details on the Mitsubishi Estate Group Guidelines for Conduct:

Definition of Term
“Fiscal 2018” refers to the Group’s fiscal year ended March 31, 2018, and other fiscal years are referred to in a corresponding manner.

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

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

(Formulated December 1, 1997; revised on August 1, 2002, January 1, 2006, and April 1, 2018)

MITSUBISHI ESTATE CO., LTD. Integrated Report 20181

2008 – Present Day 

Second Stage of the Marunouchi Redevelopment Project (3-2)

1998 – 2007 

06

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

90

04

18

14
20
12

Along with the Marunouchi
Building, this symbolic andstately building helps create afitting urban landscape as agateway to Tokyo

2018

Marunouchi Park
Building and
Mitsubishi Ichigokan

Marunouchi
Nijubashi Building

Faithful re-creation of theoriginal Mitsubishi Ichigokan—
now an art museum serving as acenter of cultural exchange andan office space that sits in the
midst of the premium officezone in the Marunouchi area

The broader and morecomprehensive Marunouchi
Redevelopment Project has also
spread to Yurakucho

80

19

90

20

00

20

02

20

Shin-Marunouchi
Building

2009

19
50

19
60

19

70

2

The building that set the stage
for the transformation of
Marunouchi

19

40

ABOUT THE MITSUBISHI ESTATE GROUP

Track Recordof Mitsubishi Estate

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

3

20
20

From 2008, the focus shifted to make the Marunouchi Redevelopment
Project broader and more comprehensive in its second stage.
Redevelopment began with the construction of the Marunouchi Park
Building and Mitsubishi Ichigokan. By spreading the vibrant and bustling
atmosphere of Marunouchi to Otemachi and Yurakucho, and establishing afinancial business center and a greater amenity infrastructure, the project
strengthened the international competitiveness of the area. Through theaddition of a museum and other art and cultural facilities as well as the
pursuit of eco-friendly development, Mitsubishi Estate has aimed togive the area a fresh appeal based on a new sense of values.

20

2007

20

19
30

20

19

10
19
00
19

0

2002

Marunouchi Building

1
18

2

3

10

The history of Tokyo’s Marunouchi area
began in 1890 when Yanosuke Iwasaki
purchased the area at the request of the
Meiji government of Japan.
At the time, the area was an expanse offlat, grassy fields that became known as
Mitsubishigahara, or Mitsubishi Fields.
Iwasaki’s reasoning behind this acquisition
was his belief that for Japan to become amodern nation, the country needed abusiness center such as that of New York or
London. The purchase price was ¥1.28
million, about three times Tokyo’s annual
budget at the time—a massive sum thatspeaks to the boldness and inspiration of
Iwasaki’s decision.

20

The construction of the area’s first modern officebuilding, Mitsubishi Ichigokan, was completed
in 1894. Soon after, three-story redbrick officebuildings began springing up, resulting in thearea becoming known as the “London Block.”
Following the opening of Tokyo Station in
1914, the area was further developed as abusiness center. American-style, large reinforced
concrete buildings lined the streets. Along withthe more functional look, the area was renamed
the “New York Block.”

As Japan entered an era of high economic
growth, there was a sharp increase indemand for office space. Through the
Marunouchi remodeling plan that began in
1959, the area was rebuilt with large-scale
office buildings providing a considerable
supply of highly integrated office space.
Sixteen such buildings were constructed,
increasing the total available floor space bymore than five times. In addition, Naka-doriAvenue, stretching from north to south
through the Marunouchi area, was widened
from 13 meters to 21 meters.
The 1980s marked the appearance ofhigh-rise buildings more than 100 meters tallin the area. However, even amid this changing skyline, the Marunouchi area remained abusiness center with beautiful scenic viewsof the waters and green woods of theImperial Palace.

08

Dawning of a Full-Scale Business Center
Development

Purchase of Marunouchi Land andVision of a Major Business CenterIn 1998, Mitsubishi Estate began to redevelop the area around Tokyo
Station in the first stage of its Marunouchi Redevelopment Project.
Based on the concept of “Pursuing diverse and multifunctional urban
development,” the project aimed to create a landscape that would
give a new image to the area, which had up until then been purely abusiness area.
Starting with the completion of the Marunouchi Building in 2002,
Mitsubishi Estate rebuilt six buildings in line with the new concept.
Moreover, we widened the sidewalks of Naka-dori Avenue from six
meters to seven meters, began holding seasonal events, and took
other measures to transform the area into a space with a vibrant andbustling atmosphere.

20

First Phase ofDevelopment
Starting from Scratch

Turning Marunouchi into a Vibrant and Bustling Area

An Abundance of Large-Capacity Office
Buildings Reflecting a Period of Rapid
Economic Growth

1890s –1950s 1890 

First Stage of the Marunouchi Redevelopment Project (3-1)

20Second Phase ofDevelopment

16

1960s –1980s ”

Focus Shifted to Make the Marunouchi Redevelopment Project
Broader and More Comprehensive

Third Phase of Development

20

Marunouchi Area Development
Goes On—As it has in the past,
as it will 100 years from now

19“

Third Phase of Development

Yurakucho

Marunouchi

OtemachiN

Kokyo Gaien (Imperial Palace National Garden)
Palace HotelTokyo

Otemon Tower•
JX Bldg.

PalaceBldg.

OtemachiPark Bldg.

Shin-Marunouchi
Bldg.

Marunouchi Bldg.

Tokyo International ForumJP TOWER

Tokyo Kotsu
Kaikan Bldg.
(Owned by a
Mitsubishi Estate
consolidated
subsidiary)
InfosYurakucho

er Circular

Marunouchi
Central Exit

Tokyo Bldg.

Shin-Marunouchi
Center Bldg.

Marunouchi Oazo

Marunouchi
North Exit

Marunouchi Marunouchi
Hotel
Kitaguchi Bldg.

hition, Marunoucad e

New York Midtown

Line

NTT Communications
Otemachi Bldg.

178 haOtemachi Nomura Bldg.

Tokyo Marunouchi
NTT Communications
Otemachi Bldg. (Annex)
Urbannet
Otemachi Bldg.

Shin-Otemachi
Bldg.

Otemachi 2-chome
Redevelopment Project(Planned Completion in 2018)

NTT Data
Otemachi Bldg.

NTT
Marunouchi
Bldg.

123 haSingapore Downtown Core

Sumitomo Fudosan
Marunouchi Bldg.

RouteTokyo Station
Tokiwabashi District Redevelopment Project

ABOUT THE MITSUBISHI ESTATE GROUP

Eitai-dori Ave.

Sapia Tower

Marunouchi Bldg.

Marunouchi
Central Bldg.

GranTokyo
South Tower

Marunouchi Today

Asahi Life
Insurance
OtemachiBldg.
(Owned by aspecial-purpose
company undermanagement of
Mitsubishi Estate)

JFE Shoji
Bldg.
Nippon Bldg.

oM
ky
To

Marunouchi
Trust Tower North

Marunouchi
Trust Tower Main

GranTokyo
North Tower

Ro
ute

y Inn

Marunouchi
South ExitTokyo
SankeiBldg.

181 ha

Ci
rc
ula
r

sswa

Nihon Seimei
Marunouchi Bldg.

ka-dori Ave.

OTEMACHI FINANCIAL CITY
North Tower
South Tower

Otemachi Sta

Marunouchi Center Bldg.

MUFG Bank

ion

Otemachi Tower

Tokyo Station, Marunouchi Line

Daimyo-koji Ave.

Otemachi Na

75 ha

ne
r

Sta
t

Marunouchi
Eiraku Bldg.

HOSHINOYA Tokyo

Hong Kong Central

O te m a c h i R i v e r s i d e P ro m e n

The Industry Clubof Japan and
Mitsubishi UFJ
Trust andBanking Bldg.

Mitsubishi Bldg.

Otemachi
Bldg.

Otemachi Naka-dori Ave.

Marunouchi Naka-dori Ave.

KDDI
Otemachi Bldg.

Yomiuri
ShimbunOtemachi First Squaren LineMarunouchi 1st St.

Gyoko-dori Ave.

Marunouchi 2nd St.

Marunouchi 3rd St.

Babasaki-dori Ave.

Shin-Nisseki
Bldg.

Marunouchi
2-chome Bldg.

(Annex)(Planned Completionin 2020)In

xpre

Yusen Bldg.

Marunouchi Naka-dori Ave.

Marunouchi Park Bldg.
& Mitsubishi Ichigokan

Shin-Tokyo Bldg.

MarunouchiNakadori Bldg.

Tokyo
Kaijo
NichidoBldg.

Domestic

ay

tan E

Shin-Kokusai
Bldg.

Meiji Yasuda Seimei Bldg.

Mitsubishi
Corp.

sw

opoli

(Planned Completionin 2018)

Kishimoto Marunouchi
Mitsui Bldg.
Bldg.

OTEMACHIFINANCIAL CITY
GRAND CUBE

re
s

Metr

Meiji Seimei Kan
Bldg.

Marunouchi
Nijubashi Bldg.

292 haChiyoda Line

SMBC East Tower

Yomiuri Kaikan
BIC CamerahoYurakucho Ekimae Bldg.
(ITOCiA)(Owned by a
Mitsubishi Estate
consolidated subsidiary)

Tok y
o

Otemachi Station,

Marunouchi
1-3 Project

Otemachi Station, Tozai Line

Yurakucho
Center Building(Yurakucho Marion)

Marunouchi 6th St.

Marunouchi 7th St.

uc

ShinYurakucho
Bldg.

Otemachi Station, Toei Mita Line

Hibiya-dori Ave.

Tokyo Station, JR Keiyo Line

iya

ak

Yurakucho
Bldg.

Marunouchi 4th St.

Kokusai Bldg.

Hib

Yu
r

Imperial
Theater

SanshiKaikan Bldg.

Yurakucho
Denki Bldg.

Bldg.

Nijubashimae Station, Chiyoda Line

Marunouchi 5th St.

ine
aL
The
Peninsula
Tokyo

Sta
t

DN
Tower 21

Togyo KaikanNippon Broadcasting
System Bldg.

ibiy

ion
,H

Toho
Twin Tower
Bldg.

Marunouchi
Police Sta.
HibiyaSankei Bldg.

City of London
Keidanren
Kaikantion, Hanzomo

Hibiya Station, Toei Mita Line

HibiyaMarine Bldg.

Yurakucho Station, Yurakucho Line

New Hibiya
Project

Wadakura-bori
Moat

Babasaki-bori Moat

Source: Mitsubishi Estate Co., Ltd.
JA Bldg.

Ote Center Bldg.

Otemachi Sta

Hibiya-bori MoatHi
C h bi y a
iyo Stada tio
Lin n,e

SMBC

Nippon Life
Marunouchi
Garden Tower

Comparison of Area Sizes

NIKKEI Bldg.
Otemachi 1-2 Project(Planned Completion in FY2020)

ro
et

an
li t
po

p
Ex

Shibuya
86 ha
Nihonbashi■ Completion before 2002

76 ha

■ Completion from 2002

Toranomon■ Completion from 2009

Tekko Bldg.

58 ha■ Completion from 2020

Shinagawa
900m

49 ha

1,800mMarunouchi is an international business center that lies between Tokyo Station and the Imperial Palace. Mitsubishi Estate owns andmanages approximately 30 office buildings in the area that is the workplace of some 280,000 office workers.

PICK UP
Mitsubishi
ChemicalNihonbashi Bldg.

Marunouchi by the Numbers 
Number of Companies Listed on theFirst Section of the Tokyo Stock
Exchange*1

Consolidated Net Sales of the 97
Companies in the Marunouchi Area

101 / 4,300 offices*2

16

Building Floor SpaceNew York

16(Including buildings under construction)

LondonApprox.

*2

Equivalent to around 8.85% of GDP in Japan

800 hectares

28 lines,13 stations

Marunouchi

Shibuya*2

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

0

5

10

Source: Fortune Global Top 500, 2017, andMitsubishi Estate Co., Ltd.

15

20

10.4%

21.7%
Trading
Professional
Firms

18.0%

25

Concentration of Professional Firms

1

0

Finance

As of the end of March 2018, the contracted area in the Marunouchi area (Mitsubishi
Estate alone) has increased about 1.7 times compared with the end of March 2000. In
terms of tenant composition, the ratio of professional firms has been rising.

7

Shinagawa2

March 2018

3.8%
10.0%

11

1

Toranomon

22.5%

24.0%

Information

22.2%

2

Toranomon

March 2000

Trading

Finance3

Nihonbashi

Shinagawa

6.3%

71

29

Shibuya14*2

280,000

13

42.5%

Manufacturing

OthersInformation

Companies

Nihonbashi(Stations with the same name on different lines arecounted in number of lines)*1 N umber of listed companies on the First and Second sections of the Tokyo Stock Exchange with head offices in the
Otemachi, Marunouchi, and Yurakucho areas*2 Otemachi-Marunouchi-Yurakucho (OMY) District Redevelopment Project Council,“The Council for Area Development
and Management of Otemachi, Marunouchi, and Yurakucho 2017”4*2

Railway Lines Servicing the Area

Number of Office Workers
Approx.

*2Companies

Manufacturing

4.4%

Major Corporate Headquarters, Number of
Offices Comparison of Main Tokyo City Areas

Marunouchi

129 trillion

Approx. ¥Fortune Global Top 500 Companies(Including buildings under construction)*2

Others 14.2%
Professional
Firms

Number of Buildings

97companies

Contracted area and tenant composition in the Marunouchi area

(Mitsubishi Estate alone)

10

20

30

40

50

60

70

Top 50 company headquarters in terms of market capitalization
Foreign financial company offices
Top 100 law firm headquarters and offices

80

As of May 2018, all of the four major law firms in Japan and three of the four
leading audit companies have their offices in Marunouchi.
Law firms:	Anderson Mori & Tomotsune, Nagashima Ohno & Tsunematsu, Nishimura & Asahi,
Mori Hamada & Matsumoto
Audit companies: KPMG AZSA LLC, Deloitte Tohmatsu LLC, PricewaterhouseCoopers Aarata LLC

As of March, 2018, Source: Mitsubishi Estate Co., Ltd.
MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

5

ABOUT THE MITSUBISHI ESTATE GROUP

Mitsubishi Estate’s

Bu

si

ne

ss

fie

ld
s

of

th

e

M

its

ub

is
h

iE

st

at
e

G
ro
u

p

Value Creation
Model“A Love for People. A Love for the City”
The Mitsubishi Estate Group is engaged in the development of wide-ranging real estate,with a special focus on the redevelopment of the Marunouchi area.
The management capital we have cultivated as a diversified developer are a great strength
for further promoting town planning in the future.
The roles and functions demanded of urban development have altered greatly as the times

Accumulated
involvement in a vast
number of assets
Long-cultivatedrelationships with various
stakeholders

have moved forward. Factors driving changes include growing demand for high-leveldisaster readiness and increasing competition among international cities accompanying
the advancement of globalization. We are committed to sustainably enhancing corporate

Credible andreputable brandvalue by constantly creating attractive urban environments that anticipate how the times
will evolve and enrich the lives of people living and working in such environments.

Ma

nag

Str
eng

em

ths

ent

of

the

cap

A wealth of information
derived from providing awide variety of services

Mit

ital

sub

ish

nur

Strong financial
foundations

i Es

tat

tur e Group
ed
thu
s fa

Human resourcesrModel for6

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

OPEN

For Detail

Value Creation
MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

7

ABOUT THE MITSUBISHI ESTATE GROUP

Fulfilling lives

”

an
d

Value Creation
Model

Contributing real value to society
through attractive urban development

Br
o
pr ad
om en
ot ing
in a
g n
bu d
si de
ne ve
ss lo
m pin
od g
e l bu
in si
no ne
va ss
tio fien lds

Mitsubishi Estate’s“

Stimulating
regions andcommunities

Raising cities’international
competitiveness

Safe andsecure cities

Promotinginteraction among
diverse people“A Love for People. A Love for the City”
The Mitsubishi Estate Group is engaged in the development of wide-ranging real estate,with a special focus on the redevelopment of the Marunouchi area.
The management capital we have cultivated as a diversified developer are a great strength
for further promoting town planning in the future.
The roles and functions demanded of urban development have altered greatly as the times

Accelerating open
innovation

Accumulated
involvement in a vast
number of assets

Comfortable
spaceshave moved forward. Factors driving changes include growing demand for high-leveldisaster readiness and increasing competition among international cities accompanying
Long-cultivatedrelationships with various
stakeholders

the advancement of globalization. We are committed to sustainably enhancing corporate
value by constantly creating attractive urban environments that anticipate how the times
will evolve and enrich the lives of people living and working in such environments.

Mo

re
rob

ust

gro

wth

Credible andreputable brandin o

By drawing diverse people together through thecreation of attractive urban environments,
we are raising our Group’s brand power and the trust placed in us.
In addition, we are expanding and strengthening management
capital such as information, networks,
and human resources to realize further business expansion.

Model for6

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

Reducing
environmental
impact

ur

ma

nag

em

ent

cap

ital

A wealth of information
derived from providing awide variety of services

Value Creation
MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

8

Increasing
productivityof businessactivities
Strong financial
foundations

Human resources
MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

9

BUSINESS SEGMENT OVERVIEWFINANCIAL HIGHLIGHTS
Years ended March 31

Office Building Business

Lifestyle Property Business

Revenue from Operations

Operating Income / EBITDA

Trillions of yen

Billions of yen

This 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
promote urban development that
contributes to the increased appeal of
cities while maintaining a balance
between property for lease and property for sale in our asset portfolio.

The Mitsubishi Estate Group operates
the PREMIUM OUTLETS®, MARK IS,
and other retail facilities using acomprehensive system whereby itremains continuously involved with theretail property from the planning stage
to ongoing operations. Under the
Logicross brand, Mitsubishi Estate ispursuing logistics facility business
opportunities nationwide. The
Company is also expanding the variety
of its properties.

300
0.8
200
0.4
100

0

0
2014

2015

2016

2017

2014

2018

2015

Operating income

Residential BusinessWe offer services to meet a variety ofneeds for condominiums, custombuilt housing, purchase and sales,
leasing, brokerage areas, renovations,and management. As the circulationof existing homes expands andpeople’s lifestyles grow increasingly
diverse, we are strengthening ourremodeling, construction, andrenovation business to seize uponsuch changes.

International Business
The Mitsubishi Estate Group has
pursued business overseas since the1970s, undertaking real estateleasing and development businesses in the United States and theUnited Kingdom. In recent years, wehave also been actively developing
our office building, residential,commercial facility, and other realestate businesses in rapidly expanding Asian markets and advancing
into continental Europe.

In fiscal 2018, consolidated revenue fromoperations amounted to ¥1,194 billion, an
increase of 6.1% year on year. That growth
was supported by the start of operations of
newly completed buildings and increased
revenue from the sale of Company-owned
properties in the Lifestyle Property Businessand International Business segments.
Consolidated operating income rose 10.7%
year on year, to ¥213.0 billion, chiefly on
increased rental income in the Office Building
Business segment and higher income in theLifestyle Property Business segment and in
the condominium business. EBITDA rose 8.1%
year on year, to ¥302.4 billion, on growth inconsolidated operating income.

400

1.2

2016

2017

2018

EBITDA

Profit Attributable to Owners of Parent /ROETotal Assets / ROA*

Billions of yen%

Trillions of yen

%

150

10

6.0

6

120

8

5.0

5

4.0

4

90

6
3.0

3

60

4
2.0

2

30

2

1.0

1

0

0
2014

2015

2016

2017

0

0

2018

Profit attributable to owners of parent

2014

ROE

Profit attributable to owners of parent
increased 17.3% year on year, to ¥120.4
billion, while ROE rose by 0.7 percentage
point year on year, to 7.3%. Both current andlong-term assets increased; however, as aresult of growth in operating income, ROA(operating income to total assets) rose 0.2
percentage point year on year, to 3.8%,
marking the third consecutive fiscal year of
improvement.

Total assets

2015

2016

2017

2018

ROA*

* ROA: Operating income/Total assets

Investment Management Business
For investors seeking real estate asset
management, we provide a wide rangeof services based on our specialized
expertise, utilizing collaboration among
our operating bases in Japan, theUnited States, Europe, and Asia
excluding Japan. 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
needs of institutional investors.

Architectural Design & Engineering Business

Hotel & Airport Business
Against the backdrop of strong
demand for accommodations, we areconducting hotel development projects
across a wide range of categories
matching hotel market trends and thecharacteristics of different locations.
Under the Royal Park Hotels brand, weare undertaking hotel management
nationwide. In our airport managementbusiness, meanwhile, we are working
to raise the value of airports where wehave already begun private management while also seeking to secure new
business opportunities.

Real Estate Services Business

Interest-Bearing Debt /Net Interest-Bearing Debt/EBITDA
Trillions of yen
2.5

10

2.0

8

1.5

6

1.0

4

0.5

2

This business provides one-stop, realestate problem-solving solutions forcorporations and high net worth
individuals to maximize the value ofreal estate and optimize its use. Its
services include real estate brokerage, condominium and officebuilding leasing management
support, parking lot management
support, and real estate appraisal.

0

0
2014

2015

2016

2017

3.0

1.0

The balance of interest-bearing debt as ofMarch 31, 2018, stood at ¥2,481.6 billion, up¥84.6 billion compared with the year-end
balance in fiscal 2017. The growth reflected
such factors as an increase in borrowing. Net
interest-bearing debt (after deducting cash
and cash equivalents) / EBITDA was 7.3 times.
Unrealized gain on rental properties and otherreal estate rose ¥459.3 billion year on year,to ¥3,422.8 billion, supported by declines in
the cap rates and cash flow improvement
underpinned by rent revenue increases.

0
2014

2015

2016

2017

2018

Note: Includes unrealized gain of the rental properties
containing self-use space.

Interest-bearing debt
Net interest-bearing debt/EBITDA

Free Cash Flow

Earnings per Share

Billions of yen

Yen

In fiscal 2018, expenditures increased owing
to purchases of property and equipment.
However, free cash flow improved ¥165.2
billion year on year, standing at a positive¥6.4 billion, mainly due to increased operating
cash flows accompanying growth in income.
Earnings per share (EPS) amounted to ¥86.78,
an increase of ¥12.78 compared with theprevious fiscal year.

100

80
200
60

40
0
20

0
2014

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

4.0

2018

–200

10

Trillions of yen

2.0

400

Making use of the knowledge, ability,
and cutting-edge technologies
accumulated over the 120 years since
our founding in the Meiji period, thisfull-service architectural design andengineering business meets societal
needs through construction, civilengineering, and urban and regional
development planning andconsulting.

Unrealized Gain on Rental Properties
Times

2015

2016

2017

2018

2014

2015

2016

2017

2018

MITSUBISHI ESTATE CO., LTD. Integrated Report 201811

MESSAGE FROM THE PRESIDENT

Into My Second Year as President
New Medium-Term Management Plan off
to a Good Start
More than a year has passed since I assumed the office ofpresident & chief executive officer of Mitsubishi Estate Co.,
Ltd., in April 2017. That period marked the start of our new
Medium-Term Management Plan and also the relocation of
our headquarters. The main strategic thrust of our MediumTerm Management Plan is twofold. First, we aim to realize
profits deriving from measures to reinforce income streams
during the previous plan. Second, we will promote businessmodel innovation to build further foundations for growth.
With business model innovation, we placed particular importance on changing employees’ mind-sets and on creating aworkplace environment that would encourage them to do so.
The relocation of our head office in January 2018 to the
Otemachi Park Building, a property we developed ourselves,
enabled us to radically change the office environment andfunctions. We took this as an opportunity to step up ourefforts to increase corporate value by stimulating communication,a linchpin for business model innovation, and encouraging awillingness among our people to take on challenges.
Against this backdrop, we increased both consolidated
revenue and consolidated operating income in fiscal 2018,
the fiscal year ended March 31, 2018. Consolidated operating
income rose 10.7% year on year, to a record high of¥213.0 billion. Earnings growth was driven by expanding incomein the office building leasing business. That, in turn, was supported by the full-year contributions of buildings completed inrecent years, as well as by higher rents from newly built properties and upward revisions when rents came up for renewal. As aresult, earnings per share rose 17.3% year on year, to ¥86.78.

Management Dedicated to Nurturing Cities froma Long-Term Perspective

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

We aim to accelerate business model innovation that anticipates changes
in the times to achieve sustainable growth by giving full play to ourgreatest management capital, the power of our people.

12

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

When I took office last year, I said that my primary mission aspresident was to promote an environment that encourages ourpeople, our Group’s most important management capital, torealize their full potential. That mission remains unchanged. Our
employees have a strong sense of mission and unity in work­ing
in the Group. They are also passionate about creating andenhancing the urban environment and take great pride in thatwork. It is vital that these human resources play an active role inanticipating changes in the times and in society to create urban
environments that will continue to generate value into the future.
I know that I too must dedicate myself wholeheartedly to
management that aligns with urban development that meetsthe demand of the times and society. In the real estatebusiness, management must go beyond generating profits
and what is reasonable in the near term to nurture real estate
as social capital over the long term. While always being sensitive to the needs of the times, we aim to realize growth of theGroup by paying careful attention to the histories of thebuildings we work with and to the feelings of the people who
visit and work in them, so sustaining their core value.

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

13

MESSAGE FROM THE PRESIDENT

Two Major Points

Progress of the Medium-Term Management Plan
Realizing Profits from Multiple Perspectives
One of the main pillars of the Medium-Term Management
Plan is to “realize profits as a result of reinforced income
streams during the previous Medium-Term Management Plan.”In this regard, I believe we were able to achieve better resultsin the first year of the current plan than we had anticipated.
In the Office Building Business, there was a significant
contribution to profit improvement from rental revenues
supported by the completion of large projects particularly in
the Marunouchi area. Companies have various motives whenit comes to moving office, some of which include finding
better office locations, bringing together functions that havebeen scattered around different offices, facilitating work stylereforms, and carrying out business continuity planning.
Marunouchi meets these needs with its convenient transport
access, dense concentration of companies, and advanced
disaster-management functions. Accordingly, the vacancy
rate of our property portfolio remains low, rents for existing
tenants have been steadily rising when they come up for
renewal, and rents per square meter when leasing newbuildings have been rising. We have at this point leased
almost all of the floors in buildings scheduled for completionin fiscal 2019.
As a result of our efforts to enhance the attractiveness ofMarunouchi, tenant companies have come to value the area
increasingly highly. Marunouchi has long been home to theheadquarters of major Japanese banks and top Japanesegeneral trading companies. In recent years, there has also
been an accelerating inflow of major accounting and law firms
and other professional companies as concentration attracts
greater concentration.
In our International Business, meanwhile, our Hybrid
Investment Business Model* is up and running in the United* Hybrid Investment Business Model: Funds structured by the Group companies thatcombine Mitsubishi Estate’s and third-party equity. They support portfolio diversificationand increased investment scale while concurrently earning management fees frominvestors for providing services to them.

Capital Gains for Current Mid-Term Management Plan Period

Unrealized Gain on Rental Properties

Billions of yen

Billions of yen

States and we expect it to make a contribution to profits fromhere on. We have established an open-ended fund in the
United States that now has around ¥250.0 billion in assets and
28 properties nationwide, having drawn additional capitalfrom both Japanese and overseas investors. We aim todevelop a similar business model in Europe and Asia andOceania, where we have been acquiring prime properties witha view to open-ended fund conversion.
Regarding initiatives under our capital recycling businessmodel, we have put in place a structure to generate stable
capital gains, including those with the pipeline we have built
thus far. In addition, we augmented our logistics businessvalue chain in September 2017 with the listing of a logistics
REIT. Over the period of the Medium-Term Management Plan,
we project annual capital gains of about ¥40.0 billion, thesame level as in fiscal 2018, and a cumulative total of around¥118.0 billion over the three years.
Unrealized gain on rental properties at the end of fiscal
2018 amounted to about ¥3,422.8 billion, an increase of
approximately ¥460.0 billion from the previous fiscal yearend. This growth was supported by declines in cap rates andcash flow improvement underpinned by greater-thanexpected progress in leasing properties and raising rents
when they came up for renewal, as well as by the Group’s
efforts to cut costs.
As noted above, fiscal 2018 was a year in which we wereable to realize profits across all aspects of our business.
However, we are determined not to ease our grip as we steadily
continue to implement the various tasks we have set ourselves.

1

2

Realization of profits deriving from reinforced income streams
during previous Medium-Term Management Plan

Capturing the momentum of business environment changes
and promoting business model innovation to seize newopportunities for further growth in the 2020s

2

1

Promoting business model
innovation

Reinforcement of income
streams

Further growth

Realization of profits

Previous Medium-Term Management Plan

Medium-Term Management Plan

FY2015–FY2017

FY2018–FY2020

2020s

Business Model Innovation
Seizing Business Opportunities in Changes in the External Environment
Another pillar of the Medium-Term Management Plan is topromote “business model innovation” to develop existing
businesses and proactively move into new business fields
to seize new opportunities for further growth in the 2020s.
The business environment in which we operate is at a major
turning point and the speed at which it is changing is
accelerating. At a global level, changes in industrial structure
and working approaches are gathering momentum with thepenetration of IT and AI, economic activity is becoming
increasingly borderless, and environmental issues are
attracting growing attention. Japan, meanwhile, is seeing
diversifying lifestyles accompanying the aging of society andchanges in the demographics of the population, rapid
growth in inbound tourism, and venture companies gaining
an expanding presence. Such changes in the external
environment can pose business risks if we are slow to
respond. At the same time, they present opportunities tobuild new foundations for growth. At its heart, our businessmodel innovation is about determining what possibilities andchallenges lie ahead, and also providing new value throughnew ideas and a challenging spirit. In this sense, businessmodel innovation is much more than just a theme in theMedium-Term Management Plan. Rather, it is a theme thatneeds to be continuously addressed as we look to the future.

Pursuing Value Creation as Only We Can

120

4,000

118.0

3,422.81002,963.53,000
80

2,569.1

78.0
2,000

60
40

39.0

39.0

2,096.5

2,180.7

FY2014FY2015

40.0
39.0

1,000

20
0

0
FY2018(Result)

14

FY2019(Estimate)

FY2020(Estimate)

Mid-term(Accumulation)

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

FY2016FY2017FY2018

Note: Includes unrealized gain of the rental properties containing self-use space.

Promoting business model innovation has two key aspects.
First, we must seek businesses where we can create new value
as the Mitsubishi Estate Group. It is vital that we offer theGroup’s distinctive value to respond promptly to needsaround the world. As a real estate company, we have a great
range of strengths nurtured over many years. These include ahuge pool of real estate assets, outstanding staff, customers
and trading partners with the Mitsubishi Estate Group brand,
the trust of society, and strong relationships. Other powerfulmanagement capital of the Group are the networks with awide range of industries that we have acquired through ourlong experience in urban development and the information towhich that gives us access. While looking ahead of changes inthe environment, we will continue to consider how best to
make use of these strengths as we pursue value that we, as aGroup, are uniquely positioned to generate.

Second, we must promote “open innovation” throughcollaboration with various companies and organizations. As
barriers between industries gradually disappear, we must
collaborate beyond the framework of our own corporategroup to create a higher level of new value than we canachieve on our own. Open innovation, which is based on thediverse values and cultures of people, entails the fostering of
human resources who can create new ideas through interaction with each other. When we relocated our headquarters,
we radically changed the office environment. We brought invarious shared areas and have introduced an open working
environment under which individual staff are not assigned aparticular desk. I expect this to promote exchanges between
people both inside and outside the Company, creating anenvironment conducive to innovation.

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

15

MESSAGE FROM THE PRESIDENT

We are also looking to develop spaces that encourage
innovation through exchanges of ideas and knowledge not
only within Mitsubishi Estate but also throughout Marunouchi.
The Marunouchi area already has many companies that areundertaking experiments to test new technologies andservices in practical use. Taking advantage of the area’s
unique strengths in terms of its dense accumulation ofcompanies and people, we are seeking to raise the valueof Marunouchi by turning it into an even more vibrant hub foropen innovation.

Steadily Sowing the Seeds for the Future
As part of our commitment to business model innovation, we
have set aside a budget of ¥100.0 billion over the three yearsof the Medium-Term Management Plan for Groupwide investment in business model innovation as we sow the seeds forthe future. In the real estate business, our seed-sowing has
two main aspects. First, we are focusing on the evolution of
established businesses to create new value by further augmenting business expertise while enhancing efficiency byintroducing new technologies. Second, we are expanding into
new growing fields on the stepping stones of the strengths
and management capital we have accumulated thus far.
Among projects already in progress, I would highlight ourlarge-scale renovation of the Otemachi Building, a property
on which construction was completed in 1958. Aiming to alignthe building with the needs in the 2020s, we are looking tomeet diverse tenant demand by increasing the variety ofoffices while respecting the demand of society by making
use of existing stocks. The Otemachi Building will contain an
upgraded and expanded FINOLAB. This is Japan’s first andlargest base for the incubation and acceleration of financial
technology (FinTech) companies.
As a new asset type, we are looking to expand our
involvement in airport management under concession contracts as we tap into moves to privatize the management ofregional airports in Japan. This is an area where we can apply
the know-how we have accumulated through the operationand management of retail facilities over many years. Thus far,
we have acquired the concessions to operate Takamatsu

Airport, where commercial operations began in April 2018,
and Fuji Shizuoka Airport. Elsewhere, we are moving ahead
with construction work to revitalize Shimojishima Airport (inMiyakojima, Okinawa Prefecture). We are also working on
introducing new services and improving the efficiency ofmaintenance operations by using leading-edge technologies:
an example of which is the introduction of robots that provide
visitor information, carry out security patrols, and do cleaningtasks in the Marunouchi area. In addition, we have launchedsuch food-related services as growing tomatoes and offering
a fish distribution service. We will continue to collaborate withventure and other outside companies with their own expertiseand services in order to develop new services and further
enhance customer satisfaction.
The Company is also establishing mechanisms to support
business creation both internally and externally. Through our
Corporate Accelerator Program and investments in andpartnerships with venture companies, we are putting in placea “Venture Co-Creation Platform” to seek out new business
opportunities. We have also introduced structures and policies
to encourage individual employees and business departments
to propose new projects. All of these initiatives are integral to
our efforts to promote open innovation. In such ways, we arebuilding the foundations for nurturing new businesses andestablishing an environment to encourage our people toconstantly take up new challenges and create new value.

Capital Policy and Corporate Value
Maintaining Financial Soundness and Improving Asset Efficiency
We are today at a stage of pursuing profit growth. By promoting
investment in growth from a medium-to-long-term perspective,
we aim to generate stable cash flows while ensuring sustainablecorporate value enhancement. Real estate investment
requires long-term and large-scale financing. In order to also
ensure flexible capital procurement capacity in response tochanges in the financial and investment environment in the
future, the Company places great importance on maintaining
financial soundness. Currently, we have the highest credit
ratings in the industry (R&I: AA– / S&P: A+ / Moody’s: A2).
Making the most of our high credit standing, we have issued
super long-term corporate bonds maturing in 20 years and40 years, aiming to extend the average duration of our bonds.
We have, however, managed to keep the average interest
rate of the corporate bonds issued to date to just 0.97%.
Along with realizing sustained profit growth throughinvestment, we believe it is important to improve asset
efficiency. In addition to the appropriate restructuring ofoperating assets, we aim to improve asset efficiency throughthe timely sale of shares held as cross holdings. We use returnon assets (ROA) (operating income divided by total assets) as
an indicator of management efficiency. In fiscal 2018, ROA was
3.8%, above the target of 3.5% set in the Medium-Term
Management Plan.

ROA (Operating Income/Total Assets) / ROE

Bonds Recently Issued
Date of launch

Amount(Billions of yen)

Term (Years)

Interest rate

Straight

2017/6/15

10100.240%

Straight

2017/6/15

10200.736%

Straight

2017/9/13

1080.175%

Straight

2017/9/13

10200.703%

Straight

2017/12/26

1540

1.402%

Straight

2018/3/14

1070.190%

Straight

2018/3/14

10401.313%

Straight(Green bond)2018/6/26

20

50.090%

%

Type

8.0
7.3
7.0
6.6
6.0
5.6
5.0

5.0

5.2

3.8

4.0
3.4
3.0
FY2014

3.2
FY2015

3.3
FY2016

3.6

FY2017FY2018

ROA (Operating income/ Total assets)
ROE

Stable Dividends and Growth in per-Share Earnings
Initiatives to Promote Business Model Innovation

New services with technologies
Efficiency of MaintenanceNew approach to meet theneeds for “food”

Introduce new functions to existing buildings
Utilize new materials (cutting costs / Environmental contribution)
The launch of Airport and Resort Business
Rendering of CLT(Japan Cross
Laminated Timber
Association)

Existing

Assets and Services

New

System to Create New Business
Platform for Creating New Business in Mitsubishi Estate Group
Venture Co-creation Platform
VC Funding

Venture Business
Funding

Corporate
Accelerator
Program

Co-creative Projects with
Leading Companies(Collaboration outside of the Company) Open Innovation

16

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

New Business
Proposal system(individual)

Business Start-Up Meeting(Department)Internal Policy

Regarding returning profits to shareholders, our basic policy
is to strive for stable shareholder returns, primarily in the formof dividends, while paying attention to the demand for funds
related to future business development centering onreconstruc­tion in Marunouchi. We aim to maintain a stable
25%–30% consolidated dividend payout ratio based on earnings trends and other factors. We are also flexibly executing
share buybacks taking into account such considerations as theprevailing economic conditions and the Company’s shareprice level.
For fiscal 2018, we increased annual dividends per share(combined total for interim and year-end dividends) ¥6 fromthe previous fiscal year, to ¥26. With earnings per share having
increased about 1.9 times the level recorded four years ago,
the Company has steadily increased dividends year by year
and thus the value of dividends per share has more thandoubled over the past four years. The consolidated dividend
payout ratio rose from 27% in fiscal 2017 to 30% in fiscal 2018.
We intend to maintain the latter level over the period of theMedium-Term Management Plan.

Changes in EPS and Dividends per Share
Yen%
40

100
86.78

35

80
74.00
60.13

60

40

46.34
25.9

52.85
26.5

26.6

30.0

30

27.0
25

20
12

14

FY2014FY201516

20

FY2016FY2017

26
20

15

0
FY2018EPS
Annual dividends per share
Dividend payout ratio (right scale)

MITSUBISHI ESTATE CO., LTD. Integrated Report 201817

MESSAGE FROM THE PRESIDENT

Making Progress toward Attaining Quantitative Targets in the Medium-Term Management Plan
When we announced our full-year results for fiscal 2018, we
not only disclosed our earnings outlook for the next fiscal
year, as we normally do, but also announced our businessoutlook for fiscal 2020, the final year of the Medium-Term
Management Plan. This set out our view that profit levels arelikely to be higher than initially targeted, highlighting ourdetermination to achieve sustained growth.
For fiscal 2019, we forecast operating income–which weuse as an indicator of growth potential in income gains, stable

Looking to 2020 and Beyond

capital gains, and other earnings–of ¥215.0 billion, while forfiscal 2020, the final year of the Medium-Term Management
Plan, we forecast operating income of ¥230.0 billion, higher
than the plan’s target of ¥220.0 billion. For ROA, the indicatorfor efficiency we use in the Medium-Term Management Plan,
and net interest-bearing debt divided by EBITDA, which weuse as a barometer of financial soundness, we are alreadyahead of the plan’s targets and we are increasingly confidentof meeting them.

Quantitative Targets
FY2018 (Results)

Operating Income

FY2020 (Targets)

FY2020 (Estimates)¥213 billion¥220 billion¥230 billion

Approx. ¥39 billion

Approx. ¥38 billion

Approx. ¥40 billion

3.8%

Around 3.5%

3.8%

Net Debt/EBITDA

7.3 times

Around 8.5 times

Around 8 times(Hybrid finance reflected)(6.7 times)(Around 8 times)(Around 7.5 times)

Aiming to Be a Front-Running, ESG-Conscious Company in Harmony with Society
The Mitsubishi Estate Group aims to ensure sustainablegrowth over the long term while paying close regard to its
environmental, social, and governance (ESG) responsibilities.
The essence of ESG-based management is to solve various
social issues through the core business while, at the sametime, enhancing a company’s corporate value. Our corebusiness, urban development, is not just about building officebuildings and condominiums. Rather, it is important toundertake urban development from a long-term perspective
in a way that pays close attention to people’s aspirations andto the history, culture, and traditions embodied in buildings.
In other words, the real estate business is characterized by its

long-term aspect and close ties with the surrounding
environment and communities. That means its management isdirectly connected to ESG. The Mitsubishi Estate Group has
focused on long-term and sustainable growth. The Group has
been pursuing urban development in the Marunouchi area fornearly 130 years and has helped build it into one of theworld’s leading international business centers. Here, too,
there are many points that resonate with the concept of the
Sustainable Development Goals (SDGs) advocated by theUnited Nations. Seeking to achieve these goals, we will
actively continue to pursue our own approaches and measures.

Growth Potential
Capital Gains
Performance

Operating Income/Total Assets (ROA)

Stability

Operating Income
Billions of yen
250

200

213.0

215.0

220.0

FY2018FY2019(Forecast)

FY2020(Target)

230.0

192.4
166.1

150

100

50

0
FY201618

FY2017

FY2020(Estimate)

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

Realizing Urban Development for the Future
As noted earlier, we are already on track to achieve thequantitative targets we have set for fiscal 2020. However, wemust not be satisfied with our accomplishments as they stand:we must do all we can to prepare the ground for growth overthe longer term.
The Mitsubishi Estate Group has moved forward thefunctions and roles of the Marunouchi area, the center of its
business activities, to meet the needs of the times and create
new value. We have also built a track record of using
knowledge gained in this process to generate Groupsynergies in various businesses in Japan and abroad, such asretail facilities, logistics facilities, residential properties, andinvestment management. All of this underscores that where
we stand today is the result of constant change. Our future
growth will also hinge on continuous transformation. Looking
ahead, we in the Mitsubishi Estate Group will continue to leadthe way in urban development and nurture new ideas as weseek to anticipate changes in the times through the unbridledinspiration of our people, our greatest asset.

The mission of the Mitsubishi Estate Group is tocontribute to society through urban development as acompany dealing with social capital in the form of real estate
centering on the Marunouchi area. We are determined tocontinue to achieve sustainable growth by creating new value
as a company that is chosen and trusted by society. We ask
for the continuing support of all our stakeholders, including
shareholders and investors, in our endeavors.

August 2018

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

MITSUBISHI ESTATE CO., LTD. Integrated Report 201819

Mitsubishi Estate-Owned Buildings in the Marunouchi Area
m2

Tokyo Tokiwabashi Project*(Planned completion of the last block in FY2028)

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

150,000

Otemachi Park Building
OTEMACHI FINANCIAL CITY GRAND CUBE

Marunouchi 1-3 Project*(Planned completionin September 2020)

Marunouchi Park Building

100,000

The Marunouchi area has been functioning as the heart of the Japanese economy
for more than a century. The Mitsubishi Estate Group constantly works to redevelop
the Marunouchi area to support urban development that will also generate newvalue for the next century. While responding to the evolving needs of society,
we are aiming for sustainable growth by promoting urban development to raisethe value of the entire area beyond the development of individual buildings.

Marunouchi
Nijubashi Building*Otemachi Building
OTEMACHI FINANCIAL
CITY South Tower

50,000Otemon Tower • JX Building

Marunouchi Eiraku Building
OTEMACHI FINANCIAL
CITY North Tower

0
0

10

20

30

40

50

60

70

Years

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

SPECIAL FEATURE

Urban Development
for Improving

SPECIAL FEATURE 1
Utility Tunnel Development
P.22 –

20

SPECIAL FEATURE 2
Large-Scale Renovation of
the Otemachi Building
P.26–

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018of Mitsubishi Estate
Corporate ValueSPECIAL FEATURE 3
Headquarters Relocation and
New Value Creation
P.30–

MITSUBISHI ESTATE CO., LTD. Integrated Report 201821

Since the 1970s, the Mitsubishi Estate Group has been developing underground utility tunnels to carry communication cables, power lines, gas pipes, and other equipment supporting a “district heating and cooling system” centeredon the Marunouchi area. The main aim is to provide a stable and efficient supply of heat to the entire district throughtunnels that act as a conduit from plants within core buildings supplying the steam and chilled water necessary for
air-conditioning to many buildings. Underground areas are relatively resistant to the impact of earthquakes, and the
Mitsubishi Estate Group is continuously expanding and upgrading the service tunnel network from the perspective ofdisaster management. By reinforcing mutual supply systems between plants, we are enhancing disaster preparedness.

SPECIAL FEATURE 1

Utility Tunnel
Development
Realizing Outstanding Energy Efficiency andReinforced Disaster-Management Functions

22

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

In developing service tunnels that contribute toenhanced area-wide energy efficiency and to urban
development with strong disaster-management
capabilities, we approach the Marunouchi area as asingle “city” and are striving for urban developmentthat goes beyond the boundaries of individual
buildings and which applies the Group’s distinctive
strengths. As of 2018, heat is supplied throughunderground service tunnels that span 61 buildings
over an area of 800,000 m22covering the areas ofMarunouchi, Otemachi, and Yurakucho. Since thecompletion of the Marunouchi Building in 2002, thenetwork of service tunnels has been extending instep with the redevelopment of the Marunouchi area.
By connecting newly redeveloped buildings and thesurrounding buildings with service tunnels andsupplying heat generated via high-performance
plants installed in the newly redeveloped buildings to
the surrounding buildings, we are improving energy
efficiency in the area as a whole.

Currently, the utility tunnel is being extended intandem with the development of the Marunouchi
Nijubashi Building, which is scheduled for completionin October 2018. Along with the development of
this building, we have been building an undergroundservice tunnel beneath Marunouchi Naka-dori Avenue,
which runs north–south through the center of the
Marunouchi area. The main plant installed in thisbuilding will supply existing buildings in the surrounding area with heat and emergency power, andin the future it will also provide information andcommunications and water for general use. Throughthis system, we are improving the sustainability of thearea’s business operations in a disaster situation.
Heat had been supplied indirectly via other buildings
prior to the development of the service tunnel.
However, with the tunnel’s completion, it has become
possible to ensure the direct supply of heat to eachbuilding, with no impact on supply even whenbuildings come up for redevelopment.

Current network of service tunnel

Plan (future projection)
Future extension ofservice tunnel
facilities (projected)

Scope of service tunnel
facilities under current plan

Marunouchi
Nijubashi building

Sub-plant

Marunouchi
Naka-dori Avenue
Main plant“District heating and cooling system” piping

Heat supply (district heating-cooling system)
Power supply in times of disaster
Supply of water for general use in times of disaster
Information and communications
Note: Work on the utility tunnel is due to be completed in December 2020.

MITSUBISHI ESTATE CO., LTD. Integrated Report 201823

SPECIAL FEATURE 1

Utility Tunnel Development“

PICK UP

Raising the Value of the City
through Disaster Prevention Efforts
Emphasizing Area Strengths“Disaster Management Facility” Buildings andUsing New Technology

Toshio Oba

As part of the Mitsubishi Estate Group’s disaster-response activities and efforts to ensure business
continuity, buildings designated as “disaster management facilities” are responsible for the core functions
connecting the area as a whole. These buildings, which all have high-level earthquake resistance, areequipped with autonomous systems for electric power, drinking water, sewage, and ventilation and air
conditioning necessary for maintaining building functions. They offer an environment that supportsbusiness continuity even in the event of a disaster. Completed in 2016, Otemachi Financial City Grand Cube
has such functions as a designated “disaster management facility.” In addition, it has a district heating
and cooling plant that supplies heat to the surrounding buildings. The building is also equipped tocoordinate with international medical service facilities that are located in neighboring buildings and acts
as a base for supporting relief work. In such ways, it is helping strengthen disaster-responsivenessthroughout the Otemachi area.
The Mitsubishi Estate Group is also working to utilize the latest disaster prevention technology.
One example is using the information network on local earthquakes connected to seismic intensity
meters installed near the Tokyo metropolitan area. The data collected is reported instantaneously to
skyscrapers in the Marunouchi area. If an earthquake occurs, this allows elevators to make emergency
stops at the nearest floor before the tremors arrive. In addition, we have put in place structures to grasp
location information for the Group employees who are involved in disaster-response measures wheneven Wi-Fi and other wireless networking technologies cannot be used. This involves using LPWA
(low-power wide-area) circuits. We are also collaborating with venture companies and other business
operators in trials using new technology to enhance disaster responsiveness throughout the area.
One example is the establishment of a “Disaster Dashboard” platform to enable the real-time andvideo-based distribution of information to business operators in the surrounding area.

”

General Manager Building Strategy Management OfficeSenior Manager Office Building Management Department
Mitsubishi Estate Co., Ltd.

Functions Demanded of a Core Business andCommercial District
I believe that keeping the city functioning even in the event of
a disaster is an important part of the value provided by the
Marunouchi area.
The first reason why disaster prevention is of particularsignificance in the Marunouchi area is that it is located at theheart of Japanese business, a place where the headquartersof many companies are gathered. The area is, therefore, acornerstone of Japan’s economy. For tenant companies,
ensuring employee safety and maintaining business continuity
are top priorities that have come increasingly to the fore since
the Great East Japan Earthquake. As well as enhancing theearthquake resistance of buildings, maintaining power supply
and communications is also essential from the viewpoint ofbusiness continuity. The Mitsubishi Estate Group owns andmanages approximately 30 buildings in the Marunouchi area.
We must use that strength to inspire ideas and enhancebusiness continuity throughout the area.
The second reason is that, in addition to being a corebusiness district, the Marunouchi area is a commercial magnet
attracting many people on both weekdays and holidays.
Many tenant companies occupying office floors have madedisaster-response plans and have established employee
safety confirmation systems. Their employees themselves canalso be expected to have some level of readiness. However,the same cannot be assumed of visitors. The number of inboundtourists to Japan visiting the Marunouchi area has risen to
approximately two million people a year in recent times,
which makes multilingual disaster-response capabilities crucial.

24

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

Area-Wide Infrastructure and Human Networks
From the perspective of strengthening business continuity,
we are currently extending our network of undergroundservice tunnels that make use of our unique strengths in the
Marunouchi area. These service tunnels connect many buildings and allow heat, power, and water from main plants withincertain key buildings to be supplied to surrounding buildings,
as required, while also carrying heating and cooling systemand communication networks. If facilities inside a building
malfunction in the event of a disaster, this system can maintainan uninterrupted power supply and communications throughout
the area. Besides improving infrastructure through undergroundservice tunnels and buildings designated as “disaster management facilities,” we have been working with venturecompanies and businesses in the surrounding area to ensurebusiness continuity while protecting safety more efficiently.
Initiatives in this regard include undertaking disaster-response
activities using the latest technologies.
Along with infrastructure development, the Mitsubishi EstateGroup is focusing on the training of people responsible forleading disaster-response measures while creating human
networks together with business people, medical personnel,
and tenants in the Marunouchi area. In 2017, we carried out the
91st integrated emergency response drill covering the entire
Marunouchi area. We have undertaken these drills in September
every year since 1926. A total of 1,250 Group employees andothers participated in training that included initial response,
personal safety confirmation, information gathering, and theuse of equipment. At the time of the Great East Japan
Earthquake, these exercises greatly helped people respondquickly by, for example, offering emergency shelter to thoseunable to return home. Drawing on the lessons learned fromsuch disasters, we are also strengthening multilingual support
through such means as providing accurate and prompt information on damage caused by disasters, disclosing the status ofrailway and subway operations, and using translation applications developed by Mitsubishi Estate for evacuation guidance.

Support,cooperation

Building designatedas “disastermanagement facility”

High-grade general building

Support,cooperation

High-grade general building
Autonomous
water and
electricity

Temporary
shelter
spaces intimes ofdisasterTemporary
shelter
spaces intimes ofdisasterTemporary
shelter
spaces intimes ofdisaster

Underground space
Subways

Otemachi Financial City
Grand CubeMITSUBISHI ESTATE CO., LTD. Integrated Report 201825

SPECIAL FEATURE 2

Large-Scale Renovation of
the Otemachi Building
The Otemachi Building celebrates its 60th anniversary in 2018, giving
it the longest history of any office building in the Marunouchi area.
Today, the building accommodates more than 100 companies andorganizations and about 50 bars, restaurants, and service outlets onnine stories aboveground and three belowground. The building
housed our own headquarters until December 2017. With this historicOtemachi Building, we decided to opt for a large-scale renovation
project with a vision of its long-term operation. Construction work
began in May 2018. While giving full expression to the features of thebuilding, we aim to completely update the functions and designs of its
facilities to offer value as a venue for the creation of new businesses.

“

Establishing a businesscreation base througha large-scale renovation

BEFORE

26

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

AF T ER”

Renovation Rather Than Redevelopment
In the Marunouchi area, our redevelopment so far has mainly
taken the form of rebuilding. With the Otemachi Building,however, we decided to carry out a large-scale renovation.
Our decision reflected the following considerations.
First, we want to diversify the types of leased officebuildings in the Marunouchi area. We have been vigorously
promoting redevelopment in the Marunouchi area since thebeginning of the 2000s, which has contributed to a rising
proportion of new buildings in Otemachi in recent years. The
new buildings feature large floor plates and pillarless spaces,
making them suitable for large-area office use. The Otemachi
Building also has large floor plates, but it is distinctive in thatit has a floor shape suitable for division into small parcels,allowing flexible responsiveness to the needs of a wide rangeof companies. That offered us an opportunity to broaden therange of our office lineup and support diversification of thetenant mix in the area. While raising the appeal of the
Marunouchi area by drawing together a concentration ofthese companies with different aspects, we aim to shape thearea into a forum for innovation by fostering collaboration
between start-ups and large companies.
Second, we seek to release potential value by making useof the existing office building stocks. Surveys have shown that
the Otemachi Building has a strong structure capable ofoperating for 100 years. In this renovation project, we arelooking to make the most of that longevity while also drawing
out the full potential of the building by giving play to its
particular features. These include a floor shape suitable fordivision into small sections as well as outstanding traffic
access. Another huge advantage with this approach is being
able to increase the value of the building while maintaining
cash flows from it. Raising the value of buildings without
relying on rebuilding has become increasingly important fromthe perspective of utilizing existing stocks. In this respect, weare in step with the needs of the times.
Third, we are pursuing environment-friendly urban
development. Renovation reduces the amount of construction
materials needed and prevents waste compared withredevelopment involving demolition and new construction.
With this renovation, we are also paying close attention to theenvironment. We are installing LED lighting and saving energy
through the use of window glass with outstanding heatinsulation and solar radiation fins, while the building willfeature the largest rooftop garden in Japan. The Mitsubishi
Estate Group has dedicated itself to being a front-running,
ESG-conscious corporation, and thus this project is inalignment with that commitment.

MITSUBISHI ESTATE CO., LTD. Integrated Report 201827

SPECIAL FEATURE 2

Large-Scale Renovation of the Otemachi Building

Separate Designs for East and West Sections

Building a Venue for the Creation of New Businesses

We are dividing the Otemachi Building into east, west, andcentral sections, each of which will have distinctive exterior
and interior designs. For the exterior, we are using glass fiber
reinforced cement (GRC) and low emissive (Low-E) multilayer
glass, seeking to improve environmental performance andreduce management costs into the future.
For the interior, we are utilizing existing
East sidematerials while upgrading designs to take on
board the latest knowledge and ideas. We
will also improve LED lighting and upgrade
the emergency power supply system toimprove safety and disaster preparedness.

In addition, the east–west passage in the center of thebuilding that passes through Marunouchi Naka-dori Avenue
will have an open design, providing
an inside space in harmony with the street.

LAB Zone

CenterZoning: conceptual design

CG rendering of completed exterior wall using GRC(glass fiber reinforced cement)

West side

In terms of leasing, based on the management experience
with FINOLAB following its relocation to the Otemachi
Building in February 2017, the west side will be principally atenant space, while the east side will be dedicated mainly to
the LAB Zone of facilities to promote interpersonal
exchanges. We aim to make this not only a venue forinteraction among tenant companies but also a center for
open innovation and communication that gathers together
people and companies across the entire Marunouchi area.
The LAB Zone will house the TechLab “collaboration
space.” This will be operated in cooperation with SAP Japan,
the Japanese unit of SAP, the world’s largest software
company and global provider of business software solutions.
TechLab will be equipped with co-working offices, sharedconference rooms, and event spaces and will act as a businesscreation base with a design firm bringing together large
enterprises and start-ups.
We are also planning to expand FINOLAB, Japan’s firstbase for financial technology (FinTech) companies in the
Otemachi Building that we operate in collaboration with
Dentsu Inc. and Information Services International-Dentsu,
Ltd. To meet the needs of more companies, we intend toincrease the floor area from about 2,150 m2 to about 4,000 m2.

KPMG Japan Corporation, the Japanese unit of KPMG,
one of the world’s four largest accounting firms, hasestablished KPMG Ignition Tokyo as a new base to drive
innovation among Japanese companies by utilizing digitaltechnology. KPMG Ignition aims to work with companies tocreate new business models and solutions supported by the
specialist expertise KPMG Japan’s professionals and digital
experts have nurtured through auditing, tax, and advisory
services and the application of the latest digital technology.
With input from the KPMG Ignition-related facilities alreadydeployed in 18 major cities around the world, it will be a baseto lead company initiatives toward digital transformation
through “brainstorming” meetings and workshops.

CG rendering of passage running south to north(central north side)

Renovation

FINOLABCG rendering of TechLab

PICK UP

Toyota Motor Corporation Development Unit a Tenant
In the west section of the Otemachi Building, Toyota Motor Corporation is establishinga development base for peripheral technologies to support automated driving as partof its aim to transform itself into a “mobility company” while maintaining and developing its existing businesses.
The Marunouchi area is becoming a base for the realization of automated vehicles
through the promotion of open innovation. In doing so, it is applying the area’s advantages as a place in which large companies, venture businesses involved in AI and otherareas, and professional firms are gathered together, as well as providing excellent
access to universities, research institutes, and government offices.

28

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

MITSUBISHI ESTATE CO., LTD. Integrated Report 201829

PICK UP

Mitsubishi Estate’s Work Style Reforms
Shiori Sasaki
Facility Management Office,General Affairs Department,
Mitsubishi Estate Co., Ltd.

SPECIAL FEATURE 3

Headquarters Relocation and New
Our headquarters relocation in January 2018 was aimed atpromoting work style reforms and supporting the Office Building
Business by making it easier to demonstrate the benefits of
upgrading head offices. We were also looking to improve work
efficiency through various approaches spanning both tangible
aspects, such as building structures and construction materials,
and intangible aspects, such as how buildings are used. The
time freed up has allowed us to generate new value while also
promoting an “open” corporate culture to support this effort.
The Headquarters Relocation Project involved the participationof not only full-time personnel but also members of officeleasing-related sales and development teams. They pooled their
combined knowledge to come up with the working environment
and approaches to enable new value creation through in-depth
discussions about how the headquarters should operate. The
aim was to create the ideal working environment, where people
spend a large part of their lives, and to support the work of the

30

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

Office Building Business, a core part of the Company’s operations. In order to support business model innovation and raise
intellectual productivity, we undertook a study based on quantitative survey data. Specifically, we conducted a weekly behavioral
survey on about 800 employees at Mitsubishi Estate who
worked at the former headquarters. We asked such questions
as “when,” “where,” “who,” “what,” and “what tools did youuse?” and we analyzed detailed data on intellectual productivity
in these acts. We learned that people spent only about 50% of
their working hours at their own desks, with a lot of time being
spent in other departments, in conference rooms, and outside
the Company. We are also analyzing interdepartmental cooperation for business promotion and staff thinking on facilities.
Based on these discussions and survey data, we aimed tocreate intellectual stimuli by encouraging in-house “accidental
communication” at the new headquarters. Some examples of
the approaches we took include creating large office spaces

As a member of the Headquarters Relocation
Project Team, Ms. Sasaki has been involved in
all aspects of the relocation of the headquarters, including conducting staff surveys,
planning and deciding on designs andspecifications, and bringing in IT tools.

Value Creation
with no walls, adopting a group address system (under whicha specific space is allocated to a group or team, but individual
employees are not assigned a particular desk), setting up
internal staircases, and doubling the shared space while
reducing the floor area used by about 20%. The post-relocation survey also revealed a significant increase in interactions
with other departments and highlighted that communication
is now more efficient and invigorated than expected.
In addition to abolishing private rooms for corporate
executive officers, we have improved communication between
management and general employees with the group address
system, which has increased the frequency of communications
with management. A number of people outside the Company
have commented on the speedier responsiveness of Mitsubishi
Estate staff since the headquarters relocation. Some havesuggested that decision making has become quicker thanks
to easier communication and quicker access to employees.

Employees’ thinking and behavior have clearly changed
with the relocation of our headquarters. Building on this,
we are accelerating reforms to promote “borderless” and“socializing” approaches to work among our people.

“Borderless” and “Socializing” Work Style
1

Natural gathering and connections between people

2

Open and direct communication

3

Flexible working arrangements

4

Surroundings that encourage a “give-it-a-go” spirit

5

Healthy living

Some of our own office leasing-related sales personnel, too,have said that their level of persuasiveness has benefited frombeing able to give explanations based on firsthand experience
when making proposals to clients for offices that facilitate work
style reforms. We expect approximately 10,000 people to comeand see our new offices in the coming year, creating far morecontact points with people and companies than before.
The relocation itself may have been completed, but making
an environment that encourages new value creation is still awork in progress. We are constantly carrying out experiments
aimed at developing next-generation offices equipped withadvanced technology such as location information systems in
office spaces. We are using the knowledge gained throughthese to help us offer proposal-based solutions to many companies that are addressing work style reforms and other issues.
At the same time, we are creating a forum to support open
innovation and promote collaboration with diverse companies.

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

31

HUMAN RESOURCE DEVELOPMENT

Training and supporting diverse staff as our source of newvalue creation and business growth

Urban development with true value is predicated on understanding the needs of people working and living in the area while also
having insight into how the times are changing. Such insight comes from our people being highly attuned to society. The Mitsubishi
Estate Group seeks to nurture and strengthen diverse human resources as the source of new value creation and business growth byestablishing an environment that inspires creativity and encourages people to take on challenges.

Approach to Human Resource Development

Cultivating Broad Perspectives through Job Rotation

Examples of Job Rotation

At Mitsubishi Estate, new graduates account for the great
majority of new employees. For these new graduates, wehave introduced a personnel system under which they work inthree departments for a period of about 10 years after joining.
Under the job rotation system, an employee might move fromthe Residential Business to the Office Building Business, orfrom development operations to a business managementrole. The intention here is to help young employees acquire a
broad practical knowledge and skills through on-the-job
training. At the same time, by providing work experience
across multiple fields, we are helping a build a broad range ofhuman networks connecting various stakeholders. These
networks extend from within the Group to clients and business partners, to national and local governments in charge ofurban planning, and to the communities in the areas we aredeveloping. We hope, through this approach, that employees
gain a new understanding and knowledge. Job rotation is amechanism that creates valuable opportunities on a sustained
basis and helps our people broaden their horizons and gain
an understanding of the business of real estate developersfrom multiple perspectives.

Multifaceted perspectives cultivated through knowledge, skills, and experience gained
through on-the-job training

The Mitsubishi Estate Group recognizes that employees are
its most important management capital.
What we seek in our employees are the following five
attributes: vision, professionalism, integrity, team building,and challenge and innovation.
We have implemented job rotation taking into accountcareer growth stages and also set up systematic training

programs in the workplace with training tailored to the needsof people in different positions and at various career stages.
In addition to holding human resource development training
sessions, which is one of the most important issues for
managers, we are working on preparing division-specifichuman resource development plans.

A Compact Organization and a Dynamic Workforce
As of March 31, 2018, the Group had 8,856 employees, with
Mitsubishi Estate alone having 806. That is only about 50%–
70% of the levels at our major competitors in Japan. Relative
to revenues, the per-capita contribution of each employee in
the Group is large. To put it another way, productivity per
employee is high. This is partly a reflection of the Group’s
organizational culture in which all employees, including new
recruits in their 20s, are assigned challenging works.

The active engagement of our people is also essential forthe promotion of the business model innovation set out in our
Medium-Term Management Plan. We aim to create an environment that spurs our people to take on challenges beyond
established business frameworks, including developing newservices that utilize the latest technology and embracing“open innovation” with venture companies.

Development ofbuildings

Development oflifestyle properties

Mitsubishi Estate

Revenue fromoperations

Operatingincome1,194,049

213,047

FY2018 (People)

Profit attributableto owners ofparent120,443

Operation of buildings

Sale of retailproperties

New businessdevelopment

International businesses

FY2018 (Millions of yen)

Number of
employees(Consolidated)

Revenue fromoperations per
employee

Operatingincome per
employee

Profit attributableto owners ofparent per
employee

8,856

134.8

24.1

13.6

32

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018basis. For example, we have introduced programs underwhich employees gain practical experience by being
appointed for one or two years to work in overseas offices ofthe Mitsubishi Estate Group or external companies. We havealso been fostering human resources who be able to perform effectively in a global setting by sending employees tostudy abroad. Moreover, we have introduced a self-development support system to help all employees with various
backgrounds develop their capabilities and apply them tothe fullest extent. We are working on multifaceted training
programs to meet the needs of diverse human resources.

Knowledge, skills, human
networks, etc., obtained in
the operation of buildings

Knowledge, skills, human networks, etc.,
obtained in the sale of retail properties

1

2

Knowledge, skills, human
networks, etc., obtained in
the operation ofinternational businesses

Knowledge, skills, human networks, etc.,
obtained in the sale of buildings

Sale ofbuildings

Multifaceted Staff Education and Training
The Group has established a staff training system with the aimof developing the skills of each employee and raising awareness of their roles at the different stages of their careers.
We provide a broad range of cross-group training programs, including those for new employees and newly
appointed managers, aiming to create a framework to
support high-level achievements and demonstrate theMitsubishi Estate Group’s comprehensive strengths. In orderto encourage the acquisition of business-related knowledge
and skills for developing the capabilities of all staff, we offer
a wide range of training programs throughout the Group
aimed at developing the capabilities of all staff. These
programs range from marketing and financial strategy tocompliance and human rights awareness. Furthermore,
we have been encouraging the development of humanresources with the skills needed to perform on a global

Knowledge, skills, human networks, etc.,
obtained in the development of lifestyle properties

Development ofhotels(Reference) Productivity per Employee
FY2018 (Millions of yen)

Knowledge, skills, human networks,etc., obtained in the corporate
communications department

Corporate
communications

3

4

5

6

7
8
9
10 ...
Years after entering Mitsubishi Estate

New Business Proposal System Encouraging Employees to Take On Challenges
We launched our “New Business Proposal System” in 1999,
which has evoked a wide range of proposals and ideas fromour employees. The Business Creation Department has, since
its establishment in 2014, worked as a secretariat for the
proposal system at the same time as developing new businesses itself. It aims to prepare the ground for employees totake up the challenge of new value creation.
Mitsubishi Jisho Residence’s business of renovating
pre-owned condominium units was born out of a proposal put
forward by an employee. After the proposal was passed in2011, we examined the feasibility of the business from various
angles. Doing so led to the establishment of the Renovation
Division in 2014, and then the business took off. Morerecently, based on a proposal adopted in 2017, we have beenpromoting a business using new large timber panels known as
Cross Laminated Timber (CLT). In March 2018, construction
began on a 10-story rental apartment complex that will, in a
first for Japan, use CLT as a flooring material.
The creation of new business was highlighted as animportant theme for “business model innovation to achieve

further growth in the 2020s” in the Medium-Term Management
Plan that began in April 2017. We have updated and strengthened the New Business Proposal System to create anenvironment that is more conducive to employees taking up
challenges as part of a new
business creation platform,
one of the measures in theMedium-Term Management
Plan. The system has
attracted growing attention
among employees. In fiscal
2018, more than 20 proposals
were submitted, four of which
are under considera­tion for
turning into commercial
businesses.
2 Chome, Izumi-ku, Takamori Project CG
rendering of expected completed exteriorof property that will be the first high-risebuilding to use CLT for flooring

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

33

HUMAN RESOURCE DEVELOPMENT

Head office employee cafeteria

Employee Interview
Job Rotation Promotes Learning, Discovery, and a
Willingness to Take On Challenges

Environment Where Members with Diverse
Experience Motivate Each OtherI am currently involved in the development of a large
multifunctional building in the Marunouchi area. This has
made me acutely aware that one person alone cannot movesuch work forward: we are a team. As real estate developers,
we must be ambitious in carrying out urban development in a
flexible way that respects the values and thinking of the whole
spectrum of stakeholders. I believe that job rotation throughthree departments over 10 years was very valuable in helping
me understand different values.
My first assignment as a new-graduate recruit was in the
Residential Business. There, I was assigned to work on
projects during short three-to-six-year periods with relatively
small teams consisting of two or three members. The teams
may have been small, but, by the same token, the scope ofeach member’s work was very wide. I myself was responsible
for overall project management of a high-rise condominium
project in Tokyo. This project stretched from upstream todownstream areas and my duties involved product planning,
sales strategy, and process and budget management. In thecourse of fighting my way through with a lot of guidance frommy superiors, I came to learn the importance of working
hand-in-hand with other team members and, as a project
manager, approaching my work with responsibility and passion.
Looking back, I think that interacting with senior employees
from within the Company and project members from outside
the Company who were keen to undertake good developments
together was a key element in pushing me toward a willingness
to take on challenges in pursuit of personal growth.
My next move to the Ministry of Land, Infrastructure, Transport
and Tourism (MLIT) came as a real surprise. As it turned out,
though, it was a good opportunity to see Mitsubishi Estatefrom the outside. The biggest surprise for me was discovering
just how enthusiastic the people in central government were,which was totally at odds with my unfair preconceptions about“bureaucratic” mind-sets. Although the nature of our work
was different, I realized that we shared a strong desire to
improve the urban environment. At the same time, ourapproaches to moving work forward were very different. I felt
clearly how the organization and culture of Mitsubishi Estate
are there to support the growth of its employees andencourage a “can-do” spirit from a longer-term perspective.

The Marunouchi Development Department where I now work
brings together colleagues who have accumulated wideranging experience in such areas as building operation andmanagement, property development, and corporate planning.
Lively discussions take place on ideas about urban development
and values drawn from this broad-ranging experience in manyand various settings, from regular departmental meetings tocasual conversations. I am involved in several projects in
Marunouchi. In helping promote the development of the
Marunouchi area, I am seeking to apply the skills and understanding I gained in the Residential Business by speaking tomany people, from managers of entire projects to designers,
builders, and others with experience and specialist knowledge.
My experience when I was seconded to the MLIT gave me
insight into how the perspectives and priorities of government
agencies differ from those in the private sector, and led to my
involvement in consultations between government bodies.
Experiencing discussions with government bodies, which areessential to large-scale developments, from a government
standpoint as opposed to a private-sector one, feeds throughto my work today.
A broad perspective and free thinking are essential tocreating new value unfettered by established frameworks. In aworld where people's values, lifestyles, and technologies are
rapidly evolving, I do not think anyone can say that any
particular way is the correct one. That is why we must be
willing to take up new challenges together, drawing motivation from members with diverse backgrounds. Such a vibrantenvironment and the opportunities it offers are wonderful
opportunities for me personally, but I think these opportunities
also provide a vital foundation for the whole Group as we
look to fulfill our mission “to contribute to society throughurban development.”

Empowered by
34

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

Hiroyuki Tadano
Manager
Marunouchi Development Department
Mitsubishi Estate Co., Ltd.

Hiroyuki Tadano joined Mitsubishi Estate in 2008. For four years,
he was responsible for the development of large-scale condominium properties. For two years beginning in April 2012, he wasseconded to the Ministry of Land, Infrastructure, Transport andTourism (MLIT) under a public sector–private sector exchange
program, where he was engaged in proposing plans related to
the Urban Park Act. From April 2014, he worked in the
Marunouchi Development Department, where he was responsible
chiefly for the development of the Otemachi Park Building, which
was completed in January 2017. He is currently working on new
projects in the Marunouchi area.

New Challenges
MITSUBISHI ESTATE CO., LTD. Integrated Report 201835

Segment Data

Operating Income¥

213,047

million

U.S.$2,005 million*

BUSINESS REVIEWRevenue from Operations¥

1,194,049

million

U.S.$11,239 million*
Total Assets

5,803,689

The Mitsubishi Estate Group is promoting its Medium-Term Management Plan for the three years
beginning fiscal 2018 with the overriding theme of “entering the next stage of value creation bystaying ahead of ever-changing social needs.”
We aim to achieve sustainable growth through the 2020s onward by applying
the Mitsubishi Estate Group’s unique power to create value.

¥

million

U.S.$54,628 million** The above amounts were translated into U.S. dollars at ¥106.24 = U.S.$1.00, the approximate prevailing exchange rate on March 31, 2018.

Millions of yen
Fiscal year ended March 31, 2018 (consolidated)

Revenue fromOperations

Operating
IncomeTotal Assets

Office Building Business

506,161

147,2433,518,967

Lifestyle Property Business

105,817

31,184514,390

Residential Business

410,598

23,860626,596

International Business

86,92524,147

697,478

Investment Management Business

22,665

4,596

111,974

Hotel & Airport Business*

33,138766

29,312

Architectural Design & Engineering Business

21,613

1,724

27,048

Real Estate Services Business

25,584

1,518

22,427

8,541

1,048

17,695

Eliminations or Corporate(26,996)(23,043)

237,797

Total

1,194,049

213,047

5,803,689

Other* Shows results for the former Hotel Business segment.
* We established the Hotel & Airport Business segment in fiscal 2019, bringing together the businesses listed below.
• The former Hotel Business segment• The Hotel Development Business of the Lifestyle Property Business segment• The Airport Project Promotion Office under the Business Creation Department and the Resort Hotel Development Business

36

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

37

BUSINESS REVIEWOFFICE BUILDING BUSINESS

Overview

OFFICE BUILDING BUSINESSThe Office Building Business, Mitsubishi Estate’s core business, engages in the development, leasing, and property
management of office buildings with state-of-the-art functions, mainly in major Japanese cities centering on the
Marunouchi area. Our businesses involve three types of earnings models: our property development and leasing
business, in which we ourselves develop office buildings and receive rental revenue from them; our capital recycling business, where we generate capital gains on the sale of properties we have developed; and our non-asset
businesses, which center on office building operations and management. Through building development andoperations, we are promoting urban development to increase the attractiveness of the entire surrounding area.
Office buildings

Business Concept

Marunouchi area (mainly theproperty development andleasing business)

Main non-asset type businesses

Major business areas in Japan(mainly the capital
recycling business)

Property management

Master leases

Revenue from Operations

Operating Income / Operating Income Ratio

Billions of yenBillions of yen600

The “Open Innovation Field” Initiative in the Marunouchi Area

%

200

40

150

30

100

20

50

10

As one of the growth strategies for the Office Building Business in the MediumTerm Management Plan, we are promoting the “Open Innovation Field” initiativein the Marunouchi area. The initiative entails bringing people and companies thatfind opportunities in innovation together and interact. Accordingly, we aim toprovide a constantly stimulating city environment that inspires creativity and awillingness to realize new possibilities and embrace change.
Specifically, we are focusing on the fields of AI, the Internet of Things (IoT), androbotics and seeking to actively promote practical tests with systems and services
that utilize state-of-the-art technology. In the office building leasing business, weare providing small offices targeted at growing companies both in Japan andoverseas as well as start-ups working on the application of advanced technologies. We are working to build a platform for providing a point of contact between
different players and support the formation of networks for lively exchanges
between start-ups and large companies.

Field test of self-driving bus on Marunouchi Naka-dori Avenue
The first time for a self-driving vehicle to run on public roadsin Tokyo's 23 wards

500
400
300
200
100
0

0

0
FY2014FY2015*1

FY2016*2

FY2017FY2018FY2014FY2015*1

Operating income (left scale)

FY2016*2

FY2017FY2018Operating income ratio (right scale)*1. From fiscal 2015, the Commercial Property Development & Investment Business has been integrated into the Office Building Business.
*2. From fiscal 2016, domestic retail & logistics property businesses (not including some multipurpose facilities), no longer in the Office Building Business, now featuring the Lifestyle
Property Business.

Competitive
Advantages

Main Office Areas in Japan 	We aim to strengthen our development pipeline by using the know-how we have accumulated through redevelopment in the Marunouchi and other areas.
Non-Asset Businesses and Others 	We intend to expand and strengthen non-asset businesses, including property management and master leases,
and businesses that utilize existing stock, such as through the renovation of aged buildings.
	We aim to leverage relationships built through office building development and the office building leasing
business to expand other businesses and create new businesses.

38

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

Otemachi Financial City
Grand Cube

Otemachi Park Building

Marunouchi Nijubashi
Building

Marunouchi 1-3 Project

Tokyo Tokiwabashi Project

Total Floor Area: 193,600 m2
Completion: Apr. 2016

Total Floor Area: 151,700 m2
Completion: Jan. 2017

Total Floor Area: 173,000 m2
Completion: Oct. 2018

Total Floor Area: 181,000 m2
Completion: Sep. 2020

Total Floor Area: 686,000 m2 (Total buildings)
Completion of Building A: Apr. 2021
Completion of Building B: FY2028

FY2017

Tokyo(Outside of Marunouchi)

Marunouchi Area 	Generally, redevelopment enables rental revenue to be increased by expanding building floor space and raising
rents per square meter. In the Marunouchi area, we aim to promote continuous redevelopment that raises value
through individual redevelopment projects as well as by realizing synergies across the whole area.
	We intend to strengthen the functions of Marunouchi through the “Open Innovation Field” initiative to cultivate
new communities and undertake field trials with leading-edge technologies.
Please see the next page.

In the Marunouchi area, we have been making good progress toward completing construction of the Marunouchi Nijubashi Building in
October 2018. The project involves replacing three buildings with 30 stories aboveground and four belowground. The new building will
have a large conference hall and banquet space and further stimulate the Marunouchi area with an expanded lineup of retail outlets
along Naka-dori Avenue. Together with this redevelopment, we are also building a service tunnel beneath Naka-dori Avenue toimprove the disaster-management functions of the area (please see pages 22–25).
We are also moving ahead with the redevelopment of the Marunouchi 1-3 Project, on which construction began in January 2018, andBuilding A, Tokyo Tokiwabashi Project in front of Tokyo Station, on which construction began in February 2018. These redevelopment
projects will move forward the integrated development of the Marunouchi area.
In areas outside Marunouchi, in May 2018 we completed the msb Tamachi (Tamachi Station Tower South) in the msb Tamachi projectin a joint development with Mitsui Fudosan Co., Ltd., and Tokyo Gas Co., Ltd., on a site adjacent to JR Tamachi Station’s east exit. The
project is located in the Tamachi area where JR Shinagawa New Station is scheduled to open in 2020. Due to open in autumn 2018, thePullman Tokyo Tamachi will be Japan’s first hotel under the Pullman brand.

Marunouchi Area

Business
Strategies	Ownership of about 30 buildings in the Marunouchi area, a leading business area in Japan with one of theworld's greatest concentrations of companies.
	Redevelopment in Marunouchi not requiring new land acquisition is largely unaffected by fluctuations in the realestate investment market, thus enabling stable and continuous redevelopment.
	Development know-how and a track record cultivated through continuous urban development in the
Marunouchi area for more than 100 years.
	Tenant relationships and information networks built through the Group’s wide-ranging businesses, including
development in the Marunouchi area.
	Relationships with the central and local governments built through public and private sector cooperation in
urban development.
	Urban development and area management with advanced disaster-management functions centering on the
Marunouchi area.

TOPIC S

FY2018FY2019FY2020

FY2021

FY2022

FY2028msb Tamachi (musubu Tamachi)

Shinjuku Station South Project

Yotsuya Station Area
Redevelopment Project

Kita-Aoyama 2-Chome Project

Total Floor Area: 149,300 m2*
Partial Completion: May 2018*

Total Floor Area: 44,100 m2
Completion: Aug. 2019

Total Floor Area: 139,700 m2
Completion: Jan. 2020

Total Floor Area: 22,900 m2
Completion: Apr. 2020

* Tower South, hotel

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

39

BUSINESS REVIEWLIFESTYLE PROPERTY BUSINESS

Overview

LIFESTYLE PROPERTY BUSINESSThe Lifestyle Property Business handles assets excluding office, residential properties, and hotels. Its activities
center on the development and operation of retail properties and logistics facilities. The retail property portfolio
spans three business formats: suburban shopping malls operated under the PREMIUM OUTLETS® brand, independent shopping centers such as MARK IS, and integrated urban facilities in the Marunouchi area. In our logistics
facility business, we are continuing to expand our portfolio particularly under the Group’s Logicross brand while
also undertaking joint developments with other companies.

Outlet shoppingmalls

Independent
shopping centers

Logistics

Integrated urban
facilities

Business
Strategies

Retailmanagement

facilities

	Regarding independent shopping centers, we are developing distinctive facilities tailored to diverse demand
based on detailed analyses of the location, local demand characteristics, tourism potential, and discussions
with tenants.

	We aim to capture inbound demand by taking various initiatives that give full play to the distinctive features ofour facilities.
Logistics Facilities 

Revenue from Operations

Operating Income / Operating Income Ratio

Billions of yenBillions of yen

%

120

40

40

30

30

20

20

10

10

	We intend to make acquisitions of land and undertake leasing operations by making use of our multiple information
networks and tenant relationships.
	We aim to generate stable capital gains by leveraging our logistics business platform to sell developed properties
to Mitsubishi Estate Logistic REIT Investment Corporation, which is managed by Mitsubishi Jisho Investment
Advisors, Inc., and other parties.

100
80
60

	With outlet shopping malls, we will continue to expand and refurbish existing facilities and develop new ones tooffer visitors unique spaces and meet their needs for a fun, one-of-a-kind experience.

	With integrated urban facilities, we are aiming to deliver wide-ranging eating and drinking options and shops aswell as various service providers to offer better amenities and convenience for office workers while also drawing
in people for shopping and tourism.

Main non-asset typebusiness

Retail properties

Business Concept

Retail Properties 	We intend to generate synergies Groupwide by sharing the information networks and management know-how
acquired by the Tokyo Ryutsu Center, which has been involved in the logistics facilities business over the nearly
50 years.

40
20
0

0
FY2014FY2015FY2016*FY20170

FY2018FY2014FY2015

Operating income (left scale)

FY2016*FY2017FY2018Operating income ratio (right scale)* The Lifestyle Property Business was established as a new segment in fiscal 2016, taking over responsibility for domestic retail and logistics property business operations(not including some multipurpose facilities) from the Office Building Business.

Retail Properties Competitive
Advantages

	The top customer drawing power in Japan of the
PREMIUM OUTLETS® shopping mall chain.
	Information networks and tenant relationships built
through wide-ranging Group businesses, including developments in the Marunouchi area.
	Extensive development and management know-how
gained through a portfolio consisting of three different
business formats, business coverage in Japan stretching
beyond Tokyo all the way from Hokkaido to Kyushu and atenant network covering approximately 3,500 stores (as ofthe end of March 2018).
Logistics Facilities Area Map of Main Retail Properties

maruyama class

AQUA CITY ODAIBAIZUMI PARK TOWN
Tapio

GOTEMBAPREMIUM OUTLETS®

 MI PREMIUMA
OUTLETS®

 OSU PREMIUMT
OUTLETS®

 HISUI PREMIUMS
OUTLETS®
 INKU PREMIUMR
OUTLETS®

Business Platform of Logistics Facilities	A business platform with a broad range of functions related
to logistics facilities, from land acquisition and development
to building operations, ownership, and asset management.
	Tenant relationships and information networks throughwide-ranging Group businesses, including developmentsin the Marunouchi area.
	Management know-how and experience gained throughTokyo Ryutsu Center Inc. (TRC) and its competitivenessunderpinned by being based in Heiwajima, a location providing excellent access to central Tokyo and Haneda Airport.

MARK IS minatomirai

LeasingLandacquisition

Development

Businessplatformof logistics
facilities
Building
operations

Asset
management

TOPIC S
Retail Properties 
We opened Corowa Koshien in Nishinomiya City, Hyogo Prefecture, in April 2018.
Located just one minute’s walk from Hanshin Electric Railway Koshien Station, thisshopping mall is close to the Hanshin Koshien Stadium, home to the Hanshin
Tigers, the most popular professional baseball team in the Kansai area. We areaiming to offer convenience for people living in the area while attracting thosecoming to Hanshin Koshien Stadium to visit.
In May 2017, we reached a basic agreement with landowners to develop an outlet
mall in Joyo, Kyoto Prefecture. The planned site is located about 20 km south of thecenter of Kyoto City, along the Shin-Meishin Expressway that is now underconstruction. The intention is to open the outlet mall after the scheduled opening of
the expressway in fiscal 2024. We are now moving ahead with various procedures
and consultations with many people concerned.
Logistics Facilities 
We have begun construction work on two logistics facility development projects
that are targeted for completion in 2019.
In September 2017, we started construction of Logicross Nagoya Kasadera, thefifth of our independently developed logistics facilities under the Logicross brand.
In addition to being located in Nagoya City, a major consumption area in the
Chubu region, the facility has excellent access to major expressways and otherpublic roads and is within walking distance from a train station, with the advantages
that offers for securing workers.
In December 2017, we began construction of LOGIPORT Kawasaki Bay, one ofJapan’s largest multi-tenant logistics facilities, which we are developing jointly with
two other companies, LaSalle Real Estate Investment Advisors Co., Ltd., and NIPPO
Corporation. Situated in a harbor district with good access to Kawasaki and
Yokohama ports and Haneda Airport and being close to the cities of Tokyo and
Yokohama, the facility will provide outstanding operational flexibility througharound-the-clock operations.

Corowa Koshien

LOGIPORT Kawasaki Bay

Ownership

40

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

41

BUSINESS REVIEWRESIDENTIAL BUSINESS

Overview

RESIDENTIAL BUSINESSThe Mitsubishi Estate Group has approximately 50 years of experience in the residential condominium business.
We have established a value chain to meet housing-related needs spanning from new development andrebuilding and redevelopment projects to purchasing and sales, brokerage, and management. We are also
developing a wide range of businesses to meet diversifying lifestyle needs. Such businesses include rental
housing, renovation, our international business, and investment-purposed real estate.

Domestic

Overseas

Business
Strategies

Rental apartments

Management

Brokerage

Custom-built
housing	We aim to expand our customer base by strengthening our brand power through the enhancement of productappeal, reliability, and services and by leveraging said brand power to acquire loyal “fans.”	We intend to optimize material costs and construction costs by utilizing our leading business scale in residential
condominium development in Japan.
	We are promoting redevelopment projects that make full use of our abundant know-how related to real estatedevelopment and of the comprehensive capabilities of the Mitsubishi Estate Group.

Main non-asset type businesses

Residentialcondominiums

Business Concept

Residential Condominiums, Domestic 

Residential Condominiums, Overseas 

Renovation

	While exploring business opportunities through collaboration with leading developers in different countries, weare also pursuing growth by utilizing the Group’s planning capabilities and development and sales know-how.
Rental Apartments 

Revenue from Operations

Operating Income / Operating Income Ratio

Billions of yenBillions of yen

%

30

9

500

	We are aiming to stabilize segment profits through capital gains from rental apartments and other investmentpurposed properties in the condominium business.
Non-Asset Type Businesses 	We aim to strengthen non-asset type businesses involving existing properties in such areas as residence management, brokerage, custom-built housing, and renovation.

400
20

6

300

Residential Business Value Chain 	We are providing one-stop services as a group making full use of all the phases of the value chain, from landacquisition, development, sales, and management through to brokerage.

200
10

3

100

0

0
FY2014FY2015FY2016*FY2017FY20180
FY2014FY2015

Operating income (left scale)

FY2016*FY2017FY2018Operating income ratio (right scale)* From fiscal 2016, certain operations of Mitsubishi Jisho House Net Co., Ltd., were moved from the Real Estate Services Business to the Residential Business.

Competitive
Advantages

	The power of The Parkhouse and The Parkhabio brands backed by outstanding technologies, uncompromisingproduct quality control, and a long and extensive track record.
	Quality control of The Parkhouse brand at all stages of the development process–from design and construction
to completion-with “Check Eyes,” our quality management and performance indication system, which reflects
our dedication to all aspects of the properties we offer.
	Product planning power that ensures that our buildings keep people safe through resilience in natural disasters
and offer both comfort and cost performance and which respects the environment and the local region by
paying careful attention to preserving biodiversity and helping realize a low-carbon society.
	Strong relationships with leading developers in Asian countries.
	The ability to provide services to meet all housing-related needs.

TOPIC S
Residential Condominiums, Domestic 
In November 2017, we completed The Parkhouse
Nishi Shinjuku Tower 60, a 60-story, high-rise condominium building standing at 208.97 meters and with a
total of 954 units, in Shinjuku-ku, Tokyo. The areaaround the property used to contain a dense concentration of wooden houses, where the potential fordisaster was a recognized concern. Through aredevelopment aimed at creating a safe urban
environment well protected against disasters, we havemade the entire area more resistant to fires andearthquakes while improving access for emergency
vehicles should a fire or earthquake occur.
In February 2018, we completed The Parkhouse
The Parkhouse
Nakanoshima Tower, a 55-story, high-rise condoNishi Shinjuku Tower 60
minium building in the center of Osaka. This is thefirst condominium property in Japan to be equipped
to allow people to use an emergency elevator in the case of a fire. Normally, people
are not permitted to use elevators for evacuation in the case of a fire in condominiums. However, our independently formulated disaster-response plan has received
approval from the Osaka Municipal Fire Department, enabling the condominium
elevators to be used by people with difficulty walking, such as the elderly andpregnant women.
Residential Condominiums, Overseas 
We entered the residential condominium business in Thailand in 2014, where wehave now been involved in the sale of more than 10,000 units. With leading Thai realestate company AP (THAILAND) Public Co., Ltd., as our local business partner, we
are meeting abundant housing needs among city dwellers in Thailand by bringing
together the expertise of AP (THAILAND) in real estate business in Thailand and thestrengths of the Group.

42

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

The Parkhouse Nakanoshima Tower

Life Asoke-Rama9

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

43

BUSINESS REVIEWINTERNATIONAL BUSINESS

Overview

The Mitsubishi Estate Group’s International
Business began with the establishment of
a company in the United States in the early
1970s. Its geographical coverage has since
expanded to include the United Kingdom,
mainland Europe, and Asia and Oceania. We
have been strengthening our portfolio withboth management properties predicated on
returns from rental fees and properties forsale premised on raising their value under acapital recycling business model. We arepromoting business expansion with respect
to the real estate trading rules and businesscustoms of each country. We seek to apply
optimal business models for each market
based on macroeconomic data and analysis
of capital and real estate markets to identify
the right time to enter.

INTERNATIONAL BUSINESS

United States 	We are pursuing hands-on development centering on RGI.
United States

Europe itsubishi Estate
M
London Limited
Europa Capital Group* ockefeller Group, Inc.
R
Mitsubishi Estate
New York Inc.
TA Realty LLC*

Business
Strategies

	We aim to promote rental business based on two flagship office buildings owned in Manhattan and the development of properties in the United States under our capital recycling business model.
	We intend to strengthen investment with the Hybrid Investment Model* utilizing TA Realty’s resources.
Europe 

Asia and Oceania

	We aim to develop business particularly in markets where different functions are handled by separate professional
enterprises as an asset manager responsible for overseeing all aspects of projects.

Mitsubishi Estate Asia Pte. Ltd.
Mitsubishi Estate (Shanghai) Ltd.
Mitsubishi Estate Taiwan Ltd.
Pan Asia Realty Advisors(Singapore) Pte. Ltd.*	We intend to expand our portfolio by acquiring properties with a view to redevelopment, centering on management
properties in the Office Building Business.
	We aim to strengthen investment with the Hybrid Investment Model* utilizing Europa Capital’s resources.

* Group companies under the Investment Management Business segment

Asia and Oceania 	We are expanding and diversifying our investment and development business jointly with leading local partners.
	In countries and regions where high and stable growth can be expected, we are focusing on asset types–andparticularly property for sale–that are likely to see strong demand given the particular characteristics of different areas.
	We aim to expand investment with our Hybrid Investment Model* through PA Realty, our joint venture with
CLSARE.
* Hybrid Investment Model: Funds structured by the Group companies that combine Mitsubishi Estate’s and third-party equity.

Revenue from Operations

Operating Income / Operating Income Ratio

Billions of yenBillions of yen

%

30

60

25

50

20

40

15

30

TOPIC S

10

20

5

10

United States We have made progress with the Hybrid Investment Model utilizing TA Realty’s
resources. As of March 2018, we had established a portfolio of 28 properties in the
United States, including office buildings in Boston and Washington, with a
combined asset value of around ¥250 billion. We expect this to generate steadyincome gains. Meanwhile, we have been making good progress with a majorrenovation project at RGI’s flagship office building in Manhattan, 1271 Avenue ofthe Americas, with a view to completion in December 2019.

100

80

60

40

20

0

0
FY2014FY2015FY2016*FY20170
FY2014FY2018FY2015

Operating income (left scale)

FY2016*FY2017FY2018Operating income ratio (right scale)* From fiscal 2016, the international investment management business was transferred from the International Business segment to the Investment Management Business segment.

United States Competitive
Advantages

	The sourcing power of Rockefeller Group International, Inc. (RGI), and its development know-how and trackrecord, as well as the name recognition it brings.
	TA Realty’s networks and track record in raising the value of properties.
Europe 	The sourcing power based on business achievements over a long period.
	The establishment of development teams and operational effectiveness.
	Europa Capital’s networks and track record in raising the value of properties.
Asia and Oceania 	Development know-how gained in the business in Japan.

Europe 
We have been steadily expanding our portfolio of office building properties in
Europe. We own seven office buildings in the United Kingdom (with another projectcurrently under development), and in June 2017 we acquired an office building in
Munich, Germany’s largest office building market, giving us a second property inmainland Europe after the building we already own in Paris.

Feringastrasse 10–12, Munich

Asia and Oceania 
In July 2017, we decided to undertake the joint development in Singapore of
CapitaSpring together with CapitaLand, Asia’s largest real estate group. The projectis expected to cost approximately ¥145 billion. In November 2017, we also decided
to participate in our first Australian residential development project, Melbourne
Quarter East Tower, in partnership with Lendlease, Australia’s leading real estate andconstruction company. The 44-story project in the center of Melbourne will contain719 apartments.

	Acclaim the Group has won for its track record in Japan among businesses in leading cities in Asia excluding
those in Japan.
	Relationships with leading local partners.
	The networks Pan Asia Realty Advisors (PA Realty) has established together with CLSA Real Estate Partners(CLSARE), which handles the real estate fund management business in Asia and Oceania.

44

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

CG rendering ofCapitaSpring whencompleted

CG rendering of Melbourne
Quarter East Tower whencompleted

MITSUBISHI ESTATE CO., LTD. Integrated Report 201845

BUSINESS REVIEWINVESTMENT MANAGEMENT BUSINESS

Competitive
Advantages

	Through the execution of M&A deals andother activities overseas, we have establisheda strategic global investment management
platform. This enables us to provide global
asset management services to clients byleveraging our expertise and achievements
fostered in Japan, the United States, Europe,and Asia excluding Japan.

HOTEL & AIRPORT BUSINESSJapan Real Estate AssetManagement Co., Ltd.

Europa Capital

TA Realty

Pan Asia Realty

Business
Strategies

	By utilizing our hybrid investment model strategy, through which we co-invest our principal investment capitalalongside our clients’ in funds that our Group companies manage, we seek to capture demand for cross-borderproperty investments. Through this approach, we are simultaneously pursuing the expansion of our overseas
portfolio while benefiting from enhanced investment diversification as well as expanding and strengthening ourinvestment management businesses.
	In Japan, we meet the needs of domestic and overseas investors by providing a diverse product lineup,
including listed REITs and private fund as well as dependable asset management services.

Revenue from Operations

Assets under Management by Area

Billions of yenBillions of yen

Asia & Oceania
30

30	Applying more than 30 years of hotel management experience with the Royal Park Hotels brand, we have been
expanding our networks of full-service hotels and accommodation-oriented, limited-service hotels.
	In our airport management operations, we are making full use of the experience we have gained with thedevelopment and management of diverse commercial facilities and the knowledge gained in businesses related
to demand from inbound visitors to Japan in our outlet and hotel operation businesses.

GlobalHeadquarters	In Japan, the Investment Management
Business offers specialist services. Mitsubishi
Jisho Investment Advisors, Inc., provides
asset management services across a wide
range of investment products, including thecountry’s largest private REIT and a listed
logistics REIT, while Japan Real Estate AssetManagement Co., Ltd., manages Japan’s
first publicly listed office REIT.

Business
Strategies

Competitive
Advantages

Mitsubishi Jisho Investment
Advisors, Inc.

	We are leveraging our development expertise and the tenant relationships we have built by handling diverse
real estate assets as a comprehensive developer in order to acquire sites for hotels and promote hotel
development.

	In the Hotel Business, our main focus is the development of hotels under the Royal Park Hotels brand on sites
we have acquired ourselves. We also actively look to lease properties to other operators and generate capitalgains through the sale of properties after holding them for a certain period of time.
	With the Royal Park Hotels brand, we aim to steadily increase operating income by improving the operating
income ratio at existing hotels while actively expanding hotel networks by leasing properties developed by othercompanies as well as utilizing various schemes, including management contracts and franchise contracts.
	In our airport business, we aim to unearth demand by enhancing the appeal of airports and their surrounding
areas by working with appropriate partners and applying our experience in urban development and the
management of commercial facilities.

Revenue from Operations
Billions of yen
40

8

30

6

20

4

10

2

25

Europe400

20Total:

15

JREA
990

Domestic
1,600

0Unitedapproximately
States
3,000
1,000

10

Overseas
1,430

50FY2014FY2015FY2016*FY2017

MJIA
610

Operating Income / Operating Income Ratio
Billions of yen

%

6

60

5

50

4

40

3

30

2

20

1

10

0

0
FY2014FY2015

Operating income (left scale)

FY2016*FY2017FY2018Operating income ratio (right scale)* From fiscal 2016, the Overseas Investment Management Business has been moved
from the International Business to the Investment Management Business.

46

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

FY2015FY2016FY2017FY2018Operating Income / Operating Income Ratio
As of end-March 2018

FY20180
FY2014

Billions of yen

%

2.0

8

1.5

6

1.0

4

0.5

2

TOPIC S
Mitsubishi Estate Logistics REIT Investment Corporation, forwhich Mitsubishi Jisho Investment Advisors, Inc., is the asset
management company, listed on the Tokyo Stock Exchange
REIT Market in September 2017. The investment corporation
invests principally in logistics facilities. It aims for stableasset management by steadily building a portfolio of highly
competitive logistics facilities. In doing so, it brings together
the abundant experience Mitsubishi Jisho Investment Advisors
has accumulated in managing real estate funds since its
establishment in 2001 and the real estate developmentknow-how of Mitsubishi Estate and the information networks
built through its development of logistics facilities since 2011.

0

TOPIC SIn April 2018, we established the Hotel & Airport BusinessGroup in order to respond to strong demand for accommodations and accelerate the expansion of the HotelBusiness, reinforce the activities of the Airport Operation
Business, and generate synergies between the two.
In the Hotel Development Business, two properties werecompleted in fiscal 2018. Plans are also moving ahead todevelop hotels in Sakaisuji in Osaka and Asakusa in Tokyo, andelsewhere. In the hotel management business under the Royal
Park Hotels brand, we plan to open more properties following
the opening of a new hotel in Kyoto’s Shijo District in April
2018, including those in Midosuji, Osaka, and in Ginza, Tokyo.
In the Airport Business, we began commercial operationof Takamatsu Airport in April 2018. At Shimojishima Airport
in Okinawa Prefecture, we are moving ahead with construction work on passenger terminal facilities prior to the startof operations scheduled for March 2019. In addition, we
concluded an agreement with the local authorities in
Shizuoka Prefecture with a view to the private operationof Mt. Fuji Shizuoka Airport from April 2019.
CG rendering of Takamatsu Airport in the future0
FY2014FY2015

Operating Income (left scale)

FY2016FY2017FY2018Operating Income Ratio (right scale)* Shows results for the former Hotel Business segment through to fiscal 2018.
* We established the Hotel & Airport Business segment in fiscal 2019, bringing together
the businesses listed below.
• The former Hotel Business segment• The Hotel Development Business of the Lifestyle Property Business segment• The Airport Project Promotion Office under the Business Creation Department andthe Resort Hotel Development Business

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

47

BUSINESS REVIEWARCHITECTURAL DESIGN & ENGINEERING BUSINESS

Competitive
Advantages

REAL ESTATE SERVICES BUSINESS	As a full-service architectural design and engineering firm, we have extensive experience in urban planning
covering such areas as the design and management of buildings for various applications and proposal-based
consulting, including large-scale complex developments in the Marunouchi area, and designing undergroundspaces that take into account traffic conditions.

Competitive
Advantages

	We undertake design and management with an in-depth understanding of operation, maintenance, andmanagement from the perspectives of business operators and clients based on experience cultivated as adeveloper’s in-house design office.

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

	We have access to a wealth of information on China and Southeast Asian countries through a network centeredon local subsidiaries established in Shanghai and Singapore.

Business
Strategies

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

	In addition to handling design project orders from within the Group and from long-established clients, theArchitectural Design & Engineering Business is working closely with the Business Development, Consulting &Solutions Group to win new orders.

Business
Strategies

	Besides construction management (CM) work involving the comprehensive management of projects such as
construction schedule, budgets, and quality control, we are focusing on winning orders in renovation and othergrowth fields in order to expand our earnings base.

	We are aiming to be the top company in CRE strategy support, real estate consulting, and recreational land andrecreational facility management by providing services to enterprises and high net worth individuals as our corecustomers.
	We are strengthening our value chain, which combines a variety of service menus of the Business Development,
Consulting & Solutions Group and of each of the Group’s businesses, while expanding the range of services weprovide to existing customers.

	We aim to expand overseas business by making full use of the Mitsubishi Estate Group’s brand.
	We provide technological support to Group companies and seek to generate synergies with those companies.

Revenue from Operations

Revenue from Operations

Billions of yen
25

12

20

8

15

6

10

4

5

2

0

0
FY2014FY2015FY2016FY2017FY2018Billions of yen

TOPIC S
We handled the architectural design and engineering workfor the Ueno Frontier Tower, a multifaceted complex
completed in October 2017 that includes shops, a movie
theater, and rental offices. Based on the concept of “connecting bustling and overlapping landmarks,” we aimed fora building open to the flow of people from Ueno Park, one
of Tokyo’s most prestigious green spaces, to Okachimachi.
Overseas, we were responsible for designing theNanshan Plaza in Taipei, Taiwan, which was completed in
January 2018 (and opened in June). This is a new landmark
in Taipei, with the 272 meter-high property consisting of 48
floors aboveground and five belowground as well as
housing offices and commercial and cultural facilities.

Operating Income / Operating Income Ratio

20
15
10
5
0
FY2014

2.0

10

1.6

8

1.2

6

0.8

4

0.4

2

0

0

0

Operating income (left scale)

FY2016FY2017FY2015FY2016*FY2017FY2018Operating Income / Operating Income Ratio%

FY2015

Mitsubishi Real Estate Services Co., Ltd., is responsible for
the Real Estate Services Business. It is enhancing its
effectiveness in proposing solutions by strengthening thevalue chain. In order to strengthen the parking lot management business, we turned Parking Management
Organization, Ltd., into a subsidiary in June 2018 andabsorbed Miura Create Inc. in July 2018. In addition, in
March 2018, we entered into a business tie-up with
VestAsia Pte. Ltd. of Singapore covering real estate
brokerage. We have also been focusing on gathering
information and networking in Asia.

25

Billions of yen

FY2014

TOPIC S30

FY2018Operating income ratio (right scale)

The Nanshan Plaza

Billions of yen

%

3.0

12

2.5

10

2.0

8

1.5

6

1.0

4

0.5

2

Seiyu Kotesashi store parking lot

0
FY2014FY2015

Operating income (left scale)

FY2016*FY2017FY2018Operating income ratio (right scale)* From fiscal 2016, certain operations of Mitsubishi Jisho House Net Co., Ltd., havebeen moved from the Real Estate Services Business to the Residential Business.

48

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

49

BUSINESS REVIEW

BUSINESS CREATION DEPARTMENT

Competitive
Advantages

BUSINESS DEVELOPMENT, CONSULTING & SOLUTIONS GROUP

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

	Strategic sales organization comprising ­horizontally integrated segments
	Ability to identify problems through consulting
Value Drivers

	Robust solutions using Groupwide resources	We have created a platform for new business creation that embraces both in-house and external parties andsupports sustainable innovation that goes beyond the boundary of established business fields.

Scope of
Activities

Business
Strategies

	We aim to raise the added value of established businesses through innovative approaches that involve introducing new functions to existing buildings, utilizing new materials, and making use of the latest technology to offer
new services and make maintenance more efficient.
	The Company has set a budget of ¥100 billion over three years for Groupwide business model innovation.
We have also put in place a platform for new business creation to promote new businesses that go beyond
the boundaries of our existing Group business framework.
	We are actively pursuing open innovation through cooperation with external partners.

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

Business Flow of Consulting Services
and Solutions

Analysis and hypothesis

Identification of issues
Proposal

Decision making

TOPIC S
We launched the Corporate Accelerator Program as one of our new business creation measures in 2017. Six companies selected from255 entries worked to improve their business plans with Mitsubishi Estate Group staff and experts. We are continuing to work closelywith the participating companies.
In addition, we have entered the agricultural business through the establishment of a joint venture company with a business partner.
We aim to generate stable income by supplying high-value-added tomatoes throughout the year. We are also pursuing synergies withestablished businesses, such as supplying office workers in the Marunouchi area and elsewhere and residents of our condominiums, andcooperating closely with our airport business.

Corporate Accelerator Program

50

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

Business
Development,
Consulting &Solutions GroupCOMMUNICATION

Customers

Support for businesspromotion

Consultation

Real Estate Development

Real Estate Investment

Real Estate Liquidity

Development method proposals
Business plan support
Project managementEffective utilization / joint ventures(equivalent exchanges / termleasehold)Provisional use
Reconstruction

Real estate investment strategy
formulation support
Market research and analysis
Due diligenceAcquisition support
Asset management

Real estate-backed financial
supportSecuritization
Specified real estate joint ventures
Sales and leaseback
Real estate brokerage

Comprehensive Building
Analysis and Renovation

Design, Supervision, andConstruction

CRE Strategy Support

New Business Development

Earthquake resistance analysis
Facility management
Energy saving and IT utilization inbuildings and facilities
Interior and exterior renovation
Barrier-free facility construction
Protective measures for buildings
and facilities
Conversion
Building renovation business(renovation of existing buildings
and subsequent leasing)Environmental assessment andresearch
Consulting for urban development
and private finance initiatives (PFIs)
Consulting, design, and supervision
for environmental andcivil-engineering solutionsC onstruction managementD esign and supervision forbuildings and structuresD esign and supervision for interiors
and exteriors
Single-unit homes and rental andcorporate housing
Residential and office renovationO rganization of CRE information
CRE valuation
Support for strategy formulationand implementationB usiness partnership
Investment / M&A

Agricultural business (tomatoes)

Building Operation andManagement
Operation and management plan
analysis and proposals
Long-term maintenance plan
consulting
Commissioned operation andmanagement of buildings,
retail facilities, and hotels
S ubleasing
Tenant marketing

MITSUBISHI ESTATE CO., LTD. Integrated Report 201851

Message from the Chairman of the Board

CORPORATE GOVERNANCE
Hirotaka Sugiyama
Chairman of the Board
Mitsubishi Estate Co., Ltd.

The mission of the Mitsubishi Estate Group is “to contribute to society through urban development.”
In line with that mission, we aim to work with stakeholders to create shared value while reinforcing thecorporate governance that forms the bedrock of our business.
Under our Medium-Term Management Plan, we aim toenhance corporate value over the long term and build mutually
profitable relationships with stakeholders. To do so, we are
seeking to establish a position as a leading company in Japanin terms of taking environmental, social, and governance (ESG)
into consideration. Corporate governance raises corporate
value by realizing the sustainable growth of the Group. It also
plays an important role in realizing the mission of the
Mitsubishi Estate Group to contribute to a sustainable society
through environmentally sound urban development.
In order to ensure governance functions are exercised
effectively, the Company conducts self-evaluations of eachdirector to improve the effectiveness of the Board of
Directors. We have established a governance structure underwhich management evolves and responds to changes in thebusiness environment through a cycle in which the Boardof Directors analyzes its effectiveness based on theseself-evaluations. The Board then uses the results of the selfevaluations to prepare the next steps to build a governancesystem that reflects changes in the business environment.
From a systemic perspective, in September 2017, weestablished the “Mitsubishi Estate Co., Ltd., Corporate
Governance Guidelines” to serve as guidelines for thedevelopment and promotion of our corporate governancesystem, which is designed to realize the mission of the
Mitsubishi Estate Group and to enhance our corporate value
on a medium-to-long-term basis. We also, in April 2018,changed the composition of the Remuneration Committee

52

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018from one with five members, which included two internal
directors, to one with four members, all of whom are outside
directors. In this way, we further improved procedures forpaying remuneration to directors by ensuring greater
objectivity and transparency. The Company has also decided
to introduce a new long-term performance-based incentive
plan (the “Phantom Stock Plan”), in addition to the Restricted
Stock Compensation System introduced in fiscal 2017. We arecommitted to continuously strengthening governance while
taking into consideration our growth strategies and theneeds of society.
Stimulating sustainable innovation by gathering people
and companies together and promoting their interaction as
well as environmentally sensitive urban development demanda multifaceted and long-term perspective. The Board of
Directors is committed to meeting the expectations ofshareholders and investors by doing all it can to guide theCompany in a way that takes into account future changes insociety and the business environment.
August 2018

Chairman of the Board
Mitsubishi Estate Co., Ltd.

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

53

CORPORATE GOVERNANCE

Directors(Back row, from left)

Tetsuji Arimori, Iwao Taka, Hiroshi Katayama, Jo Kato, Shin Ebihara, Masaaki Shirakawa, Noboru Nishigai, Shin Nagase, Toru Okusa(Front row, from left)

Tetsuo Narukawa, Junichi Tanisawa, Junichi Yoshida, Hirotaka Sugiyama, Shu Tomioka, Setsuko Egami

54

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

As of June 28, 2018

Name
PositionAppointment year
Number of shares held
(As reported in Fiscal 2018 Financial
Report, available only in Japanese)

Hirotaka Sugiyama

Junichi Yoshida

Junichi Tanisawa

Tetsuji Arimori

Chairman of the Board

DirectorDirectorDirector
2007
51 thousand shares







2016
43 thousand shares2014
33 thousand shares2018
31 thousand shares

Hiroshi Katayama

Noboru Nishigai

Jo KatoToru Okusa

Director

Director

DirectorDirector
2016
27 thousand shares2017
25 thousand shares
2011
74 thousand shares2013
32 thousand shares

Shin Ebihara

Shu Tomioka

Tetsuo Narukawa

Masaaki Shirakawa

Outside Director

Outside Director

Outside Director

Outside Director









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

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

2018–shares
Born on April 15, 1949
Apr. 1974 Joined The Industrial Bank ofJapan, Ltd.
Dec. 1997 Chairman of the Board ofManaging Directors,
Industriebank von Japan(Deutschland) Aktiengesellschaft,
IBJ (Germany)
Apr. 2004 Executive Managing Director,
Mizuho Bank, Ltd.
Apr. 2006 Senior Managing Executive
Officer and COO of Corporate
Planning & Management Division,
Kowa Real Estate Co., Ltd.
Apr. 2010 President, Kowa Real EstateCo., Ltd.
Oct. 2012 President & CEO, Nippon Steel
Kowa Real Estate Co., Ltd.
Jun. 2014 Director & Executive Advisor,
Nippon Steel Kowa Real EstateCo., Ltd.
Jun. 2016 Executive Advisor, Nippon Steel
Kowa Real Estate Co., Ltd.
Apr. 2017 Retired from the position of
Executive Advisor, Nippon Steel
Kowa Real Estate Co., Ltd.
Jun. 2018	Director, Mitsubishi EstateCo., Ltd. (Current position)

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

Shin Nagase

Setsuko Egami

Iwao Taka

Outside Director

Outside Director

Outside Director







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

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

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

MITSUBISHI ESTATE CO., LTD. Integrated Report 201855

CORPORATE GOVERNANCE

Overview of Corporate Governance System

Outside Directors

Basic Policy 
The Company shall aim to realize enhancement of its genuine
corporate value through a harmonious balance between
corporate growth and the interests of its various stakeholders
by following its brand slogan, “A Love for People. A Love for
the City,” based on its basic mission of “contributing tosociety through urban development.” The Company shallposition the development and promotion of the corporate
governance system as one of the most importantmanagement issues in realizing this goal.

In developing and promoting the corporate governancesystem, to bring about greater clarity of roles and thestrengthening of functions in both the supervision ofmanagement and the execution of business while also
fulfilling accountability to our shareholders and otherstakeholders, the basic policy shall work to ensure thetransparency and objectivity of management.

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

Reason for nomination
Shin Ebihara

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

Shu Tomioka

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

Tetsuo Narukawa

The Company expects that he would carry out the supervision and check functions regarding the Company’s managementfrom an objective viewpoint independent from management executives in charge of business affairs by leveraging his international experience as well as management experience in financial institutions and real estate companies.

Masaaki Shirakawa

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

Shin Nagase

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

Setsuko Egami

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

Iwao Taka

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

Composition of the Board of Directors
Internal directors
who are concurrently
serving as corporate
executive officers
5Non-executive,
independent,
outside directors
7

Board of Directors 

Executive /Non-executive

The Board of Directors decides the basic policy of theCompany’s management, and it also carries out supervisionof the execution of duties by directors and corporate
executive officers. As of June 28, 2018, the Board of
Directors consists of 15 directors, of whom seven are
outside directors. The role of chairman of the Board of
Directors is held by the chairman of the Board of theCompany, who does not concurrently serve as a corporate
executive officer.

Independence Standards for Independent Outside Directors
Internal directors who are
not corporate executive
officers
3

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

Nominating Committee, Audit Committee, and Remuneration Committee
The membership of each committee is as follows.
Nominating Committee
Tetsuo Narukawa(Committee chairman)

Audit Committee
OutsideDirector

Overview of Activities in Fiscal 2018

Remuneration Committee

Jo Kato(Committee chairman)

Shin Ebihara(Committee chairman)

OutsideDirector

Tetsuo Narukawa

OutsideDirector

Attendance by Outside Directors at Meetings of the Board of Directors and Committees (Meetings Attended / Total Meetings)
Outside Directors

Hirotaka Sugiyama

56

Toru Okusa

Shin Ebihara

OutsideDirector

Shu Tomioka

OutsideDirector

Masaaki Shirakawa

OutsideDirector

Masaaki Shirakawa

OutsideDirector

Shin Nagase

OutsideDirector

Setsuko Egami

OutsideDirector

Setsuko Egami

OutsideDirector

Iwao Taka

OutsideDirector

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

Board of Directors

Nominating Committee

Audit Committee

Remuneration Committee

Isao Matsuhashi

9/9

5/5

—

—

Shin Ebihara

9/9

—

—

6/6

Shu Tomioka

9/9

—

15/15

—

Masaaki Shirakawa

9/9

5/5

—

6/6

Shin Nagase

9/9

—

15/15

—

Setsuko Egami

9/9

5/5

—

6/6

Iwao Taka

9/9

—

15/15

—

MITSUBISHI ESTATE CO., LTD. Integrated Report 201857

CORPORATE GOVERNANCE

Nominating Committee
Duties

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

Remuneration

Major activities

The Nominating Committee determined the details of the director nomination proposal put to the Ordinary General
Meeting of Shareholders held in June 2018 based on standards established for nominating director candidates. In addition,
reports and deliberations were conducted at meetings of the Nominating Committee with regard to the nomination of
corporate executive officers prior to the resolution by the Board of Directors.

Total Remuneration Paid to Directors, Corporate Executive Officers, and Statutory Auditors in Fiscal 2018

Number of meetings

5

Category

Internal directors

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

Major activities

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

Number of meetings

15

Remuneration Committee
Duties

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

Major activities

The Remuneration Committee determined the amounts of monetary and stock compensation to be issued to each director andcorporate executive officer based on the policy related to such compensation. Also, the Remuneration Committee revised thepolicy and deliberated on the introduction of a new long-term performance-based incentive plan (the “Phantom Stock Plan”).
Please see the next page.

Number of meetings

6

Evaluation of the Effectiveness of the Board of Directors
The Company regularly conducts self-evaluations of each director with regard to operation of the Board of Directors and thecontent of deliberation. The results of these evaluations shall be reported to the Board of Directors, and the Board of Directors
analyzes and evaluates its effectiveness based on these self-evaluations and other information.
The process and results of evaluation of the effectiveness of the Board of Directors conducted in fiscal 2018 are as follows.

1. Process of Evaluation

2. Results of Evaluation and Future Initiatives(1) Method of evaluation
All Directors conducted self-evaluations in the form of a
response to a questionnaire relating to the composition,
operation, effectiveness, etc., of the Board of Directors andeach of the Nominating, Audit, and Remuneration
Committees, and taking these results into consideration, they
discussed the issues with each other and examined proposedcorrective measures at Board of Directors meetings.
(2) Items of evaluation(1) Main items improved since the previous evaluation
As a result of examination and discussion at Board of
Directors meetings, one point was identified.
• With regard to dialogue with shareholders and investors, asa result of increasing the number of opportunities to deliver
reports at meetings of the Board of Directors, prompt
sharing of information and improved discussions at meetings of the Board of Directors were achieved.
(2) Main issues and future initiatives aimed at further
improvements in effectivenessAs a result of examination and discussion at the Board of
Directors meetings, two points were identified.
• In addition to enhancing the examination and discussion of
the management plan by increasing the number of opportunities to perform these activities, and allowing more time forthem, initiatives are to be taken to examine the process bywhich the management plan is formulated, and to carry out
a detailed review of the themes that should be discussed by
the Board of Directors.
• With the aim of enhancing discussion on important matters,
meetings of the Board of Directors will continue to consider
the frequency at which items related to the status of theperformance of duties by Corporate Executive Officers arereported, and the content thereof.

Composition of theBoard of Directors

Proportion of Outside Directors, number ofmembers, diversity

Operation of theBoard of Directors

Frequency, required time, selection of agenda
items, content of handout materials, materials
other than handouts provided, questions andanswers, training, etc.

Effectiveness of theBoard of Directors

Management plan, delegation of authority to
Corporate Executive Officers, risk management
systems, dialogue with shareholders and investors,
election and dismissal of key management
personnel, successor training plan, remuneration
paid to Officers, composition, operation, cooperationof each of the Nominating, Audit, and Remuneration
Committees, etc.

Others58

Method of the evaluation of the effectiveness of
the Board of Directors, etc.

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

Corporate executive officers
Outside directors

Total remuneration(Millions of yen)

Monetary remuneration(Millions of yen)

Stock compensation(Millions of yen)

Recipients

299

281

18

4

1,019

767

252

12

107

107

—

7

Note: The above amounts include remuneration payments made to the one director who retired from his position as of the end of the 118th Ordinary General Meeting of
Shareholders held on June 29, 2017.

Board Policies and Procedures in Determining the Remuneration of Senior Management and Directors(i) Procedures for Deciding Remuneration Paid to Officers
The policy concerning decisions on the details of remuneration paid to Directors and Corporate Executive Officers of the Company and the details of remuneration for each person
shall be decided upon by a resolution at the Remuneration Committee which is comprised solely of Outside Directors.
(ii) The Basic Policy for Deciding Remuneration for Officers
The basic policy for deciding remuneration for Directors and Corporate Executive Officers of the Company is as follows.
• The remuneration system shall be the one that is linked with our medium- to long-term performance targets, etc. aimed at in the management strategy and the Medium-Term
Management Plan and realizes sustained corporate value improvement and sharing of values with our shareholders.
• The remuneration system shall be the one that allows for giving incentives to management executives’ taking up of challenges and appropriate risk taking in line with the strategy
targets and expectations of shareholders and other stakeholders.
• The remuneration system shall be the one that makes it possible to fulfill the high accountability for the benefit of our shareholders and other stakeholders through objective
deliberations and judgments at the Remuneration Committee.
(iii) Remuneration systems for Officers
The remuneration systems for Directors and Corporate Executive Officers shall be separately established in consideration of respective functions and roles to be fulfilled for the
purpose of achieving the sustained corporate value improvement. In addition, Directors who concurrently serve as Corporate Executive Officers shall be paid remuneration as
Corporate Executive Officers.
• Directors (excluding Directors who concurrently serve as Corporate Executive Officers)
In consideration of their function and role of supervising performance of duties by Corporate Executive Officers and Directors, they shall receive, in principle, only basic remuneration in the form of money, and the standards shall be decided upon individually taking into account factors such as position and responsibilities as Directors and whether they are
full-time or part-time.
• Corporate Executive Officers
In consideration of their function and role of taking charge of business execution of the Company, their remuneration shall, in principle, be comprised of basic remuneration andvariable remuneration. Variable remuneration is comprised of monetary compensation that is paid based on short-term performance, etc. and stock compensation, etc. (including
monetary compensation paid based on indicators such as stock price) that is paid with a view to realizing the medium- to long-term sharing of values with shareholders. The
standards and ratio of basic remuneration and variable remuneration, valuation indicators for variable remuneration and other matters shall be decided upon taking into accountmedium- to long-term performance targets, etc., aimed at in the management strategy and the Medium-Term Management Plan and factors such as position and responsibilities
as Corporate Executive Officers.

Implementation of a New Long-Term Performance-Based Incentive Plan (the Phantom Stock Plan)At the Compensation Committee meeting held in April 2018, Mitsubishi Estate decided to implement a new long-term performance-based
incentive plan (the “Phantom Stock Plan”) in addition to the Restricted Stock Compensation System implemented in the fiscal 2017
OverviewA) Phantom Stock Eligibility
The Representative Corporate Executive Officers, Corporate Executive Officers and Group Executive Officers
B) Business Year and Performance Evaluation PeriodBusiness Year: April 1st through March 31st of the following year
Performance Evaluation Period: The last three years
C) Payout Calculation
The payout amount will be determined by multiplying each Executive Officer’s Base amount with the following (i) and (ii):(i) Percentage of net fluctuation in common stock price over the performance evaluation period(ii) Percentage based on the relative ranking, during the performance evaluation period, of the Company’s total shareholder return
among 5 (five) peer companies in the same industry (between 0%–100%)* The five competitors above are Nomura Real Estate Holdings, Inc., Tokyu Fudosan Holdings Corporation, Mitsui Fudosan Co., Ltd.,Tokyo Tatemono Co., Ltd., and Sumitomo Realty & Development Co., Ltd.
D) Dividends, etc.
	The Company will not pay dividends or dividend equivalents for Phantom Stock grantees, even if the Company distributes dividends
on common stockE) Other information
Detailed information of Phantom Stock Plan will be disclosed in the Company’s securities report or integrated report.

MITSUBISHI ESTATE CO., LTD. Integrated Report 201859

CORPORATE GOVERNANCE

An Outside Director Discusses Mitsubishi Estate’s Governance

Shin Nagase
Outside Director

Regarding the need to “further increase opportunities
and time for discussions on the formulation of management
plans,” which was cited as another issue, I believe we havebeen making progress in scrutinizing other agenda items andgiving more time for discussions now than in the past.
However, the “Results of Evaluation and Future Initiatives” forfiscal 2018 identified further room for improvement. I think weneed to review themes that need to be discussed by the
Board of Directors and also examine processes including
debate on the Company’s vision from a long-term perspective.
I see certain efforts toward making specific improvements,
which stem from this clarification of direction through evaluations of the effectiveness of the Board of Directors, as evidence
that the PDCA (plan-do-check-act) cycle for strengthening
governance is functioning as it should.

prevent the occurrence of natural disasters such as large-scale
earthquakes. Against this backdrop, we need to take the time
to discuss how to develop the Group's business, including
approaches to asset allocation, and further heighten
sensitivity toward risk management. I myself can bring to bear
my experience at an airline company when I talk about the
responsibility of the management team for managing risks at
all the different work environments. I intend to be actively
engaged in creating a system necessary for taking prompt
action on the basis of understanding what the Group needs
to prioritize in times of emergency.

Business Model Innovation: Belief and Conviction

Management of the Board of Directors Leveraging
Diversity and Expertise
The Board of Directors plays a pivotal role in corporate
governance. What composition a board takes depends onthe characteristics of a company and on changes in thebusiness environment in which it operates. At the moment,
the Company’s Board of Directors consists of a total of 15
people, comprising eight internal directors (including thenon-executive chairman of the Board) and seven outside
directors. The outside directors all bring their own experiences and knowledge in specialized fields to the governancetable. I think it is fair to say the Board is well balanced and isfunctioning smoothly. The diversity of the backgrounds of theseven outside directors is a great advantage in overseeing
business execution. Broadly speaking, some directors areoriented toward governance along the lines of Westernways of thinking, while others hold a position that can beconsidered as an extension of Japanese management
approaches. I believe this diversity of viewpoints and areasof expertise enables the Group to hold unbiased discussions on the stance we should take from multiple
perspectives.
At the meetings of the Board of Directors since I became
an outside director, outside directors have actively been
spoken out. Some proposals to which they objected wereamended and others were entirely dropped. To further
improve the effectiveness of the Board of Directors, I believe

60

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

we must have internal directors, who possess a detailed
understanding of the business environment and of the operations of the Mitsubishi Estate Group, and outside directors,
with their wide-ranging knowledge, hold in-depth discussions
between themselves about the direction the Group shouldtake. I also recognize my responsibilities in this regard.

Actions for Specific Improvements Drawn from
Effectiveness Evaluations
In fiscal 2017, all members of the Board of Directors participated in the Company’s first evaluation of the effectiveness of
the Board. One of the findings of this process was that there
was a need to increase the opportunities for reporting at
Board of Directors meetings and to enhance the contents ofsuch reports to further expand opportunities for discussing
and sharing information to promote dialogues with shareholders and investors. In response, we have increased opportunities
for reporting from the perspectives of both investor relations(IR) and shareholder relations (SR). The volume of informationin the form of opinions and requests with regard to the Group
has also greatly increased as we seek to ensure prompt
reporting after meetings with shareholders and investors.
I think we need to focus more on how to best use this information in our management processes.

Audit Committee: Activities Emphasizing
Information from the Front Lines
The Audit Committee, of which I am a member, is responsible
for conducting audits on the execution of duties by directors
and corporate executive officers. To enhance its effectiveness,the presence of internal directors as committee members is in
my view essential. Internal directors with appropriate backgrounds and personalities for auditing work are appointed as
full-time members of the Audit Committee and work together
with the Internal Audit Office and outside director members inorder to gather information. This includes visit-based audits. It
is important for the Audit Committee to be familiar with thesituation on the front lines and to take whatever action may
be needed. Under its current structure, the Audit Committee
is led by a chairman who is a full-time committee member andhas spent his career within the Company. A majority of its
members are outside directors who participate in discussions
with their objective perspectives. I think this structure works
well in terms of sound governance and effective oversight.

It is easy enough to talk about “business model innovation”
as set out in our Medium-Term Management Plan. However,actually building the pillars of the Group's growth by tacklingnew initiatives requires a huge effort. The management teammust have the conviction to concentrate on investing inmanagement capital–especially human resources–from along-term perspective. Otherwise, business model innovation
will not penetrate through to the employees on the ground.
Take the example from the Airport Operation Business, anarea on which the Group is focusing. The management of
airports has a large impact on regional communities andeconomies as they are essential social infrastructure with ahigh public profile. Considering the significance of the
Airport Operation Business, the management team mustshow its resolve to build the business into a pillar of future
growth by demonstrating the power of the Group by gaining
the understanding of all stakeholders, including shareholders
and investors.
Helping raise the Group’s presence as an outside director
is rewarding and worth doing for myself. I intend to make fulluse of my knowledge and experience to support this effort
and seek to play a part in achieving medium-and-long-termsustainable growth and enhancing corporate value.

Proactive Approach to Risk Management
Although the Mitsubishi Estate Group has prime assets, themajority of which are located in Tokyo’s Marunouchi area, theexternal environment is constantly changing and no one can

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

61

RISK MANAGEMENTCORPORATE GOVERNANCE

As of June 28, 2018

Corporate Executive Officers, Executive Officers,
and Group Executive Officers

Junichi Yoshida

Junichi Tanisawa

Kenichi Iwata

Atsuo Kyono

Representative Corporate
Executive Officer
President & Chief Executive Officer

Representative Corporate
Executive Officer
Deputy President

Executive Vice President

Representative Corporate
Executive Officer
Executive Vice President

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

Risk Management & Compliance System As of August 2018

Board of Directors

Corporate Officer in Charge of Risk Management & ComplianceAppointment

Decision of Basic Policy
Supervision

Reporting= Responsible for overseeing risk management= Responsible for overseeing compliance
Overall management

Risk Management & Compliance Committee

Reporting

Risk Management & Compliance-Related Deliberation and Decision-Making Bodies

Vice-Chairman

Chairman

Mitsubishi
EstateHiroshi Katayama

Futoshi Chiba

Representative Corporate
Executive Officer
Executive Vice President

Senior Executive Officer

Senior Executive Officer

Senior Executive Officer

Risk Management
Promotion Officers(Line and Staff Departments,
Other)

Compliance Promotion
Officers(General Managers)

Committee Members

Mitsubishi Estate Directors, Representatives from Main Group Companies
Mitsubishi Estate

ReportRisk Management
Promotion Personnel

Compliance Promotion
Personnel

Advisors

Chairman of the Board
Full-Time Members of the Audit Committee
General Manager of Internal Audit Office

Assistance

Tetsuo Yuasa

Mitsubishi Estate
Corporate Officer in Charge of
Risk Management & Compliance

Mitsubishi Estate

Command

Tetsuji Arimori

President &Chief Executive
Officer

Directions
througheach duty

Outside Experts

Group Company

Risk Management
OfficerCompliance Officer

Risk Management & Compliance Subcommittee

Noboru Nishigai

Hisashi Komada

Kenji Hosokane

Keiji Takano

Senior Executive Officer

Senior Executive Officer

Senior Executive Officer

Senior Executive Officer

Risk Management & Compliance-Related Deliberation and Reporting Bodies

Corporate Officer in Charge of
Risk Management & Compliance

General Managers of Line and Staff
Departments for Business Groups

General Managers ofCorporate Group

People Designated by Presidents ofMain Group Companies

Consultation

Executive
Committee

AdviceRisk Management Promotion Secretariat / Compliance Promotion
Secretariat (Mitsubishi Estate Legal & Compliance Department)

Executive Officers

Ikuo Ono
Masaki Yamagishi
Toru Kimura

General Manager of Internal Audit Office
General Manager of Mitsubishi Estate
Audit Committee OfficeGroup Executive Officers

Atsushi Nakajima

Yuji Fujioka

Naoto Aiba

Senior Executive Officer

Senior Executive Officer

Group Executive Officer

Soichiro Hayashi

Hidemi Waki

Yutaka TajimaGroup Executive Officer

Group Executive Officer

Group Executive Officer

62

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

Naoto Aiba
Soichiro Hayashi
Hidemi Waki
Yutaka Tajima
Akinori Nakajo
Akihiko Watanabe
Bunroku Naganuma
Masaharu Miyajima
Tetsuya Okusa
Yutaro Yotsuzuka
Nobuhiro Okumoto
Naoki Umeda
Ryozo Kawabata

Risk Management Activities 
1

2

Risk management activities of each individual

Identification and monitoring of key risks that needbusiness group and Group company

particular attention from the Group

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

To accurately grasp the risks facing the Group as a whole,and by selecting and mapping key risks that requiremeasures to be taken, the risks that must be addressed
and their level of priority are brought to light. Whilemonitoring risks throughout the year, particularly key risks,
support is provided as necessary.

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

63

RISK MANAGEMENT

MediumRisks that are appropriately
dealt with by continuing
existing measures

Status of Control

Risks that necessitate theimprovement of existingmeasures or introductionof new measures

Large

Risk impact

Candidates for risks needing
countermeasures in the future

Key risks requiring countermeasuresduring fiscal year

Ongoing risks requiring countermeasures(currently having impact)

Ongoing risks requiring countermeasures(large impact)

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

Risks of Information
Security

In light of society’s growing concerns over the protection of personal information and information management, the Mitsubishi Estate Group comprehensively revised the Mitsubishi EstateGroup’s rules related to information management in 2018. While updating our information
management systems to ensure scrupulous management, we are also working to reinforce thesecurity of our information systems. We are aiming to further improve information management
through continuous monitoring and supervision.
In response to the enactment of the revised Act on the Protection of Personal Information,
the Mitsubishi Estate Group has, in order to ensure the appropriate handling of personal
information, revised relevant regulations such as the Mitsubishi Estate Group’s Policy on
Personal Information Protection and rules on the treatment of personal information and beenmonitoring compliance with regard to the revised regulations by Group companies.

Risks of Corruption

In 2013, the Group published the Mitsubishi Estate Group Basic Regulations on the Preventionof Corruption and established a system to prevent corruption across the organization. In 2016,
the Group established the Rules on Corruption Risk Assessment and Corruption Due Diligence,
which requires that the risk of corruption be assessed for each contract and mandates due
diligence in the case of counterparties with which transactions are deemed high risk. In 2018,
we established and announced the Mitsubishi Estate Group Anti-Corruption Guidelines. In
addition, we are seeking to gain a greater understanding of rules related to the prevention ofcorruption among staff through training programs and are also constantly monitoring this position.

Risks of Natural and
Man-Made Disasters, etc.

The occurrence of such natural disasters as earthquakes, floods, or climate change or man-madedisasters including accidents or fires may impact the performance, financial position, or otheraspect of the Group’s business. The Group is redeveloping its properties to install advanced
disaster-management functions and has established disaster-response measures through area
management.

Risks of Fluctuations in
Exchange Rates

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

Risks of Fluctuations in
the Real Estate Market

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

Risks of Increases inInterest Rates

The Group acquires funding for its operations by borrowing from financial institutions or issuing
corporate bonds. The Bank of Japan (BOJ) has implemented a policy of quantitative andqualitative 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 the BOJ’s policy
or a deterioration in the demand-supply balance for Japanese government bonds (JGBs) causedby growth in the issuance of JGBs, it may negatively affect the performance, financial position, orother aspect of the Group’s business.
The Group hedges interest rate risk on a certain portion of its variable interest rate financing
through interest rate swaps to convert its interest rate payments into fixed payments. In the future,
the Group plans to manage its interest rate risk by procuring funds based on a consideration of its
fixed and variable interest rate borrowings and its outstanding corporate bond balances.

Risk Management Related to Investment Projects
Among the various risks recognized by the Group, risks
related to investment projects are based on the assessment ofbusiness viability by Companywide research functions andunder investment decision rules of the Strategic Investment
Office. Prior to the deliberation of important investment
projects by the Executive Committee, which is chaired by thepresident and CEO and is responsible for strategic planningfor the entire Group and monitors the progress of eachbusiness toward realizing this strategy, the Strategic
Investment Committee deliberates and evaluates profitability,
the nature of risks and related countermeasures, and othermatters. At each phase, risk assessments are also conductedfrom legal and financial aspects in order to grasp an overall
picture of the risks.

Strategic Investment Committee 
In its deliberations, in addition to assessing the economic
viability of the project using multiple indicators, the Strategic
Investment Committee verifies the appropriateness ofvarious aspect of premises, such as rents, unit selling prices,and construction costs. For risks, in particular, simulations of
upside and downside scenarios are incorporated into

investment decision rules. The difference between the
scenario set by the responsible business group in charge ofthe project and the downside scenario is recognized as risk.
The Strategic Investment Committee holds discussions on
the acceptable limits of that risk.

Risk Evaluation Process for Individual Projects
Scenarios anticipated by business units

Business Groups	Verification of individual
investment projects• Verification of consistency
with strategies of eachbusiness group• Economic viability
verification
	Preparation of the responsible
business group’s anticipatedscenarios with importantinvestment projects andsubmission thereof to theStrategic Investment
Committee

Strategic Investment Committee
Presenting scenarios anticipated bybusiness units with major projects

Role
Discussion on and verification of theappropriateness of important investment projects
 erification of the responsible
Vbusiness group’s anticipated scenarios• Verification of consistency with
Companywide strategies• Verification of consistency withbusiness group strategies• Verification of economic viability• Verification of appropriateness ofassumptions (such as rents andconstruction costs)• Preparation of upside/downside
scenarios, quantifying risk

Strategic Investment Office• Companywide researchfunctions• Preparation and use ofinvestment decision rules

Sharing visualized risks and points at issue for business viability

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

Role
Investment decisions regarding
important projects
 erification of importantV
investment projects• Verification of compatibility
with Companywide strategies• Verification of compatibility
with business group
strategies• Verification of economic
viability here necessary, the Strategic
W
Investment Office prepares separate
scenarios and submits them to the
Executive Committee
Jurisdiction

64

Executive Committee

Strategic Investment Office scenarios

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

65

FINANCIAL SECTION

Eleven-Year Summary of Selected Financial Data (Consolidated)
Financial Results (Millions of yen)
Revenue from operations
Operating income
Ordinary income
Profit attributable to owners of parent

3/20083/20093/20103/20113/20123/20133/20143/20153/20163/20173/2018¥  787,652
177,983
162,061
86,963¥  942,626
138,567
108,624
45,423¥1,013,415
148,972
117,381
11,900¥  988,447
158,258
130,830
64,219¥1,013,069
146,299
120,665
56,512¥  927,157
118,349
92,38145,507¥1,075,285
161,271
139,638
64,297¥1,110,259
156,332
133,11373,338¥1,009,408
166,199
144,851
83,426¥1,125,405
192,495
169,851
102,681¥1,194,049
213,047
190,506
120,443

4,327,137
1,238,889
1,645,407
270,798
56,867

4,429,070
1,148,494
1,834,195
201,088
60,364

4,355,065
1,183,156
1,762,111
114,085
73,926

4,245,209
1,202,270
1,639,050
76,332
70,6284,387,015
1,256,791
1,716,890
282,171
67,465

4,711,521
1,239,547
2,085,417
208,135
73,364

4,765,368
1,329,057
1,973,042
159,677
74,805

4,901,526
1,495,838
1,929,355
177,331
72,696

5,311,840
1,509,680
2,291,038
275,316
74,2455,484,115
1,592,777
2,396,994
275,372
75,974

5,803,689
1,698,348
2,481,675
289,570
77,545

135,821309,237
412,392

168,527(327,292)(4,921)
243,341

293,338(286,841)
37,203286,859

Financial Position (Millions of yen)
Total assets
1

Total equity*

Interest-bearing debt
Capital expenditures
Depreciation and amortization
Cash Flows (Millions of yen)
Cash flows from operating activities(16,248)

45,824

212,668

Cash flows from investing activities(212,207)(214,500)(112,639)

Cash flows from financing activities

238,942
219,712141,055
184,552(106,852)

177,825

259,263(67,223)(140,269)
229,062¥62.9916.00¥32.9016.00¥ 8.5812.00¥245,911
4.6%
8.5
7.1%
25.4%

¥209,522
3.2%
4.7
3.8%
48.6%

¥2,4201,382,518¥1,102
1,382,518

Cash and cash equivalents at end of year

203,243

122,286

336,489(272,009)(217,992)(133,537)

57,189215,771

27,150191,837(177,514)

224,739200,078(46,568)(189,109)
198,489¥46.27
12.00¥40.7212.00¥32.7912.00¥46.3412.00¥52.8514.00¥60.1316.00¥74.0020.00¥86.7826.00¥230,730
3.4%
5.2
1.0%
139.9%¥237,109
3.7%
6.6
5.4%
25.9%

¥222,885
3.4%
6.5
4.6%
29.5%

¥200,587
2.6%
5.0
3.6%
36.6%

¥246,332
3.4%
7.5
5.0%
25.9%

¥239,934
3.2%
7.7
5.2%
26.5%

¥252,034
3.3%
8.5
5.6%
26.6%

¥279,718
3.6%
8.7
6.6%
27.0%

¥302,424
3.8%
9.5
7.3%
30.0%

¥1,5301,390,397¥1,4071,390,397¥1,476
1,390,397¥2,596
1,390,397¥2,446
1,390,397¥2,7871,390,397¥2,090.5
1,390,397¥2,0301,390,685¥1,798.5
1,390,908(231,003)

Per Share Amounts (Yen)
Earnings
Cash dividends
Principal Financial Indicators
EBITDA*2 (Millions of yen)
ROA*3
Interest coverage ratio*4 (Times)
ROE
Payout ratio
Stock Information
Stock price*5 (Yen)
Number of shares issued and outstanding (Thousands of shares)
Mitsubishi Estate’s Stock
Price Changes on theTokyo Stock Exchange

5,000

Yen
4,000

3,000

2,000

1,000

0
3/20073/20083/20093/20103/20113/20123/20133/20143/20153/20163/20173/2018Notes:*1 Total equity is calculated by deducting non-controlling interests and stock acquisition rights from total net assets.
*2 EBITDA is calculated as the sum total of operating income, interest and dividend income, equity in earnings of unconsolidated subsidiaries andaffiliates, depreciation and amortization, and goodwill.
*3 ROA (Operating income / Total assets) is calculated based on the average total assets from the beginning to the end of the period.
*4 The interest coverage ratio (ICR) is calculated by dividing the sum total of operating income, interest and dividend income, and equity in earnings of unconsolidated subsidiaries
and affiliates by the sum total of interest expenses and commercial paper interest.
*5 As of March 31

66

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

67

FINANCIAL SECTION

Japan’s Real Estate Market

Financial Review

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

Revenue from Operations / Operating Income Million m2
2.0

In 2017, the new supply of large-scale office buildings in Tokyo’s
23 wards by floor area decreased 28.9% year on year, to690,000 m2. Supply is expected to expand again in 2018, but
demand is also projected to hold firm as companies look to
expand office space and gather together functions handled bydecentralized offices against a backdrop of strong corporate
earnings. Supply volume is expected to be at a high level in 2020,
but to be low in 2021 and 2022. The average for the next five
years (2018 to 2022) is expected to be at a similar level to thepast record high.

1.5

1.0

0.5

0
2013

2014

2015

2016

2017

2018

2019

2020
2021
(Estimate)* Buildings with a standard floor area of 10,000 m2 and above

2022

CY

Source: Mori Building Co., Ltd.

Office Building Market (Average Rents / Vacancy Rates in Five Central
Tokyo Metropolitan Wards)
Yen / tsubo-month%

25,00010

20,0008

15,000

6

10,000

4

5,000

2

In the office building market, growth in demand for offices led tovacancy rates in the five central Tokyo metropolitan wards(Minato-ku, Chiyoda-ku, Chuo-ku, Shinjuku-ku, and Shibuya-ku)
declining to 2.80% as of March 2018, falling below 3% for the firsttime in 10 years. Average rents have also followed a steadyupward trend as demand ran ahead of supply amid a growing
sense of a shortage of vacancies.

0

0
3/09

3/10

3/11

Average rent (left scale)

3/12

3/13

3/14

3/15

3/16

Vacancy rate (right scale)

3/17

3/18

M/Y

Source: Miki Shoji Co., Ltd.

Supply of New Condominiums in the Tokyo Metropolitan Area / Average
Condominium Prices
Units

Millions of yen

80,00080

60,00060

40,00040

20,00020

In the housing market, the supply of condominiums in the Tokyo
metropolitan area rose 0.4% year on year, to 35,898 units.
Meanwhile, the average price of condominiums in the Tokyo
metropolitan area increased 7.6% year on year, to ¥59.08 million,
as a result of growth in the supply of high-priced properties.

0

0
2008

2009

2010

2011

2012

2013

2014

2015

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

2016

2017

CY

Source: R eal Estate Economic
Institute Co., Ltd.

Expected Cap Rate by Type of Property in the Tokyo Area
7.0
Economy Hotel for Lodging in Tokyo
6.0
Multiple-Tenant-Type
Warehouse Property in Tokyo(Koto District)

Residential Property for Standard
Studio in Southern Tokyo

4.0

3.0

Revenue from Operations

Operating Income / Operating
Income Ratio

Trillions of yen

Billions of yen

1.2

%

5.0

In fiscal 2018, the fiscal year ended March 31, 2018, consolidated
revenue from operations amounted to ¥1,194,049 million, an
increase of ¥68,644 million, or 6.1%, year on year. Consolidated
operating income increased ¥20,551 million, or 10.7%, from theprevious fiscal year, to ¥213,047 million. The results for eachbusiness segment are as follows.
In the Office Building Business segment, revenue fromoperations and operating income both increased on the contributions from higher rental revenue and income from both newly
completed buildings and existing buildings as well as higher
revenue from property sales. As of March 31, 2018, the nationwide
vacancy rate (all purposes) stood at 1.87%–below the 2.93%
recorded at the end of the previous fiscal year and lower than our
initial forecast of 2.5%–supported by good progress in leasing
newly completed buildings in the Marunouchi area and existingbuildings in the Marunouchi and other areas. As a result, revenue
from operations in this segment rose ¥21,923 million year on year,
to ¥506,161 million, and operating income increased ¥13,672
million, to ¥147,243 million.
In the Lifestyle Property Business segment, revenue fromoperations increased ¥16,862 million year on year, to ¥105,817
million, and operating income rose ¥5,377 million, to ¥31,184
million, thanks to the booking of revenue and income on the saleof Company-owned properties and a good performance in theoutlet shopping center business.
In the Residential Business segment, revenue and income
both rose supported by a rise in the gross margin and growth in
the number of condominium units sold accompanying sales ofunits in a large, high-rise condominium project. Due to thesedevelopments, segment revenue from operations increased¥2,747 million year on year, to ¥410,598 million, and operating
income increased ¥4,607 million, to ¥23,860 million.
In the International Business segment, revenue from operations
increased as a result of the sale of Company-owned properties.
Conversely, operating income declined owing to a fall in

rental revenue and a reaction to non-recurring income booked in
the previous fiscal year. Accordingly, segment revenue fromoperations increased ¥20,368 million year on year, to ¥86,925
million, but operating income declined ¥2,166 million, to¥24,147 million.
In the Investment Management Business segment, revenuerose owing partly to increased acquisition fees. As a result,revenue from operations in this segment rose ¥1,342 million year
on year, to ¥22,665 million, and operating income increased¥75 million, to ¥4,596 million.
In the Architectural Design & Engineering Business segment,
revenue from Mitsubishi Jisho Sekkei Inc.’s architectural designand engineering services rose supported by the booking ofrevenues for services related to the Marunouchi Nijubashi
Building (Chiyoda-ku, Tokyo) as well as by increases in both theaverage amount received per project for architectural design andengineering services and the amount of revenue per project frominterior design and construction work. Consequently, segment
revenue from operations increased ¥2,303 million year on year, to¥21,613 million, and operating income rose ¥1,278 million, to¥1,724 million.
In the Hotel Business segment, we made progress in strengthening the management structure of each individual hotel under
the Royal Park Hotels brand managed by Royal Park Hotels andResorts, which oversees business activities in the segment, and in
adding new hotels with a primary focus on accommodation. In
fiscal 2018, segment revenue from operations was essentiallyunchanged from the previous fiscal year, at ¥33,138 million, while
operating income declined ¥1,165 million, to ¥766 million.
In the Real Estate Services Business segment, the number ofbrokerage transactions declined but average commissions pertransaction rose. As a result, segment revenue from operations
increased ¥1,341 million year on year, to ¥25,584 million, while
operating income fell ¥639 million, to ¥1,518 million.
In the Other segment, revenue from operations increased¥4,303 million year on year, to ¥8,541 million, while operating
income rose ¥759 million, to ¥1,048 million.

A-Grade Office Building* in the Marunouchi
and Otemachi areas

1.0

The expected yield (cap rate) for major classes of real estate,including residential condominiums, logistics facilities, andhotels, remained on a gradual downtrend, with the cap rate for
A-grade buildings in the Marunouchi area standing at 3.5% as ofApril 2018. This reflected expectations of a continuation ofmonetary easing by the Bank of Japan, of long-term interest
rates remaining at low levels, and of rising rents particularly with
office buildings.

2009

2010

2011

2012

2013

2014

2015

2016

2017
2018
As of April 1 each year

* Covers properties within five minutes’ walk from the nearest station andwith floor areas of at least 50,000 m2

25

200

20

150

15

100

10

Profit Attributable to Ownersof Parent / ROE

Billions of yen

Billions of yen

400

0.6

%

150

15

100

10

50

5

300

0.8
200

0.4
50

0.2
0

5

0
2014 2015 2016 2017 2018

0

%

250

Operating Income / EBITDA

02014 2015 2016 2017 2018

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

100

0

0
2014 2015 2016 2017 2018

Operating income

EBITDA02014 2015 2016 2017 2018

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

Source: Japan Real Estate Institute68

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69

FINANCIAL SECTION

Millions of yen

FY2018FY2017

YoY Change

Revenue from Operations

1,194,049

1,125,405

68,644

Office Building Business

506,161484,238

21,923

Lifestyle Property Business

105,81788,955

16,862

Residential Business

410,598

407,850

2,747

International Business

86,92566,556

20,368Investment Management
Business

22,66521,323

1,342

Architectural Design &Engineering Business

21,613

19,3092,303

Hotel Business

33,13833,512(373)

Real Estate Services Business

25,58424,243

1,341

Other

8,541

4,237

4,303

Eliminations(26,996)(24,820)(2,175)

Operating Income

213,047

192,495

20,551

Office Building Business

147,243

133,570

13,672

Lifestyle Property Business

31,18425,807

5,377

Residential Business

23,86019,253

4,607International Business

24,14726,313(2,166)

Investment Management
Business

4,596

4,520

75

Architectural Design &Engineering Business

1,724

445

1,278

766

1,932

(1,165)

Real Estate Services Business

1,518

2,157

(639)

Other

1,048

289

759

(23,043)(21,793)(1,249)Hotel BusinessEliminations or Corporate

Other Income (Expenses) Analysis of Financial Position 

Non-operating revenue increased ¥1,066 million year on year, to¥10,447 million. Other expenses rose ¥964 million, to ¥32,988
million, owing to increased loss on disposal of fixed assets andhigher interest expenses.
Total extraordinary income declined ¥1,765 million year on
year, to ¥14,719 million, despite the gain on sales of fixed assets
and the gain on exchange from business combination.
Extraordinary loss declined ¥9,686 million year on year, to¥13,768 million, despite the increased loss on disposal of fixed
assets, owing to the reduced impairment loss and the disappearanceof the previous fiscal year’s loss on step acquisitions generated by
the conversion of companies into consolidated subsidiaries.

(1) Consolidated Cash Flows
On a consolidated basis, cash and cash equivalents at the end of
the fiscal year amounted to ¥286,859 million, an increase of¥43,517 million compared with the previous fiscal year-end. That
was the result of an increase in income before income taxes andminority interests, a decrease in inventories, proceeds fromlong-term borrowings, purchases of property and equipment, andthe repayment of long-term borrowings.

Profit Attributable to Owners of Parent 
Income before income taxes and minority interests increased¥28,576 million year on year, to ¥191,457 million. Corporate tax,etc., increased ¥7,634 million, to ¥53,707 million. As a result, profit
attributable to owners of parent increased ¥17,762 million, or
17.3%, year on year, to ¥120,443 million. Earnings per shareamounted to ¥86.78.

down ¥40,451 million from the previous fiscal year. The net cash
was used primarily for purchases of property and equipment.
(Cash Flows from Financing Activities)
Net cash provided by financing activities was ¥37,203 million,
compared with net cash used in financing activities of¥4,921 million in the previous fiscal year. This result can be
attributed mainly to long-term borrowings and the issuanceof corporate bonds.
(2) Consolidated Balance Sheets
Total assets stood at ¥5,803,689 million on March 31, 2018, up¥319,573 million from a year earlier, principally as a result of theoperating, investing, and financing activities previously identified
and related changes in assets and liabilities.
Total liabilities increased ¥207,946 million, to ¥3,924,601
million. The balance of interest-bearing debt as of March 31,
2018, stood at ¥2,481,675 million, an increase of ¥84,681 million
compared with the year-end balance in fiscal 2017. Deducting
cash and cash equivalents, the balance of net interest-bearing
debt as of March 31, 2018, was ¥2,194,815 million, an increaseof ¥41,163 million year on year.

(Cash Flows from Operating Activities)
Net cash provided by operating activities was ¥293,338 million, up¥124,810 million year on year. Income before income taxes andminority interests amounted to ¥191,457 million, while depreciation and amortization—a non-cash item—totaled ¥77,545 million.
These and other cash inflows were adjusted to reflect a decline ininventories, increase in equity investments, corporate tax payable,
and other items.
(Cash Flows from Investing Activities)
Net cash used in investing activities totaled ¥286,841 million,
Comparison of Fiscal 2018 and Fiscal 2017 Consolidated Cash Flows
Millions of yen
86,614 (53,837)
77,545
191,457

7,263

Proceeds from sales of property
and equipment and beneficial interests
in trust of property and equipment

30,540 (46,244)

Increase in Other
equityIncrease ininvestments
inventories

5,277

13,694
256,429

Incometaxes, etc.

Depreciation
and amortization
Adjustment
for extraordinary
income or loss

Effect of exchange rate on
cash and cash equivalents

Proceeds fromsales of investment
securities(16,242)

243,341

Comparison of Fiscal 2018 and Fiscal 2017 Revenue from Operations
Millions of yen
1,194,049
1,125,405
OfficeBuilding
Business

21,923

Lifestyle
Property
Business

Residential
Business

International
Business

2,747

20,368Investment
Management
Business

1,342

16,862(289,570)

Income before
income taxes andminority interests

Architectural
Design &Engineering
Business

Hotel
Business(373)

Real Estate
Services
Business

Other

4,303

FY2017Purchases ofproperty andequipment

Net cash used ininvesting activities(286,841)

Net cash provided byoperating activities
293,338

Eliminations(2,175)

Other

Newly (243,230)
acquired Repayment Cashfunds
dividends

FY2017FY2018

Total Assets / ROA (Operating
Income/Total Assets)

Billions of yen

Trillions of yen

%

6.0

6

5.0

5

4.0

4

3.0

3

2.0

2

1.0

1

100
0

Comparison of Fiscal 2018 and Fiscal 2017 Operating Income–100

Millions of yen

Lifestyle
Property
Business

192,495
OfficeBuilding
Business

Residential
Business

4,607(2,166)

5,377

75

1,278

(1,165)

213,047
Real Estate
Services
Business

(639)

Other

759

Eliminations
or Corporate

–300
–400

(1,249)2015

Cash flows from operating activities
Cash flows from financing activities

FY201800
2014

13,672FY2017FY2018

Balance of Interest-Bearing Debt

–200
Hotel
Business

Other

Net cash provided byfinancing activities
37,203200

Architectural
Design &Engineering
Business

68,040paid

Cash Flows300

Investment
Management
Business

(183)

1,341

2,303

400

International
Business

286,859(44,035)

2016

2017

2018

Cash flows from investing activities

2014 2015 2016 2017 2018

Total assets (left scale)ROA (Operating income /Total assets)(right scale)

Trillions of yennet
2.5

net hghbri

Times
10

2.0

8

1.5

6

1.0

4

0.5

2

0

0
2014 2015 2016 2017 2018

Net interest-bearing debt (left scale)Net interest-bearing debt (after hybrid
debt deductions)* (left scale)Net interest-bearing debt/EBITDA(right scale)Net interest-bearing debt/EBITDA(after hybrid debt deductions)*(right scale)* The subordinated bond and subordinatedloans subject to equity credit from a credit
rating agency (50% equity treatment) are
shown after deductions.
Years ended March 31

70

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71

FINANCIAL SECTION

Total net assets increased ¥111,627 million year on year, to¥1,879,088 million. The growth in net assets can be attributed toincreases in such items as retained earnings, unrealized holding
gain on securities, and retirement benefits and liability
adjustments.

Matters Related to Rental Properties 
Mitsubishi Estate and some of its consolidated subsidiaries own
office buildings and retail facilities in Tokyo and other major cities
in Japan as well as overseas, with the aim of obtaining rental
revenue from these buildings and facilities. Because certain
leased office buildings among these are used by the Company orsome 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 valuesof investment and rental properties and other real estate that
includes portions used as investment and rental properties.


Fiscal Year Ended
March 31, 2018
(April 1, 2017, to
March 31, 2018)

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

Rental Properties

Billions of yen

%

3,000

120

2,500
2,000

Subordinated loan

Subordinated bondCPLong-term ratio (right scale)100

Fixed ratio (right scale)80

Lease liability
60

1,500
1,000

Bank loan

40

500

2011

2012

2013

2014

2015

2016

2017

3,644,937

3,327,104

Increase during the period(164,790)

317,832

Balance as of the end of the period

3,480,147

3,644,937

Mitsubishi UFJ Financial Group, Inc.
Asahi Glass Co., Ltd.

Market value as of the end of the period

6,768,625

6,517,887

Unrealized gain

3,288,478

2,872,950

566.3

636.2

747.2

701.5

685.2

653.0

612.7

603.8

—

—

—

—

—

250

250

250

1,065.4

1,072.3

1,292.9

1,261.9

1,208.8

1,381.2

1,428.5

1,523.0

Subordinated loan

—

—

—

—

—

—

100

100

CP

—

—

35.0

—

28.0

—

—

—

Lease liability

7.2

8.3

10.2

9.5

7.2

6.8

5.6

4.7

Fixed ratio (right scale)

61.7

61.8

53.1

54.0

60.1

64.1

69.7

73.2

Long-term ratio (right scale)

95.0

95.0

93.7

96.1

93.4

95.1

96.4

93.6

Straight Bond
Subordinated bondBank Loan

Mitsubishi Heavy Industries, Ltd.

Balance as of the beginning of the period

182,876

Increase (decrease) during the period

296,913647

Balance as of the end of the period

480,436

183,523

Mitsubishi Logistics Corporation

Market value as of the end of the period

614,790274,081

Central Japan Railway Company

134,354

90,558Notes:
1. The amount included on the consolidated balance sheets presented in the table
above is equal to the total acquisition price for applicable properties or real estateless the aggregate amounts of depreciation and impairment loss for these propertiesor real estate.
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.

3.0

10

2.5

Also, the following table shows profit and loss related to realestate, including the rental properties containing self-use space,for each fiscal year.

Fiscal Year Ended
March 31, 2018
(April 1, 2017, to
March 31, 2018)439,592

436,705

Rental costs

275,749

280,387

Difference

163,843

156,318(4,745)(16,194)

Rental revenue

21,41915,996

Rental costs

16,872

11,522Difference

4,546

4,474

Other income (loss)

(362)

(580)

2.0

6

Total/Average interest(right scale)

1.5

Other income (loss)

4

Bank loans/
Average interest (right scale)

1.0

Rental Properties Containing Self-Use Space

0

Duration of bonds

0
2011

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

2012

8.22
1.88
1.01
1.40

2013

7.71
1.72
0.87
1.27

2014

7.52
1.54
0.72
1.05

2015

6.82
1.55
0.70
1.07

2016

6.31
1.52
0.62
0.96

2017

5.94
1.41
0.61
0.96

2018

6.19
1.38
0.66
0.95

7.20
1.32
0.75
0.97
Years ended March 31

HEIWA REAL ESTATE CO., LTD.
East Japan Railway Company

NIKON CORPORATION
Mitsubishi Chemical Holdings
Corporation
Mitsubishi Materials Corporation
TOYOTA MOTOR CORPORATION
Shin-Etsu Chemical Co., Ltd.
TOHO CO., LTD.
Obayashi corporation
RENAISSANCE INCORPORATEDSHIMIZU CORPORATION
Mitsubishi UFJ Lease & Finance
Company Limited
Mitsubishi Research Institute, Inc.
THE HACHIJUNI BANK, LTD.
Odakyu Electric Railway Co., Ltd.
Fukuoka Financial Group, Inc.
T&D Holdings, Inc.
Chiba Bank, Ltd.
Nippon Suisan Kaisha, Ltd.

Rental revenue

8

0.5

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

Rental Properties

Bonds/Average interest(right scale)2

Mitsubishi Electric Corporation

183,523

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

Japan Airport Terminal Co., Ltd.

Amounts recorded on consolidated balance sheets

0Years%Taisei Corporation
Kirin Holdings Company, Limited

Unrealized gainYears ended March 31

Mitsubishi Corporation

Rental Properties Containing Self-Use Space

20

2018

Company

Balance as of the beginning of the period

Straight bond0•	With equity investments in stocks held for purposes other thanfor pure investment, the number of shares and their total value
are recorded on the balance sheet as follows:
156 stocks, ¥251,225 million•	The classification, company, number of shares, amounts shownon the balance sheet, and the purpose for which shares are held
other than for pure investment are shown below:
Specific Investment Shares

Amounts recorded on consolidated balance sheets

Interest-Bearing Debt

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

Number ofsharesAmount booked Purposeon balance sheet of holding(¥ million)
shares13,088,457
39,246,142
4,540,606
2,426,690
3,111,400
4,371,938
2,346,997
5,577,294
4,274,100
857,300
3,665,554
367,900
3,510,000

37,45927,35420,001
13,104
12,647
12,383
9,561
9,489
8,761
8,454
8,284
7,405
6,654

1*

5,646,000

5,818

1*

1,739,700
598,462
308,212794,100
2,404,961
1,419,000
2,738,650

5,567
4,084
3,391
2,803
2,799
2,748
2,604

1*

3,760,000

2,346

1*

598,500
3,441,500
901,000
3,108,000
960,200
1,852,000
2,789,900

2,007
1,961
1,939
1,780
1,621
1,583
1,540

3*

2*
1*
3*
4*
3*
1*
1*
4*
4*
3*
4*
3*

3*
1*
4*
3*
4*
3*

2*
3*
2*
2*
2*
1*

1* To raise corporate value by maintaining and strengthening good relationships withtenants
2* To contribute to stable fund procurement
3* To contribute to maintaining and strengthening trading relationships, including withGroup companies
4* To contribute to raising corporate value by maintaining and strengthening stablepartnerships and collaborative relationships
Note: Asahi Glass Co., Ltd., has changed its trade name to AGC Inc. as of July 1, 2018.

Deemed Holdings of Equity Securities
Company

Tokio Marine Holdings, Inc.
Mitsubishi Electric Corporation
Mitsubishi UFJ Financial Group, Inc.

Number ofsharesAmount booked Purposeon balance sheet of holding(¥ million)
shares6,929,500
10,656,000
4,306,400

32,811
18,131
3,001

5*
5*
5*

5* To maintain authority to exercise voting rights
Note: With the top stocks in terms of the amounts recorded on the balance sheet,specific investment shares and deemed holdings of equity securities forinvestment purposes are not included in aggregate totals.
Years ended March 31

72

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73

FINANCIAL SECTION

Consolidated Balance Sheets
Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
March 31, 2018 and 20172018

Millions of yen

Thousands of
U.S. dollars (Note 2)

2017

2018

AssetsMillions of yen

Thousands of
U.S. dollars (Note 2)

2018

2017

2018

¥   372,992¥  320,772$ 3,510,843

61,16956,099575,768

Liabilities and net assets

Current assets:

Current liabilities:¥   287,153¥  243,681$   2,702,871

Notes and accounts receivable–trade (Note 13)

44,67043,823

420,468

Marketable securities (Notes 13 and 14)

8,219

13,51577,367

Allowance for doubtful receivables

(224)

(270)

(2,113)Inventories (Note 3)

434,638

408,294

4,091,103

Equity investments (Notes 13 and 14)

365,933

292,7643,444,405

Deferred income taxes (Note 7)

11,351

10,730106,846

Other current assets

77,29969,152

727,591

1,229,041

1,081,690

11,568,540

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

Total current assets

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

18,14011,831

170,746

Investment securities (Notes 13 and 14)

255,290

233,689

2,402,957

Asset for retirement benefits (Note 6)

20,2809,487

190,896

Other investments (Notes 4 and 13)

190,981180,033

1,797,639

484,692

435,042

4,562,239

Total investments

Property and equipment (Note 5):

Short-term borrowings and current portion of long-term debt
(Notes 5 and 13)
Notes and accounts payable–trade (Note 13)
Accrued income taxes (Note 7)

27,675

16,471

260,503

Advances and deposits

117,570

116,562

1,106,646

Accrued expenses and other current liabilities

86,07776,717810,214

665,484

586,623

6,263,976

Long-term debt (Notes 5 and 13)

2,103,893

2,070,567

19,803,213

Lease deposits received (Note 13)414,390

398,0143,900,509

Liability for retirement benefits (Note 6)

26,84722,042

252,710Deferred income taxes (Note 7)

489,832

481,226

4,610,621

Negative goodwill

95,992

90,535903,547

Other non-current liabilities

128,159

67,645

1,206,320

Total long-term liabilities

3,259,116

3,130,031

30,676,922

Total liabilities

3,924,601

3,716,654

36,940,899

			 Issued – 1,390,908,105 shares in 2018 and 1,390,685,972 shares in 2017

141,898

141,659

1,335,640

		Capital surplus

161,819

161,477

1,523,153

		Retained earnings

763,277

674,259

7,184,462

		 Less treasury stock, at cost

(5,294)(5,489)(49,838)

1,061,700

971,906

9,993,416

121,787

109,644

1,146,339

Total current liabilities
Long-term liabilities:

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

2,063,202

1,987,344

19,420,205

Total shareholders’ equity

678,420

708,801

6,385,731

Accumulated other comprehensive income:

2,538,917

2,494,685

23,897,947

		 Unrealized holding gain on securities

Machinery and equipment and other

135,004

133,132

1,270,746

		 Deferred gain (loss) on hedging instruments

369

73

3,482

Construction in progress

142,127

92,367

1,337,795

		 Land revaluation reserve

526,623

527,128

4,956,922

5,557,672

5,416,331

52,312,425

		 Foreign currency translation adjustments(12,227)(13,363)(115,095)(1,575,800)(1,559,574)(14,832,456)

		 Retirement benefits liability adjustments (Note 6)

3,981,871

3,856,757

37,479,969

Total accumulated other comprehensive income

Land
Land in trust
Buildings and structures

Less accumulated depreciation
Property and equipment, net

95(2,612)899

636,648

620,870

5,992,547

326

529

3,070

180,412174,154

1,698,163

Total net assets

1,879,088

1,767,460

17,687,198

Total liabilities and net assets¥5,803,689¥5,484,115$54,628,098

Stock acquisition rights
Non-controlling interests
Intangible and other assets

108,083¥ 5,803,689

Total assets

110,624¥ 5,484,115

1,017,348$ 54,628,098

Contingent liabilities (Note 11)

See accompanying notes to consolidated financial statements.

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FINANCIAL SECTION

Consolidated Statements of Income

Consolidated Statements of Changes in Net Assets

Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2018 and 2017

Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2018 and 2017
Millions of yen

Thousands of
U.S. dollars (Note 2)

2018

2017

2018

¥1,194,049¥1,125,405$11,239,173

Cost of revenue from operations (Note 3)(890,237)(847,725)(8,379,490)

Selling, general and administrative expenses(90,765)(85,184)(854,340)

Operating income

213,047

192,495

2,005,342

Revenue from operations

Other income (expenses):
Interest and dividend income
Interest expenses
Equity in earnings of unconsolidated subsidiaries and affiliates
Other, net (Note 12)
Income before income taxes

5,849

4,902

55,062(23,121)(22,743)(217,631)

419

872

3,952

(4,738)(12,645)(44,604)(21,590)(29,614)(203,220)

191,457

162,8811,802,122

Income taxes (Note 7):(57,334)

Current
DeferredProfit(43,451)(539,667)

3,626(2,622)

34,134(53,707)(46,073)(505,533)

137,749

116,808

1,296,588(17,305)(14,126)(162,893)¥   120,443¥  102,681$ 1,133,694

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

Millions of yen

Balance at April 1, 2016
Changes in the year:
Issuance of new shares
Cash dividends paid
Profit attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Land revaluation reserve (Note 1-h)Changes in the scope of consolidationChanges in equity related to transactions
with non-controlling shareholders
Net change in items other than those inshareholders’ equity
Total of changes in the year
Balance at April 1, 2017
Changes in the year:
Issuance of new shares
Cash dividends paid
Profit attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Land revaluation reserve (Note 1-h)Changes in the scope of consolidationChanges in equity related to transactions
with non-controlling shareholders
	Net change in items other than those inshareholders’ equity
Total of changes in the year
Balance at March 31, 2018

Commonstock

CapitalsurplusRetainedearnings

Shareholders’ equity
Total
Treasuryshareholders’stockequity¥141,373¥161,188¥600,116¥(5,385)¥   897,293

285

285
(104)

571
(24,976)
102,681(104)
0(3,451)(110)(24,976)
102,6810(3,451)(110)
2285
141,659

288
161,477

239

239¥ 89,945¥ (30)

19,698
19,698109,644

104
104
73

12,142
12,142¥121,787

296
296
¥369

2
74,143674,259(104)(5,489)(31,920)
120,443
0Accumulated othercomprehensive income
Unrealized
Deferred gain
holding gain (loss) on hedging
on securities
instruments

(15)
509

(26)
221

103

74,613
971,906478(31,920)
120,443
(26)
205
509
103

239
¥141,898

342¥161,819

89,017¥763,277194¥(5,294)Land
revaluation
reserve

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

89,793¥1,061,700

Millions of yen

See accompanying notes to consolidated financial statements.

Consolidated Statements of Comprehensive Income
Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2018 and 2017
Millions of yen

Thousands of
U.S. dollars (Note 2)

2018

2017

2018

¥137,749¥116,808$1,296,588

Unrealized holding gain (loss) on securities

12,144

19,703

114,316

Deferred gain (loss) on hedging instruments

365

159

3,444

4

3,363

45

Foreign currency translation adjustments

95(26,882)900

Retirement benefits liability adjustments

2,744

10,092

25,837

ProfitOther comprehensive income (Note 21):Land revaluation reserve

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

355

(996)

3,346

15,711

5,439

147,889¥153,461¥122,247$1,444,478

Total comprehensive income (loss) attributable to:Shareholders of Mitsubishi Estate Co., Ltd.

¥136,731¥108,648$1,287,004

Non-controlling interests¥ 16,730¥ 13,599$   157,473

See accompanying notes to consolidated financial statements.

76

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

Balance at April 1, 2016
Changes in the year:
Issuance of new shares
Cash dividends paid
Profit attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Land revaluation reserve (Note 1-h)Changes in the scope of consolidationChanges in equity related to transactions
with non-controlling shareholders
	Net change in items other than those inshareholders’ equity
Total of changes in the year
Balance at April 1, 2017
Changes in the year:
Issuance of new shares
Cash dividends paid
Profit attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Land revaluation reserve (Note 1-h)Changes in the scope of consolidationChanges in equity related to transactions
with non-controlling shareholders
	Net change in items other than those inshareholders’ equity
Total of changes in the year
Balance at March 31, 2018

¥521,248¥ 13,900¥ (12,676)¥612,387

Stockacquisitionrights

Noncontrollinginterests

Total
net assets¥ 529¥148,970¥1,659,180
571(24,976)
102,681(104)
0(3,451)
(110)
2

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

10,063
10,063(2,612)

8,483
8,483
620,870—529

25,18325,183
174,154

33,666108,280
1,767,460
478(31,920)
120,443
(26)
205
509
—
103

(505)
(505)
¥526,623

1,135
1,135
¥(12,227)

2,708
2,708
¥     95

15,777
15,777¥636,648

(202)
(202)
¥ 326

6,258
6,258
¥180,412

21,833
111,627¥1,879,088

See accompanying notes to consolidated financial statements.

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

77

FINANCIAL SECTION

Consolidated Statements of Changes in Net Assets (continued)

Consolidated Statements of Cash Flows

Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2018 and 2017

Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2018 and 2017
Millions of yen

Thousands of
U.S. dollars (Note 2)

2018

2017

2018

¥ 191,457
77,545(1,378)(9)675(1,161)
5,508—(1,513)(419)(49)(1,461)(5,849)23,121(2,340)86,614(53,837)
7,119
16,66915,574356,266
6,148(22,830)(46,244)
293,338¥ 162,881
75,974
3,247(1,013)
227—
12,260
6,431
—
(872)
(989)
4,330
(4,902)
22,743(8,865)84,853(32,460)(5,837)(4,896)(75,505)
237,609
5,641(22,532)(52,189)
168,527$ 1,802,122
729,909(12,970)(86)
6,358(10,934)
51,852—(14,245)(3,952)(468)(13,753)(55,062)
217,631(22,031)815,275(506,755)
67,015
156,907
146,596
3,353,407
57,870(214,899)(435,287)
2,761,092

18,981(12,491)
13,523(286,506)
5,277(17,240)

9,100(10,615)
11,223(274,686)
1,534(7,749)178,665(117,582)
127,293(2,696,781)
49,671(162,275)

3,916

—

36,866—(2,776)

—

—

295

—

(7,154)(5,147)(286,841)(52,929)(688)(327,292)(67,340)(48,455)(2,699,937)

66,723—
180,713(158,155)
75,715(85,075)(25,278)—
263,710(166,494)
34,805(76,556)

628,045—
1,700,993(1,488,664)
712,687(800,781)(80)(31,913)(10,724)
37,203(183)
43,517
243,341—¥ 286,859(107)(25,112)(9,886)(4,921)(5,144)(168,830)
412,392(219)¥ 243,341(758)(300,391)(100,944)
350,188(1,722)409,6192,290,491—$ 2,700,110

Thousands of U.S.dollars (Note 2)

Balance at April 1, 2016
Changes in the year:
Issuance of new shares
Cash dividends paid
Profit attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Land revaluation reserve (Note 1-h)Changes in the scope of consolidationChanges in equity related to transactions
with non-controlling shareholders
	Net change in items other than those inshareholders’ equity
Total of changes in the year
Balance at April 1, 2017
Changes in the year:
Issuance of new shares
Cash dividends paid
Profit attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Land revaluation reserve (Note 1-h)Changes in the scope of consolidationChanges in equity related to transactions
with non-controlling shareholders
	Net change in items other than those inshareholders’ equity
Total of changes in the year
Balance at March 31, 2018

Commonstock

CapitalsurplusRetainedearnings$1,330,696$1,517,209$5,648,689

2,691

2,691

Shareholders’ equity
Total
Treasuryshareholders’stockequityAccumulated othercomprehensive income
Unrealized
Deferred gain
holding gain (loss) on hedging
on securities
instruments$(50,690)$8,445,905$   846,623$  (288)

(979)

5,383
(235,094)
966,505(979)
3(32,489)(1,038)

185,418
185,418
1,032,042

983
983
694

114,296
114,296$1,146,339

2,787
2,787
$3,482(235,094)
966,5053(32,489)(1,038)24
2,691
1,333,388

2,719
1,519,929

2,251

2,249

24
697,882
6,346,572(979)(51,669)(300,456)
1,133,694
(3)

(147)
4,798

(249)
2,080

977

702,3149,148,220
4,501(300,456)
1,133,694
(249)
1,929
4,798
977

2,251
$1,335,640

3,224$1,523,153

837,889$7,184,462

1,831$(49,838)

Land
revaluation
reserve

Accumulated other comprehensive income
Foreign
Retirement
Total
currency
benefits liability
accumulatedtranslation
adjustments
other compreadjustments(Note 6)hensive income$4,906,334$ 130,837

845,196$9,993,416

Thousands of U.S.dollars (Note 2)

Balance at April 1, 2016
Changes in the year:
Issuance of new shares
Cash dividends paid
Profit attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Land revaluation reserve (Note 1-h)Changes in the scope of consolidationChanges in equity related to transactions
with non-controlling shareholders
	Net change in items other than those inshareholders’ equity
Total of changes in the year
Balance at April 1, 2017
Changes in the year:
Issuance of new shares
Cash dividends paid
Profit attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Land revaluation reserve (Note 1-h)Changes in the scope of consolidationChanges in equity related to transactions
with non-controlling shareholders
	Net change in items other than those inshareholders’ equity
Total of changes in the year
Balance at March 31, 2018

$5,764,188

Noncontrollinginterests

Total
net assets$ 4,980$1,402,207$15,617,282
5,383(235,094)
966,505(979)
3(32,489)(1,038)24

55,342
55,342
4,961,676(256,620)(256,620)(125,783)

94,724
94,724(24,592)

79,84879,8485,844,036—
4,980

237,044
237,044
1,639,252

316,893
1,019,207
16,636,490
4,501(300,456)
1,133,694
(249)
1,929
4,798
—
977

(4,753)(4,753)$4,956,922

See accompanying notes to consolidated financial statements.

78$(119,317)

StockacquisitionrightsMITSUBISHI ESTATE CO., LTD. Integrated Report 2018

10,687
10,687$(115,095)

25,49225,492$     899

148,510
148,510$5,992,547(1,910)(1,910)$ 3,070

58,91058,910$1,698,163

205,5111,050,707$17,687,198

Cash flows from operating activities
Income before income taxes and minority interests
Depreciation and amortization(Gain) loss on sales or disposal of property and equipment(Gain) loss on sales of securities
Valuation (gain) loss on equity investments
Gain on sales of shares of affiliated companies
Impairment loss
Loss (gain) on step acquisitions
Gain on exchange from business combination
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 operating activities
Cash flows from investing activities
Proceeds from sales of marketable securities
Purchases of marketable securities
Proceeds from sales of property and equipment
Purchases of property and equipment
Proceeds from sales of investment securities
Purchases of investment securities
	Proceeds from sales of investments in subsidiaries
resulting in change in scope of consolidation
	Payments for sales of investments in subsidiaries
resulting in change in scope of consolidation
	Proceeds from purchase of investments in subsidiaries
resulting in change in scope of consolidation (Note 15)
	Purchase of investments in subsidiaries
resulting in change in scope of consolidation (Note 15)
Other
Net cash provided by (used in) investing activities
Cash flows from financing activities
Net increase (decrease) in short-term borrowings
Net increase (decrease) in commercial paper
Increase in long-term borrowings
Repayment of long-term borrowings
Proceeds from issuance of corporate bonds
Repayment of corporate bonds	Purchase of investments in subsidiaries that do not
result in change in scope of consolidation
Cash dividends paid
Other
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents of subsidiaries excluded from consolidation
Cash and cash equivalents at end of year (Note 15)
See accompanying notes to consolidated financial statements.

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

79

FINANCIAL SECTION

Prior service cost is being amortized as incurred by the straight-line
method over periods (mainly 1 year through 10 years), which areshorter than the average remaining years of service of the employees.

Notes to Consolidated Financial Statements
Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2018 and 2017

1

SIGNIFICANT ACCOUNTING POLICIESa. Basis of preparation
The accompanying consolidated financial statements of Mitsubishi
Estate Co., Ltd. (the “Company”) and consolidated subsidiaries areprepared on the basis of accounting principles generally accepted inJapan, which are different in certain respects as to the application anddisclosure requirements of International Financial ReportingStandards, and are compiled from the consolidated financial statements prepared by the Company as required by the Financial
Instruments and Exchange Act of Japan.
The notes to the consolidated financial statements include information 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 ofJapan, amounts of less than one million yen have been rounded off.
As a result, the totals shown in the accompanying consolidated
financial statements (both in yen and U.S. dollars) do not necessarily
agree with the sums of the individual amounts.
Certain amounts in the prior year’s financial statements have been
reclassified to conform to the current year’s presentation.
b. Principles of consolidation
The accompanying consolidated financial statements include theaccounts of the Company and its consolidated subsidiaries that it
controls directly or indirectly. Companies over which the Company
exercises significant influence in terms of their operating and financial
policies have been included in the consolidated financial statements
on an equity basis.
All significant intercompany balances and transactions have been
eliminated in consolidation.
c. Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain
estimates and assumptions that affect the amounts reported in thefinancial statements and accompanying notes. The actual results could
differ from those estimates.
d. Foreign currency translation
Current and non-current monetary accounts denominated in foreign
currencies are translated into yen at the current rates.
The revenue and expense accounts of the foreign consolidated
subsidiaries are translated using the average rate during the year.
Except for shareholders’ equity, the balance sheet accounts are alsotranslated into yen at the rates of exchange in effect at the balance
sheet date. The components of shareholders’ equity are translated attheir historical exchange rates.
e. Cash equivalents
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, 2018 and 2017 is presented in Note 15.
f. Marketable securities and investment securities
Securities other than those of subsidiaries and affiliates are classified
into three categories: trading, held-to-maturity or other securities.
Trading securities are carried at fair value and held-to-maturity
securities are carried at amortized cost. Marketable securities classified
as other securities are carried at fair value with any changes in unrealized

80

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

holding gain or loss, net of the applicable income taxes, included
directly in shareholders’ equity. Non-marketable securities classified
as other securities are carried at cost. Cost of securities sold isdetermined by the moving average method.
g. Inventories
Inventories are mainly stated at cost, determined by the identified
cost method. Net book value of inventories in the consolidatedbalance sheets is written down when their net realizable values decline.
h. Property and equipment, depreciation and impairment
Property and equipment, except for land as discussed below, is statedat cost less accumulated depreciation. Depreciation of property, plantand equipment is calculated principally by the declining-balancemethod based on the estimated useful lives and the residual value
determined by the Company, except for certain buildings of theCompany and domestic consolidated subsidiaries acquired on or after
April 1, 1998 and facilities attached to buildings and other non-building
structures acquired on or after April 1, 2016, which are depreciated by
the straight-line method. Property and equipment of foreign subsidiaries
on which depreciation is calculated by the straight-line method at
rates determined based on the estimated useful lives of the respective
assets. The Company and its consolidated subsidiaries have capitalized
the costs incurred for significant renewals and additions; however,costs for maintenance and repairs 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 theirproperty and equipment (including land) for impairment whenever
events or changes in its business circumstances indicate that thecarrying amount of the assets may not be fully recoverable. They
perform cash flow analyses to determine if impairment exists.
If impairment is determined to exist, any related loss on impairment
is calculated based on the cash flow analyses.
The useful lives of property and equipment are summarized as follows:	   Buildings and structures    2 to 75 years

k. Income taxes
Deferred tax assets and liabilities are determined based on thefinancial statements and the tax bases of assets and liabilities, using
the enacted tax rates in effect for the year in which the temporary
differences are expected to reverse. Deferred tax assets are also
recognized for the estimated future tax effects attributable to operating loss carry forwards. Valuation allowances are established to reducedeferred tax assets if it is more likely than not that the some portion or
all of the deferred tax assets will not be realized.
l. Derivative financial instruments
The Company and certain of its consolidated subsidiaries utilize
derivative financial instruments for the purpose of hedging their
exposure to adverse fluctuations and changes in interest rates (interest
rate swaps) and foreign exchange rates (currency swaps), but do notenter into such transactions for speculative or trading purposes.
Derivative financial instruments are carried at fair value with any
changes in unrealized gain or loss charged or credited to operations,
except for those which meet the criteria for deferral hedge accounting
under which unrealized gain or loss is deferred as an asset or liability.
m. Revenue recognition
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 recognized at the time of contract conclusion for services provided up to
the conclusion and at the time of ownership transfer for services
provided up to the transfer.
(c)	Revenue from real estate brokerage is recognized when an underlying lease agreement goes into force or the underlying units aredelivered.
(d) 	Revenue of construction contracts, of which the percentage ofcompletion can be reliably estimated, is recognized by thepercentage-of-completion method. The percentage-of-completion
method is calculated at the cost incurred by the end of the2i. Intangible and other assets
Intangible and other assets primarily consist of goodwill and land use
rights. Goodwill is stated on the basis of cost and is being amortizedover a period of 5 years or an estimated economical period on astraight-line basis. A loss is recognized if the fair value falls below thecarrying amount. Land use rights are stated on a cost basis.
j. Retirement benefits
Accrued retirement benefits and prepaid pension 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 toeach period 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 areshorter than the average remaining years of service of employees.
Certain foreign consolidated subsidiaries have adopted thecorridor approach for the amortization of actuarial gain and loss.

n. Appropriation of retained earnings
Under the Companies Act of Japan, the appropriation of retained
earnings with respect to a given financial year is made by 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 8 for more information.
o. Accounting standards issued but not yet effective
Accounting Standard and Implementation Guidance on Revenue
Recognition
On March 30, 2018, the ASBJ issued “Accounting Standard for
Revenue Recognition” (ASBJ Statement No. 29) and “Implementation
Guidance on Accounting Standard for Revenue Recognition” (ASBJ
Guidance No. 30).
(1) Overview
	This is a comprehensive accounting standard for revenue recognition.
Specifically, the accounting standard establishes the following
five-step model that will apply to revenue from customers:
1. Identify the contract(s) with a customer
2. Identify the performance obligations in the contract
3. Determine the transaction price
4. Allocate the transaction price to the performance obligations in
the contract
5. Recognize revenue when (or as) the entity satisfies a performanceobligation(2) Scheduled date of adoption
	The Company expects to adopt the accounting standard andimplementation guidance from the beginning of the fiscal year
ending March 31, 2022.
(3)	Impact of the adoption of accounting standard and implementation
guidance	The Company is currently evaluating the effect of the adoptionof this accounting standard and implementation guidance on its
consolidated financial statements.

U.S. DOLLAR AMOUNTS

Translation of yen amounts into U.S. dollar amounts is included solely forconvenience, as a matter of arithmetic computation only, at the rate of¥106.24 = U.S.$1.00, the approximate rate of exchange prevailing on

3

consolidated fiscal year as a percentage of estimated total cost.
The completed-contract method continues to be applied for othercontracts for which the percentage of completion cannot be
reliably estimated.
(e) 	Revenue from finance lease transactions and related costs arerecognized upon receipt of lease payments.
(f) Other operating revenue is recognized on an accrual basis.

March 31, 2018. The inclusion of such amounts is not intended to imply
that yen amounts have been or could be readily converted, realized or
settled in U.S. dollars at the above or any other rate.

INVENTORIESInventories at March 31, 2018 and 2017 were as follows:
Millions of yen

Thousands of U.S. dollars

2018

2017

2018

Real estate for sale

¥ 95,391¥ 60,195$  897,886

Land and housing projects in progress

327,213337,928

3,079,946

1,267

1,058

11,933

Land held for development
Other

10,766

9,112

101,337

Total¥434,638¥408,294$4,091,103

Write-downs of inventories as a result of a decrease in profitability for the years ended March 31, 2018 and 2017 were ¥2,950 million($27,767 thousand) and ¥15,200 million, respectively, and recognized in cost of revenue from operations.

MITSUBISHI ESTATE CO., LTD. Integrated Report 201881

FINANCIAL SECTION

Millions of yen

OTHER INVESTMENTS

4

Other investments at March 31, 2018 and 2017 were as follows:

Lease deposits
Long-term prepaid expenses and other
Total

Millions of yen

Thousands of U.S. dollars

2018

2017

2018

¥108,097¥106,149$1,017,486

82,88373,883

780,153¥190,981¥180,033$1,797,639

SHORT-TERM BORROWINGS AND LONG-TERM DEBT

5At March 31, 2018 and 2017, short-term borrowings and the current portion of long-term debt consisted of the following:
Millions of yen

Thousands of U.S. dollars

2018

2017

2018

Loans, principally from banks¥159,090¥ 86,415$1,497,459

Current portion of long-term debt

213,901

234,356

2,013,384¥372,992¥320,772$3,510,843

Total

The weighted-average interest rates per annum on short-term borrowings outstanding at March 31, 2018 and 2017 were 0.76% and 0.44%,
respectively. Short-term borrowings are principally unsecured.
At March 31, 2018 and 2017, long-term debt consisted of the following:
Millions of yen

Thousands of U.S. dollars

2018

2017

2018

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

2.045% unsecured bonds due 2017—

10,000—1.825% unsecured bonds due 2017—

10,000—3.125% unsecured bonds due 2017—

10,000

—1.77% unsecured bonds due 2017—

20,000—0.187% unsecured bonds due 2018—

15,000

—1.65% unsecured bonds due 2018¥   10,000

10,000$    94,126

2.005% unsecured bonds due 2018

10,00010,00094,1260.811% unsecured bonds due 2018

10,00010,00094,126

3% unsecured bonds due 2018

10,00010,00094,126

1.84% unsecured bonds due 2018

15,00015,000141,189

1.72% unsecured bonds due 2018

10,00010,00094,126

0.631% unsecured bonds due 201910,00010,00094,126

1.87% unsecured bonds due 201915,00015,000141,189

1.62% unsecured bonds due 201910,00010,00094,126

0.571% unsecured bonds due 201910,00010,00094,126

1.53% unsecured bonds due 201910,00010,00094,1261.975% unsecured bonds due 201910,00010,00094,1261.805% unsecured bonds due 201910,00010,00094,126

2.5% unsecured bonds due 2020

10,00010,00094,126

1.165% unsecured bonds due 2020
0.577% unsecured bonds due 2020

10,00015,00010,00015,0000.54% unsecured bonds due 2021

15,00015,000141,189

1.262% unsecured bonds due 2021

15,00015,000141,189

1.103% unsecured bonds due 2021

20,00020,000188,253

1.095% unsecured bonds due 2021

10,00010,00094,126

1.178% unsecured bonds due 2022

20,00020,000188,253

82

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

2017

2018

1.087% unsecured bonds due 2022¥   20,000¥   20,000$   188,253

1.026% unsecured bonds due 2022

30,00030,000282,379

2.42% unsecured bonds due 2022

10,00010,00094,1260.929% unsecured bonds due 2022

10,00010,00094,126

1.5% unsecured bonds due 2022

10,00010,00094,1262.075% unsecured bonds due 2023

10,00010,00094,1260.643% unsecured bonds due 2024

20,00020,000188,253

2.28% unsecured bonds due 2024

10,00010,00094,126

1.067% unsecured bonds due 2024

10,00010,00094,126

0.19% unsecured bonds due 2025

10,000—94,1260.175% unsecured bonds due 2025

10,000—94,126

0.27% unsecured bonds due 2026

10,00010,00094,1262.305% unsecured bonds due 2027

10,00010,00094,126

0.24% unsecured bonds due 2027

10,000—94,1262.385% unsecured bonds due 2027

10,00010,00094,126

2.52% unsecured bonds due 2027

15,00015,000141,189

2.425% unsecured bonds due 2027

10,00010,00094,1262.555% unsecured bonds due 2028

10,00010,00094,126

2.9% unsecured bonds due 2032

10,00010,00094,1262.615% unsecured bonds due 2032

10,00010,00094,126

2.04% unsecured bonds due 2032

20,00020,000188,253

1.72% unsecured bonds due 2033

10,00010,00094,1260.859% unsecured bonds due 2036

10,00010,00094,126

0.736% unsecured bonds due 2037

10,000—94,1260.703% unsecured bonds due 2037

10,000—94,126

0.789% unsecured bonds due 2056

15,00015,000141,189

1.402% unsecured bonds due 2057

15,000—141,189

1.313% unsecured bonds due 2058

10,000—94,1260.610% unsecured bonds inherited from DAINIPPON ENTERPRISE INC. due 2018

1,162

1,237

10,9420.390% unsecured bonds inherited from DAINIPPON ENTERPRISE INC. due 2020

1,550

1,550

14,5890.102% unsecured bonds under Euro MTN program due 2025

1,111

—

10,461

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

75,00075,000705,948

3ML+88bp interest deferrable and early redeemable subordinated unsecured
bonds due 2076

75,00075,000705,948

1.33% interest deferrable and early redeemable subordinated unsecured
bonds due 2076

70,00070,000658,885

1.48% interest deferrable and early redeemable subordinated unsecured
bonds due 2076

30,00030,000282,379

Loans from banks and insurance companies:
Secured155,177

138,578

1,460,635

1,308,793

1,303,557

12,319,217

2,317,795

2,304,923

21,816,598

Unsecured

94,126
141,189

Thousands of U.S. dollars

2018Less current portion(213,901)(234,356)(2,013,384)¥2,103,893¥2,070,567$19,803,213

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

83

FINANCIAL SECTION

The aggregate annual maturities of long-term debt subsequent to March 31, 2018 are summarized as follows:

6Year ending March 31,

Millions of yen

Thousands of U.S. dollars

2019¥   213,901$ 2,013,384

2020

316,163

2,975,931

2021

210,404

1,980,463

2022

175,001

1,647,223

2023
2024 and thereafter

156,702

1,474,988

1,245,622

11,724,606¥2,317,795

Total$21,816,598

The assets pledged as collateral for short-term borrowings of ¥1,827 million ($17,200 thousand), long-term debt of ¥155,177 million ($1,460,635
thousand) and other current liabilities of ¥5,106 million ($48,569 thousand) at March 31, 2018 were as follows:

RETIREMENT BENEFIT PLANS

The Company and most of its domestic consolidated subsidiaries have either funded or unfunded defined benefit plans, defined contribution plans
and lump-sum payment plans in the form of a defined benefit plan. The Company has adopted a retirement benefit trust for the lump-sum payment
plan and defined benefit plan. Rockefeller Group, Inc., a foreign consolidated subsidiary of the Company, has adopted defined benefit plans.
The simplified method, which assumes the retirement benefit obligation to be equal to the benefits payable if all eligible employees voluntarily
terminated their employment at the fiscal year end, has been adopted in accounting for defined benefit plans for some consolidated subsidiaries
and the Company’s executive officers.
The changes in the retirement benefit obligation during the years ended March 31, 2018 and 2017 are as follows:
Millions of yen

Retirement benefit obligation at the beginning of the year
Service cost

Retirement benefits paid

(5,365)(5,323)(50,505)

(771)

211

(7,261)

(570)

(625)

(5,367)

Prior service cost

202,506

1,906,122

Translation adjustments

Land in trust

128,591

1,210,391

Other

7,977

75,091
27,525$5,164,175

Retirement benefit obligation at the end of the year

Current portion of long-term borrowings
Long-term borrowings
Total

Millions of yen

Thousands of U.S. dollars

2017

2018

—

¥ 6,829—¥34,249

10,681¥34,249¥17,510(9,925)$1,311,749

Millions of yen

Thousands of U.S. dollars

Plan assets at the beginning of the year

2018

2017

2018

¥124,645¥111,304$1,173,240

2,908

2,841

27,375

Actuarial gain and loss

3,387

11,90331,886$322,377

Contributions by the Company

6,650

2,608

62,603$322,377

Retirement benefits paid

(3,693)(3,912)(34,762)

Translation adjustments

(379)

(387)

(3,571)

Other
Thousands of U.S. dollars

2018

2017

2018

Buildings and structures¥43,632¥21,765$410,699

Land

13,857

7,312

130,440

Construction in progress

7,465

6,118

70,265

Other property and equipment

2,921

—

27,499¥67,877¥35,196$638,904

Total

700
¥137,489

Expected return on plan assets

The assets pledged as collateral for the above non-recourse loans at March 31, 2018 were as follows:
Millions of yen(1,054)¥139,360

The changes in plan assets during the years ended March 31, 2018 and 2017 are as follows:

The following borrowings are non-recourse loans at March 31, 2018 and 2017, which are secured by collaterals as the sole source of recovery.
2018

50,947
8,078

Land

2,924

5,493

31,644

13,900¥548,641

5,412

964

$1,931,143

Total$1,294,138

1,803

1,476

Other property and equipment¥134,263

858¥205,164

Construction in progress

2018¥137,489

3,361

Thousands of U.S. dollars

Machinery and equipment

2017

Actuarial gain and loss

Interest cost

Millions of yen

Buildings and structures

Thousands of U.S. dollars

2018

Plan assets at the end of the year

(1,011)286(9,518)¥132,508¥124,645$1,247,251

The following table sets forth the funded status of the plans and the amounts recognized in the consolidated balance sheet as of March 31,2018 and 2017 for the Company’s and the consolidated subsidiaries’ defined benefit plans:Millions of yen

Thousands of U.S. dollars

2018

2017

2018

Funded retirement benefit obligation¥ 121,741¥ 120,031$ 1,145,911

Plan assets at fair value(132,508)(124,645)(1,247,251)(10,766)(4,614)(101,340)

Unfunded retirement benefit obligation

17,61817,457

165,838

Net liability for retirement benefits on the balance sheet

6,852

12,84364,498

Liability for retirement benefits

26,84722,042

252,710

Asset for retirement benefits(20,280)(9,487)(190,896)

285

288

2,684

¥   6,852¥  12,843$    64,498

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

84

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

MITSUBISHI ESTATE CO., LTD. Integrated Report 201885

FINANCIAL SECTION

The components of retirement benefit expense for the years ended March 31, 2018 and 2017 are as follows:

7
Millions of yen

Thousands of U.S. dollars

2018

2017

2018

Service cost

¥ 5,412¥ 5,493$ 50,947

Interest cost

858

964

8,078

Expected return on plan assets(2,908)(2,841)(27,375)

Amortization of actuarial loss

3,174

4,251

29,878

Amortization of prior service cost

(267)

183

(2,518)

Other

178

216

1,682

¥ 6,447¥ 8,267$ 60,692

Retirement benefit expenses(*) 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, 2018 and 2017 are as follows:
Millions of yen

Thousands of U.S. dollars

2018

2017

2018

Prior service cost¥   493¥      (27)

$ 4,644

Actuarial gain and loss

3,371

14,351

31,734¥3,864¥14,323$36,378

Total

INCOME TAXESThe effective tax rates reflected in the consolidated statements of income for the years ended March 31, 2018 and 2017 differ from the statutory
tax rates for the following reasons:Statutory tax rate

2018

2017

30.86%

30.86%

1.63

0.01

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

0.22

0.25

Revenues deductible for income tax purposes(0.46)(0.14)

Change in valuation allowance(0.94)(1.03)

Undistributed earnings of affiliates

0.30

0.03

Equity income(0.32)(0.24)

Gain on negative goodwill—(2.56)

Loss on step acquisitions

—

1.22

(2.12)(0.05)

Effect of enacted changes in tax laws and rates on Japanese tax
Other
Effective tax rate

(1.09)(0.05)

28.05%

28.29%The significant components of deferred tax assets and liabilities as of March 31, 2018 and 2017 were as follows:
The components of retirement benefits liability adjustments included in accumulated other comprehensive income (before tax effect) as ofMarch 31, 2018 and 2017 are as follows:
Millions of yen

Thousands of U.S. dollars

2018

2017

2018

Unrecognized prior service cost¥    277¥  185$   2,615

Unrecognized actuarial gain and loss

(1,270)(5,042)(11,959)¥   (992)¥(4,857)$ (9,343)

Total

The fair values of plan assets, by major category, as a percentage of total plan assets as of March 31, 2018 and 2017 are as follows:
2018

2017

Bonds

14%

7%

Stocks

55%

55%

10%

11%

General accounts
Other

21%

28%

Total

100%

100%

(*) Approximately 44% and 45% of total plan assets were held in the retirement benefit trust as of March 31, 2018 and 2017, 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:

Millions of yen

Thousands of U.S. dollars

2018

2017

2018

¥   2,474¥   2,357$    23,291

11,274

13,287106,120

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

7,248

8,265

68,224

Unrealized loss on property and equipment

68,18089,528641,760

Unrealized loss on property and equipment by consolidation

10,807

10,976

101,727

Loss on valuation of investment securities

2,695

2,525

25,375

Loss on valuation of equity investments

2,743

6,715

25,824

Land revaluation reserve

23,90323,910224,999

Accrued bonuses

2,892

2,921

27,227

Other

66,17448,091

622,881

198,396

208,579

1,867,432

Valuation allowance(79,840)(80,765)(751,507)

Total deferred tax assets

118,555

127,814

1,115,925

Total gross deferred tax assets

Deferred tax liabilities:
Reserves under Special Taxation Measures Law(60,552)(62,992)(569,956)

Land revaluation reserve(265,679)(265,912)(2,500,750)

Unrealized gain on property and equipment by consolidation(109,050)(118,001)(1,026,457)

2018

2017

Discount rates

0.0 ~ 3.66%

0.0% ~ 4.15%

Unrealized gain on property and equipment(64,134)(36,955)(603,674)

Expected rates of return on plan assets

1.0 ~ 6.75%

1.0% ~ 6.75%

Unrealized gain on securities(51,396)(45,962)(483,778)

Rates of salary increase

0.4 ~ 4.0 %

0.4% ~ 4.0%

Other

The required contribution to defined contribution plans by the Company and its consolidated subsidiaries for the years ended March 31, 2018and 2017 are ¥4,140 million yen ($38,970 thousand) and ¥213 million, respectively.

86

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018(32,774)(57,975)(308,498)

Total deferred tax liabilities(583,588)(587,799)(5,493,115)

Net deferred tax liabilities¥(465,032)¥(459,985)$(4,377,190)

Change in deferred tax assets and deferred tax liabilities due to reduction in corporate income tax rate.
On December 22, 2017, the Tax Cuts and Jobs Act was enacted in the United States, effectively lowering the federal corporate income tax rate
effective for the periods beginning on or after January 1, 2018. Consequently, the federal corporate income tax rate applicable to the Company’s
consolidated subsidiaries in the U.S. was reduced from 35% to 21%.
As a result, as of and for the year ended March 31, 2018, net deferred tax liabilities have decreased by ¥1,754 million ($16,510 thousand) andincome taxes-deferred have decreased by ¥1,784 million ($16,800 thousand).

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

87

FINANCIAL SECTION

Maturities of lease investment assets for finance leases that are not deemed to transfer ownership of the leased property to the lessee asof March 31, 2018 are as follows:

SHAREHOLDERS’ EQUITY

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

to ¥161,819 million ($1,523,153 thousand), and the legal reserveamounted to ¥21,663 million ($203,913 thousand) at March 31, 2018.
Such distributions can be made at any time by resolution of theshareholders or by the Board of Directors if certain conditions are met,
but neither the capital reserve nor the legal reserve is available for
distributions.

Year ending March 31,

2019
2020
2021
2022
2023
2024 and thereafter

AMOUNTS PER SHARE

9

Years ended March 31,

Total

2018

Yen

U.S. dollars

2017

2018

Net income:¥86.78¥74.00$0.81

Diluted

86.76

73.98

0.81

Cash dividends applicable to the year

26.00

20.00

0.24

Yen

U.S. dollars

As of March 31,

2018

2017

2018

Net assets¥1,223.58¥1,147.80$11.512020 and thereafter
Total

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 proposedby the Board of Directors as applicable to the respective years
together with the interim cash dividends paid.

LessorInvestments in leases included in other assets on the consolidated balance sheets as of March 31, 2018 and 2017 consisted of the following:
Millions of yen

Thousands of U.S. dollars

2018

2017

2018

¥13,596—$127,982(6,493)—(61,120)¥ 7,101—$ 66,840

Maturities of lease receivables for finance leases that are deemed to transfer ownership of the leased property to the lessee as of March 31,2018 are as follows:Year ending March 31,

2019
2020
2021
2022
2023
2024 and thereafter
Total

Millions of yen

Thousands of U.S. dollars¥   285,949
1,136,937¥1,422,887$ 2,691,547
10,701,591$13,393,138

Millions of yen

Thousands of U.S. dollars¥52,57310¥52,583$494,853
96$494,949

Millions of yen

Thousands of U.S. dollars¥8,247$77,628

Total

11 CONTINGENT LIABILITIESAt March 31, 2018, the Company and its consolidated subsidiaries had the following contingent liabilities:

Millions of yen

Thousands of U.S. dollars¥   459
459
459
459
459
11,301¥13,596$  4,320
4,320
4,320
4,320
4,320
106,379$127,982

Total(2) Guarantee for business undertakings

Business undertaking guarantees

Rockefeller Group International Inc. and Mitsubishi Estate Asia Pte. Ltd. provide business undertaking guarantees for property development
projects in proportion to their share.

12 OTHER INCOME (EXPENSES)The components of “Other, net” in “Other income (expenses)” for the years ended March 31, 2018 and 2017 were as follows::
Millions of yen

Gain on sales of shares of affiliated companies
Gain on sales of fixed assets
Gain on negative goodwill
Gain on sales of investment securities
Settlement received
Gain on exchange from business combination
Loss on disposal of fixed assets
Loss related to retirement of fixed assets
Impairment loss(*1)
Loss on step acquisitions
Other, net

88

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018$   56,178
1,072,265$1,128,443

Years ending March 31,

Other

Investments in leases

Thousands of U.S. dollars¥  5,968
113,917¥119,885(1) Guarantee of loans

10 LEASES

Unearned interest income

Millions of yen

2019

Guarantees of house purchasers’ loans from banks

Gross lease receivables$ 1,056
1,107
1,160
1,216
1,274
61,046$66,840

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, 2018 from noncancelable operating leases is summarized as follows:2020 and thereafter
Basic net income per share was computed based on the net income
available for distribution to shareholders of common stock and theweighted average number of shares of common stock outstanding
during the year, and diluted net income per share was computed
based on the net income available for distribution to the shareholders
and the weighted average number of shares of common stock
outstanding during each year after giving effect to the dilutive
potential of shares of common stock to be issued upon the exerciseof warrants and stock subscription rights.

Thousands of U.S. dollars¥  112
117
123
129
135
6,485
¥7,101

Future minimum lease payments subsequent to March 31, 2018 on noncancelable operating leases are summarized as follows:
Years ending March 31,

2019

Basic

Millions of yen

Thousands of U.S. dollars

2018

2017

2018

¥ 1,161
12,044———
1,513(5,746)(8,259)(5,508)—56¥ (4,738)——¥ 13,505
1,013
1,966
—
(4,453)(4,762)(12,260)(6,431)(1,221)¥(12,645)$ 10,934
113,370———
14,245(54,092)(77,743)(51,852)—534$ (44,604)

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

89

FINANCIAL SECTION(*1) Impairment loss
The Company recorded consolidated impairment losses for the following asset groups
for the fiscal year ended March 31, 2018:

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

Major Application
Leased assets, etc.
(total 18 groups)

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

Category

Location

Land, Buildings, etc.

Arizona, U.S.A, etc.

Asset grouping for the Company and its consolidated subsidiaries (collectively, the“Group”) was made based on a minimum unit that generates cash flows, which issubstantially independent from cash flows of other assets or asset groups. Company
condominiums are regarded as shared assets. As a result, for the fiscal year ended
March 31, 2018, the book values of 18 asset groups, consisting of those for which themarket prices fell considerably compared with the book values due to the decline ofland prices and those for which profitability decreased considerably due to fallen rent
levels or deteriorated market conditions, etc., were reduced to the respective collectible
amounts and such reductions were recorded as impairment losses in the amount of¥5,508 million ($51,852 thousand).
The breakdown of such impairment losses was ¥2,463 million ($23,189 thousand) inland and ¥3,045 million ($28,663 thousand) in buildings and structures.
The collectible amounts of asset groups are measured using net sale value or use
value, and the net sale value is principally expressed as an appraised value by a realestate appraiser. Future cash flows mainly discounted at a rate of 5% are used tocompute the use value.

Category

Location

Land, Buildings, etc.

New Jersey, U.S.A, etc.

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

Estimated Fair Value of Financial Instruments
Carrying value of financial instruments on the consolidated balance sheet as of March 31, 2018 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

20181) Cash on hand and in banks

Overview(1) Policy for financial instruments
In consideration of plans for capital investment, the Group raises
funds mainly through bank borrowings and bond issues. In terms offund management, the Group makes every effort to avoid market risks
by emphasizing liquidity and shortening the fund management
period. The Group uses derivatives for the purpose of hedging
exposure to interest rates, reducing interest expenses, and hedging
the risk of fluctuations in foreign exchange rates and does not enter
into derivatives for speculative purposes.
(2) Types of financial instruments and related risk
Trade receivables – notes and accounts receivable – are exposed tocredit risk in relation to customers. Trade receivables denominated inforeign currencies, which arise from overseas operation, are exposed
to foreign currency exchange risk.
Marketable securities and investment securities are exposed tomarket risk. Those securities are composed of mainly held-to-maturity
debt securities and the shares of common stock of other companies
with which the Group has business relationships.
Equity investments are composed of mainly preferred equity
investments in special purpose companies under the Law concerning
Liquidation of Assets, investments in real estate investment trusts andinvestments in silent partnerships for special purpose companies.
They are exposed to credit risks of issuers, risks of fluctuations ininterest rates and market prices, respectively.
Lease and guarantee deposits for leased assets are exposed tocredit 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 58 years from the balance sheet date. Certain
long-term 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 and currency swap transactions in accordance with thesame policies and purposes adopted by the Company.

90

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

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

Carrying
Value

Estimated
Fair Value¥  287,153¥  287,153

Difference

Carrying
Value

Estimated
Fair Value

Difference—$ 2,702,871$ 2,702,871—

2) Notes and accounts receivable–trade44,670420,468

		 Allowance for doubtful receivables (*1)(224)

(2,113)44,44544,445—418,354418,354

—

7,240

7,245

¥    5

68,154

68,203$     49

248,092

248,092—

2,335,205

2,335,205

—

60

1,444

1,383

573

13,59313,0193) Securities and investment securities
		 (i) Held-to-maturity debt securities
		 (ii) Other securities
		 (iii) Investments in subsidiaries and affiliates

11,534

11,534—

108,568

108,568—

Total assets¥  598,527¥  599,915¥ 1,388$ 5,633,728$ 5,646,797$ 13,069

1) Notes and accounts payable–trade¥   61,169¥   61,169—$   575,768$   575,768—

2) Short-term borrowings

159,090

159,090—

1,497,459

1,497,459—

3) Current portion of long-term borrowings

147,739

147,739—

1,390,619

1,390,619—

4) Equity investments
13 FINANCIAL INSTRUMENTS

Thousands of U.S. dollars

4) Current portion of long-term bonds

66,162

66,162—622,764

622,764—

5) Long-term bonds

787,661825,636¥37,974

7,413,981

7,771,423$357,442

6) Long-term borrowings

1,316,232

1,335,031

18,79812,389,232

12,566,180

176,948

Total liabilities¥2,538,055¥2,594,828¥56,773$23,889,826$24,424,216$534,390

Millions of yen

20171) Cash on hand and in banks2) Notes and accounts receivable–trade
		 Allowance for doubtful receivables*

Carrying
Value

Estimated
Fair Value

Difference¥  243,681¥  243,681—

43,552—

43,823(270)
43,552

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

15,112

15,114¥     2		 (ii) Other securities

225,933

225,933

—
363

60

424

10,102

10,102—

Total assets¥  538,443¥  538,809¥   366

1) Notes and accounts payable–trade		 (iii) Investments in subsidiaries and affiliates
4) Equity investments¥   56,099¥   56,099—

2) Short-term borrowings

86,41586,415—

3) Current portion of long-term borrowings

149,281

149,281—4) Current portion of long-term bonds

85,07585,075—5) Long-term bonds

777,712814,378¥36,665

6) Long-term borrowings

1,292,854

1,310,801

17,946

Total liabilities¥2,447,439¥2,502,051¥54,612(*1) The value of notes and account receivable-trade is shown at net value, after deducting allowance for doubtful accounts.

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

91

FINANCIAL SECTION

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

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

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

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

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

Thousands of
U.S. dollars¥ 25,605$   241,012

354,399

3,335,836(iii) Lease and guarantee deposit receivables *108,097

1,017,486(iv) Lease and guarantee deposit payables (*4)

414,390

Marketable securities and investment securities classified as other securities at March 31, 2018 and 2017 were as follows:(ii) Equity investments (*2)
( 3)

3,900,509
Millions of yen

2017(i) Unlisted stocks (*1)

¥ 17,278(ii) Equity investments (*2)

282,662(iii) Lease and guarantee deposit receivables (*3)

106,149(iv) Lease and guarantee deposit payables *398,014( 4)(*1) Because no quoted market price is available and it is extremely difficult todetermine the fair 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 theabove table.
(*3) Because no quoted market price for lease and guarantee deposit receivables for rental
properties is available and calculation of the actual period of duration from lease
initiation to evacuation is difficult, it is extremely difficult to estimate a reasonableamount of cash flow and therefore they are not included in the above table.
(*4) Because no quoted market price for lease and guarantee deposit payables for rental
properties is available and calculation of the actual period of duration from lease
initiation to evacuation is difficult, it is extremely difficult to estimate a reasonableamount of cash flow, and therefore they are not included in the above table.

Equity securities
Other
		Subtotal

Equity securities
Corporate bonds
Other
		Subtotal
Total

Fair Value¥74,928
6,491
81,420¥242,285
11,535
253,820¥167,357
5,043
172,400$705,273
61,105766,379$2,280,548
108,579
2,389,127$1,575,274
47,473
1,622,748

2,375
—
3,751
6,126
¥87,546

2,186
—
3,619
5,805
¥259,626

(188)
—
(132)
(321)
¥172,079

22,357—35,312
57,669$824,049

20,578—34,06754,646$2,443,774(1,778)—(1,244)(3,023)$1,619,725

Millions of yen

2017
Cost

Fair Value

Unrealized
Gain (Loss)¥75,080
4,491
79,572¥223,945
10,103
234,048¥148,864
5,611
154,475

2,235
—
142
2,378
¥81,951

1,978
—
9
1,987
¥236,036

(257)
—
(133)
(390)
¥154,084

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

Millions of yen

Thousands of U.S. dollars

Due in one
Year or 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¥287,153
44,670

—
—

—
—

—
—

$2,702,871
420,468

—
—

—
—

—
—

—
4,500
—

¥   294
2,200
—

¥125
—
—

—
—
—

—
42,356—$ 2,767
20,707—$1,176
—
—

—
—
—

Total

3,623
¥339,947

32¥2,526

338
¥463

—
—

34,111$3,199,808

305$23,780

3,187$4,364——As of March 31, 2017

Due in one
Year or Less

Due after One Yearthrough Five Years

Due after Five Years
through Ten Years

Due after
Ten Years¥243,681
43,823

—
—

—
—

—
—

Notes and accounts receivable–trade

Fair Value

Cost

Securities whose cost exceeds their fair value:

Equity securities

Cash on hand and in banks

Cost

Unrealized
Gain (Loss)

Unrealized
Gain (Loss)

Securities whose fair value exceeds their cost:

Other

Note C: Redemption schedule for receivables and marketable securities with maturities

As of March 31, 2018

Thousands of U.S. dollars

2018

2018

(i) Unlisted stocks (*1)

Millions of yen

Other		Subtotal
Total

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

Millions of yen

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

Proceeds from sales of securities classified as other securities totaled ¥14 million ($137 thousand) and ¥1,417 million for the years ended
March 31, 2018 and 2017, respectively. Gross realized gains were ¥8 million ($76 thousand) and ¥1,013 million for the years ended March 31,2018 and 2017, respectively.
The Company and its consolidated subsidiaries recognized ¥675 million ($6,358 thousand) and ¥227 million of impairment loss on investment
securities for the years ended March 31, 2018 and 2017, respectively.
Marketable debt securities classified as held-to-maturity securities at March 31, 2018 and 2017 are summarized as follows:

Held-to-maturity debt securities
Corporate bonds
Other

5
10,8002,420¥  214
1,200
—

¥110
—
—

—
—
—

Debt securities whose fair value exceeds their cost:

31¥300,761

17¥1,431

374
¥484

—
—

		Subtotal

Government bonds
Corporate bonds

Other marketable securities with maturities:
Other
Total

Government bonds
Millions of yen

Corporate bonds
Long-term borrowings
Total

Due in One
Year or Less

Due after One
Year throughTwo Years¥ 66,162
147,739¥213,901¥ 75,000
241,163¥316,163

Due in One
Year or Less

Due after One
Year throughTwo Years¥ 85,075
149,281¥234,356¥ 66,162
145,123¥211,285

Due after Two Due after Three
Years throughYears throughThree YearsFour Years

Thousands of U.S. dollars

Due after FourYears throughFive Years

Due after
Five Years

Due in One
Year or Less

Due after One
Year throughTwo Years

Due after Two Due after Three
Years throughYears throughThree YearsFour Years

Due after FourYears throughFive Years

Due after
Five Years¥ 65,000
110,001¥175,001¥ 90,000
66,702¥156,702¥   506,111
739,510¥1,245,622$   622,764
1,390,619$2,013,384$   705,948
2,269,983$2,975,931$   485,222
1,495,241$1,980,463$   847,138
627,849$1,474,988$ 4,763,849
6,960,756$11,724,606

Due after Two Due after Three
Years throughYears throughThree YearsFour Years

Due after FourYears throughFive Years

Due after
Five Years¥ 65,000
107,816¥172,816¥  520,000
673,416¥1,193,416¥ 51,550
158,854¥210,404

Amortized Cost

Fair Value

Unrealized
Gain (Loss)

Amortized Cost

Fair Value

Unrealized
Gain (Loss)¥   429
2,504
2,934

¥   440
2,504
2,945

¥10
0
11

$ 4,046
23,57527,621$ 4,149
23,57827,727

$103
2
106

—
4,207
98
4,306
¥7,240

—
4,201
98
4,300
¥7,245

—
(6)
—
(6)
¥ 5

—
39,603929
40,532$68,154—
39,546929
40,475$68,203

—
(56)
—
(56)
$ 49

Debt securities whose cost exceeds their fair value:

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

As of March 31, 2018

Thousands of U.S. dollars

2018

Marketable securities and investment securities:
National and local government bonds

Millions of yen$   611,822
1,035,401$1,647,223

Corporate bonds
Other
		Subtotal
Total

Millions of yen

As of March 31, 2017
Corporate bonds
Long-term borrowings
Total

92

¥ 75,000
233,323¥308,323¥ 51,550
133,175¥184,725

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

93

FINANCIAL SECTION

Millions of yen

16 DERIVATIVES AND HEDGING ACTIVITIES

2017(1) Currency related transactions

Amortized Cost

Fair Value

Unrealized
Gain (Loss)¥   400
100
501¥   414
100
515

¥ 13
0
13

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

—
(8)
(2)
(10)
¥  2

Millions of yen

Thousands of U.S. dollars

2018

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

Corporate bonds
Other
		Subtotal
Total

Due after
One Year

Currency swap contracts by
Corporate bonds andallocation method
Long-term borrowings
Payment in JPY and receipt in USD
Total¥14,463¥14,463¥14,463¥14,463Class of transactions

Debt securities whose cost exceeds their fair value:
Government bonds

Subject to hedge accounting

Notional
AmountCash and cash equivalents

Millions of yen

Thousands of U.S. dollars

2018

2017

2018

¥287,153(392)
98¥286,859¥243,681(605)
265¥243,341$2,702,871(3,690)929$2,700,110

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:

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

Millions of yen

Thousands of U.S. dollars

2018

2017

2018

—
—
—
—
—
—
—
—
—
—
—

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

—
—
—
—
—
—
—
—
—
—
—

Interest rate swap contracts
Fixed rate payment andfloating rate receipt
Interest rate swap contracts by
short-cut methodFixed rate payment andfloating rate receipt
Total

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:

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

Disclosure for the year ended March 31, 2018 is omitted due to immateriality.

$136,138$136,138$136,138$136,138$(6,272)$(6,272)

Thousands of U.S. dollars

Millions of yen

Thousands of U.S. dollars

2018

2017

2018

—
—
—
—
—
—
—
—
—

¥   3,226
184,115—(4,207)(126,331)(802)
56,000(3,070)¥  52,929

—
—
—
—
—
—
—
—
—

Subject to hedge accounting

Long-term borrowings

Notional
AmountDue after
One Year

Due after
One Year

Fair Value¥ 68,614¥ 68,614¥679 $  645,839 $  645,839$6,395

264,628¥333,242

248,954¥317,568(*) 2,490,852 2,343,324¥679 $3,136,692 $2,989,164(*)$6,395

Fair Value

Notional
AmountLong-term borrowings

Millions of yen

2017Class of transactions

Interest rate swap contracts
Fixed rate payment andfloating rate receipt
Interest rate swap contracts by
short-cut methodFixed rate payment andfloating rate receipt
Total

Subject to hedge accounting

Long-term borrowings

Notional
AmountDue after
One Year

Fair Value¥29,588¥29,588¥122

264,042¥293,631

259,708¥289,296(*)¥122

Long-term borrowings

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

(3) Interest and currency related transaction
Millions of yen

Thousands of U.S. dollars

2018Class of transactions

Fixed assets¥(666)¥(666)

2018

The following table represents a reconciliation of cash and cash equivalents as of March 31, 2018 and 2017:Marketable securities with maturities of three months or lessFair Value

Millions of yen

15 SUPPLEMENTAL CASH FLOW INFORMATIONTime deposits with maturities of more than three months

Due after
One Year(2) Interest related transactions

Class of transactions

Cash on hand and in banks

Fair Value

Notional
AmountInterest rate and currency swap
contracts by short-cut method andallocation methodPayment in JPY andreceipt in USD
Floating rate payment andfixed rate receipt
Total

Subject to hedge accounting

Notional
AmountDue after
One Year

Fair Value

Notional
AmountDue after
One Year

Fair Value¥49,400¥49,400¥49,400¥49,400¥(6,940)¥(6,940)$464,988$464,988$464,988$464,988$(65,329)$(65,329)

MITSUBISHI ESTATE CO., LTD. Integrated Report 201895

Long-term borrowings

Millions of yen

2017Class of transactions

Interest rate and currency swap
contractsPayment in JPY andreceipt in USD
Floating rate payment andfixed rate receipt
Total

Subject to hedge accounting

Notional
AmountDue after
One Year

Fair Value¥57,412¥57,412¥57,412¥57,412¥(5,381)¥(5,381)Long-term borrowings

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

94

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

FINANCIAL SECTION

Impairment losses of the Company and its consolidated subsidiaries on fixed assets by reportable segments for the years ended March 31,2018 and 2017 are summarized as follows:

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

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

Millions of yen

2018
Reportable segments

Impairment loss

OfficeBuilding
Business

Lifestyle
Property
Business—¥1,972

Architectural
Investment
Design and
Residential International Management Engineering
Business
Business
Business
Business¥186¥2,273

¥941

—

Hotel
Business

Real Estate
ServiceBusiness

Subtotal

Other

¥13

—

¥5,388¥120

Eliminations
Total or Corporate Consolidated¥5,508—¥5,508

Thousands of U.S. dollars

Impairment loss—

$18,571$1,758$21,402$8,860—$129—$50,722$1,130$51,852—$51,852
Millions of yen

2017
Reportable segments

The reportable segment information of the Company and its consolidated subsidiaries for the years ended March 31, 2018 and 2017 aresummarized as follows:
Millions of yen

2 018
Reportable segments

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

Lifestyle
Property
Business

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

Hotel
Business

Real Estate
Services
Business

Subtotal

Other

Eliminations
Total or Corporate Consolidated

Impairment loss

OfficeBuilding
Business

Lifestyle
Property
Business¥236—

Investment
Residential International Management
Business
Business
Business¥2,718¥8,110Architectural
Design andEngineering
Business

Hotel
Business

Real Estate
Services
Business

Subtotal

Other

—

¥21

—

¥12,260—¥1,174

Eliminations
Total or Corporate Consolidated¥12,260—¥12,260

The following tables present the amortization and balance of goodwill as of and for the years ended March 31, 2018 and 2017 by reportablesegment:
Millions of yen

2018¥   497,909¥103,696¥408,032¥ 87,311¥ 21,963¥13,900¥32,679¥25,038¥1,190,531¥ 3,518¥1,194,049—¥1,194,049

8,252
506,161
147,243¥3,518,967

2,121
105,817
31,184¥514,390

2,566
410,598
23,860¥626,596(386)
86,92524,147¥697,478

702
22,665
4,596¥111,974

7,712
21,613
1,724¥27,048458
33,138766¥29,312546
25,584
1,518¥22,427

21,972
1,212,504
235,042¥5,548,196

5,023
8,541
1,048
¥17,695

26,996
1,221,046
236,091¥5,565,891¥ (26,996)(26,996)(23,043)¥237,797—
1,194,049
213,047¥5,803,689

48,170¥   127,877

13,604¥ 36,958

2,906¥ 24,085

6,687¥ 90,423

3,837¥ 13,691

122¥   481

1,549¥ 1,647347¥   320

77,224¥   295,487

49¥5,324

77,273¥   300,812

271¥  4,021

77,545¥   304,833

Thousands of U.S. dollars

Reportable segmentsAmortization of
goodwill
Balance of goodwillAmortization ofnegative goodwill
Balance of negative
goodwillArchitectural
Design andEngineering
Business

Hotel
Business

Real Estate
Services
Business

Subtotal

Other¥ 1,990¥11,442

—
—

—
—

—
—

¥  5,561¥ 15,745——¥  5,561¥ 15,745——¥  5,561¥ 15,745

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

¥111,738—¥111,738—¥111,738

OfficeBuilding
Business

Lifestyle
Property
Business

Investment
Residential International Management
Business
Business
Business¥   409—¥    69—¥3,030¥4,034

¥ 60
¥268

—

—

—

¥99,056¥12,681—

Eliminations
Total or Corporate Consolidated

2 018

Thousands of U.S. dollars

Reportable segments

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

Lifestyle
Property
Business

Investment
Residential International Management
Business
Business
Business

Architectural
Design andEngineering
Business

2018
Hotel
Business

Real Estate
Services
Business

Reportable segments

Subtotal

Other

Eliminations
Total or Corporate Consolidated$ 4,686,647$   976,057$3,840,665$   821,831$   206,731$130,841$307,604$235,680$11,206,059$ 33,114$11,239,173—$11,239,173

77,6744,764,321
1,385,947$33,122,810

19,967996,025
293,533$4,841,778

24,1533,864,819
224,590$5,897,936(3,634)
818,196
227,292$6,565,117

6,609
213,340
43,267$1,053,975

72,594203,435
16,230$254,602

4,315
311,919
7,218$275,908

5,141
240,821
14,288$211,106

206,820
11,412,880
2,212,369$52,223,235

47,28480,3999,873$166,558

254,105
11,493,279
2,222,243$52,389,794$ (254,105)—(254,105) 11,239,173(216,900)
2,005,342$2,238,303 $54,628,098

453,407$ 1,203,670

128,052$   347,881

27,354$   226,706

62,949$   851,126

36,120$   128,875

1,148$  4,529

14,580$ 15,510

3,272$  3,021

726,885$ 2,781,321

465$ 50,117

727,351$ 2,831,439

2,557$   37,855

Amortization of
goodwill
Balance of goodwillAmortization ofnegative goodwill
Balance of negative
goodwillArchitectural
Design andEngineering
Business

Hotel
Business

Real Estate
Services
Business

Subtotal

Other$ 18,738$107,700

—
—

—
—

—
—

$   52,343$  148,208

—
—

—

—

—

—

—

—

—

—

—

—

—

$1,051,756

OfficeBuilding
Business

Lifestyle
Property
Business

Investment
Residential International Management
Business
Business
Business$  3,853—$    656—$28,521$37,977$  573$2,530———$932,388$119,367—

Eliminations
Total or Corporate Consolidated$   52,343$  148,208——$   52,343$  148,208

—

—

—

—

—

$1,051,756—$1,051,756
Millions of yen

2017

Capital expenditures

729,909$ 2,869,295

Reportable segments

Millions of yen

2 017
Reportable segments

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

Lifestyle
Property
Business

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

Hotel
Business

Real Estate
Services
Business

Subtotal

Other

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

7,409
484,238
133,570¥3,445,008

4,705
88,95525,807¥484,292

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

532
21,3234,520¥106,990

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

3,517
4,237
289
¥12,649

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

47,755¥  162,651

12,704¥ 59,054

3,144¥ 27,267

5,913¥ 39,724

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

75,669¥  290,386

64¥   274

75,734¥  290,661

240¥  3,055

75,974¥  293,716Amortization of
goodwill
Balance of goodwillAmortization ofnegative goodwill
Balance of negative
goodwillArchitectural
Investment
Design and
Residential International Management Engineering
Business
Business
Business
Business

OfficeBuilding
Business

Lifestyle
Property
Business

Hotel
Business

Real Estate
Services
Business

Subtotal

Other¥   409—¥    69—¥3,030¥7,064——¥ 1,963¥13,659

—
—

—
—

—
—

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

—

—

—

—

—

—

—

—

—

—

—

—

—

¥98,647¥12,611

—

—

—

—

—

—

¥111,259—¥111,259—¥111,259

Eliminations
Total or Corporate Consolidated

Gain on Negative Goodwill
The Company recorded a gain on negative goodwill of ¥12,702 million in the Other businesses segment for the year ended March 31, 2017.
Products and Service Information
Refer to reportable segment information.
Geographic Area Information
Geographic area information has been omitted since revenue from external customers in Japan and property and equipment located in Japanaccounted for more than 90% of revenue from operations on the consolidated income statement and property and equipment on the
consolidated balance sheet, respectively.
Major Customer Information
The Company does not have any major customers whose share of revenue from operations accounted for more than 10% of revenue fromoperations shown on the consolidated income statement. Accordingly, major customer information has been omitted.

96

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97

FINANCIAL SECTION

18RENTAL PROPERTIES19

The Company and some of its consolidated subsidiaries own office buildings for lease, commercial facilities for lease and others in Tokyo andother areas including overseas countries (the United States and the United Kingdom, etc.) for the purpose of obtaining revenue from leases.
Some office buildings for lease in Japan are regarded as real estate including space used as rental properties since they are used by theCompany and some of its consolidated subsidiaries.
The carrying value on the consolidated balance sheet as of March 31, 2018 and the fair value of these rental properties and real estate including
space used as rental properties are as follows:
Millions of yen

As ofApril 1, 2017

Net Change¥3,644,937

Rental properties
Real estate including space used asrental properties

Fair value

As ofMarch 31, 2018

As ofMarch 31, 2018¥(164,790) ¥3,480,147

183,523

296,913(1) Asset retirement obligations presented in the consolidatedbalance sheet
1. Outline of asset retirement obligations

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

As ofApril 1, 2017

Net Change

Carrying value

Fair value

As ofMarch 31, 2018

As ofMarch 31, 2018

2. Calculation method for asset retirement obligations

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

¥6,768,625 $34,308,521 $(1,551,110) $32,757,410 $63,710,706

480,436

614,790

1,727,443

2,794,740

4,522,184

5,786,810

3. Change in asset retirement obligations during the years ended March
31, 2018 and 2017 are as follows:
Millions of yen

Thousands of
U.S. dollars

2018

2017

2018

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

Balance at the beginningof the year

¥2,936¥2,689$27,639

The carrying value on the consolidated balance sheet as of March 31, 2017 and the fair value of these rental properties and real estate including
space used as rental properties are as follows:

Increase due to the acquisitionof property and equipment

58

17

554

Adjustments due to the elapseof time

62

35

589

Decrease due to the fulfillmentof asset retirement obligations

(43)

(7)

(410)

Millions of yen

2017

Rental properties
Real estate including space used asrental properties

Carrying value

Fair value

Net Change

As ofMarch 31, 2017

As ofMarch 31, 2017

¥3,327,104¥317,832¥3,644,937¥6,517,887

182,876647

183,523

274,081

As ofApril 1, 20161)	Obligation to remove asbestos that is used for some properties
and equipments in a particular way required by the Ordinance on
Preventing Asbestos Hazards
	For such properties, the Company has an obligation to remove
asbestos at demolition of buildings. However, no demolition has
taken place in the past other than those related to redevelopment
or other projects involving many other business associates. It istherefore difficult to reasonably estimate the timing to fulfill suchobligation based on the physical useful life of the assets caused byaging and it is impossible to estimate the timing without specificbusiness plans. Although the Company has been voluntarily
conducting asbestos removal work when that is feasible due tosuch as termination of tenancy, it is impractical to make a reasonableestimation of progress of such voluntary removal work based on
the actual record of the tenancy termination and of the remaining
amount of asbestos at demolition. Moreover, it is difficult todistinguish costs of asbestos removal from total costs of demolition.
Although the Company made the best estimation taking into
account all the evidence available as of March 31, 2018, theseobligations are excluded from recognition of asset retirement
obligations since the probability of obligations in terms of scope
and amount was not reasonably estimated.

Thousands of U.S. dollars

2018
Carrying value

ASSET RETIREMENT OBLIGATIONS

OtherBalance at the end of the year

341

200

3,210

¥3,355¥2,936$31,5832)	Obligation of restoration based on some real estate rental
agreements
	For some commercial facilities, the Company has an obligationof restoration at the termination of leasehold rental agreements.
However, the timing to fulfill the obligation is uncertain since it ispractically possible to continue to use those facilities by re-signing
contracts and some contracts set forth a special provision to reduce
the possibility to fulfill the obligation. Furthermore, given its
business strategies and the current business environment, theCompany intends to continue its operation and not to fulfill theobligation. Although the Company made the best estimation
taking into account all the evidence available as of March 31, 2018,
these obligations are excluded from recognition of asset retirement
obligations since the probability of the obligations in terms ofscope and amount could not be reasonably estimated.

(2) Asset retirement obligations not recognized in the consolidatedbalance sheet
As stated below, certain obligations are excluded from recognition ofasset retirement obligations.

1. The carrying value represents the acquisition cost less accumulated depreciation and accumulated impairment loss.
2. The fair value is based on the following:(1) The fair value of real estate in Japan is calculated by the Company based mainly on the Real Estate Appraisal Standards.
(2) The fair value of real estate in overseas countries is appraised principally by local real estate appraisers.
The income or loss from rental properties and real estate including space used as rental properties for the years ended March 31, 2018 and2017 are as follows:
Millions of yen

2018

Rental properties
Real estateincluding spaceused as rental
properties

Lease
income(*)

Lease cost

Lease
income(loss), net¥439,592¥275,749¥163,843

Thousands of U.S. dollars

2017

Other, net

Leaseincome(*)¥(4,745)¥436,705

2018

Lease cost

Lease
income(loss), net

Other, net

Leaseincome(loss), net

Other, net¥280,387¥156,318¥(16,194) $4,137,734 $2,595,531 $1,542,203$(44,670)

Lease
income(*)

Lease cost

20 RELATED PARTY TRANSACTIONSThe Company has related party transactions with key management personnel of the Company and major individual shareholders.
The corresponding balances as of March 31, 2018 and 2017 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

—

—

2018
21,41916,872

4,546

(362)

15,996

11,522

4,474

(580)

201,614

158,815

42,798(3,409)(*) Lease income excludes that from real estate including space used as rental properties that was used by the Company and some of its consolidated subsidiaries for leasing service
and operating management.

Type

Name

Occupation

Ownership ratioof voting shares

Relationship withthe related party

Nature oftransaction

Transaction
amountBalanceoutstandingat year end

—

—

—

—

—

—

—

—
Millions of yen

2017
Type

Director

Name

Occupation

Naoto Aiba

Representative
executive officerof the Company

Ownership ratioof voting shares

0.00%

Nature oftransaction

Transaction
amountBalanceoutstandingat year end

Contract for
construction of Construction of
housing and otherhousing¥17—

Relationship withthe related party

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

98

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99

FINANCIAL SECTION

21 OTHER COMPREHENSIVE INCOME

Independent Auditor’s Report

The following table presents reclassification and tax effects allocated to each component of other comprehensive income for the years ended
March 31, 2018 and 2017:
Millions of yen

Thousands of U.S. dollars

2018

2017

2018

¥17,604¥ 32,426$165,707—(3,162)—

17,60429,263

165,707

Unrealized holding gain (loss) on securities:
Amount arising during the year
Reclassification adjustments for gains and losses included in net income
Amount before tax effects
Tax effects(5,459)(9,560)(51,391)

Unrealized holding gain (loss) on securities

12,144

19,703

114,316

Deferred gain (loss) on hedging instruments:
Amount arising during the year

528

(80)

4,972

Reclassification adjustments for gains and losses included in net income

(6)

307

(61)

Amount before tax effects

521

227

4,911

Tax effects

(155)

(67)

(1,467)

Deferred gain (loss) on hedging instruments

365

159

3,444

4

3,363

45

Amount arising during the year

310

(27,340)

2,921

Amount before tax effects

310(27,340)

2,921

Tax effects

(214)

458

(2,020)95(26,882)

900

Revaluation reserve for land:Tax effects
Foreign currency translation adjustments:

Foreign currency translation adjustments
Retirement benefits liability adjustments:

958

9,888

9,018

Reclassification adjustments for gains and losses included in net income

2,906

4,434

27,359Amount before tax effects

3,864

14,32336,378Tax effects(1,119)(4,230)(10,541)

Retirement benefits liability adjustments

2,744

10,092

25,837

Amount arising during the year

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

100

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

355

(996)

3,346

¥15,711¥  5,439$147,889

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

101

CORPORATE DATA

Principal Mitsubishi Estate Group Companies
Consolidated subsidiary

New segments as of April 1, 2018

Affiliate accounted for by the equity method

OFFICE BUILDING BUSINESS

Address

Phone

Business activities

Share ofvotingrights (%)

Address

Phone

Business activities

Share ofvotingrights (%)

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

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

Comprehensive building
operation and management

100.0

MEC Eco LIFE Co., Ltd.

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

Research and creation of environmental
design proposals

100.0

Hokuryo City Service Co., Ltd.

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

Management and operation of buildings,
commercial facilities, and sporting facilities

100.0

Mitsubishi Jisho House Net Co., Ltd.

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

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

100.0

Yuden Building Kanri Co., Ltd.

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

Operation and management of the
Yurakucho Denki Building

62.5

Ryoei Life Service Co., Ltd.

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

Management of commercial nursing homes

100.0

Nan Shan Plaza Property Management
Co., Ltd.

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

Property management of Nanshan Plaza

70.0

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

Real estate operations in the United States

100.0(Outside the scope of consolidation)

INTERNATIONAL BUSINESS

Building Leasing Business
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

Mitsubishi Estate New York Inc.

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

+1-212-698-2200

Tokyo Kotsu Kaikan Co., Ltd.

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

Management of Tokyo Kotsu Kaikan andother buildings

50.0

Mitsubishi Estate London Limited

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

+44-20-7292-3180

Real estate operations in Europe

100.0

Mitsubishi Estate Asia Pte. Ltd.

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

Real estate operations in Asia

100.0

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

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

54.9

Mitsubishi Estate (Shanghai) Ltd.

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

+86-21-6340-4000

Real estate business in China

100.0

100-6, Songren Road, Xinyi District,Taipei, 11073, Taiwan+886-2-8780-3003

Real estate business in Taiwan

100.0Parking BusinessTokyo Garage Co., Ltd.

(Outside the scope of consolidation)

Mitsubishi Estate Taiwan Ltd.

District Heating and Cooling Business(Outside the scope of consolidation)

Marunouchi Heat Supply Co., Ltd.

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

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

64.2

Ikebukuro District Heating
and Cooling Co., Ltd.

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

Cooling and heating supply businessin the Higashi-Ikebukuro district

68.0

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
90.0

+81-6-6881-5170

Cooling and heating supply businessin the Osaka OAP district

35.0

Otemachi Park Building, 1-1, Otemachi 1-chome,
Chiyoda-ku, Tokyo 100-0004

Investment corporation asset management

OAP Tower, 8-30, Tenmabashi 1-chome, Kita-ku, Osaka,
Osaka Prefecture 530-6004

Japan Real Estate AssetManagement Co., Ltd.

+81-3-3211-7921

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

TA Realty LLC

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

+1-617-476-2700

Investment management business in the United States

70.0

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

Europa Capital LLP

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

+44 - 20-7881-6800

Investment management business in Europe

82.6

Pan Asia Realty Advisors (Singapore)
Pte. Ltd.

80 Raffles Place, #18-01, UOB PLAZA 1,
Singapore 048624+65-6416-7888

Investment management business in Asia andOceania

77.8

Royal Park Hotels and Resorts Co., Ltd.

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

Comprehensive supervision and managementof hotel business

100.0

INVESTMENT MANAGEMENT BUSINESSOthersMarunouchi Direct Access Limited

Shin Kokusai Building, 4-1, 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

HOTEL & AIRPORT BUSINESSLIFESTYLE PROPERTY BUSINESS
Mitsubishi Jisho RetailManagement Co., Ltd.

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

Operation and management ofcommercial facilities

100.0

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

Mitsubishi Estate·Simon Co., Ltd.

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

Development and operation of
PREMIUM OUTLETS® malls

60.0

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

Yokohama Sky Building Co., Ltd.

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

Leasing of the Sky Building andother properties

54.4

Royal Park Hotel Co., Ltd.

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

Management and operation of Royal Park Hotel

55.7

Tokyo Ryutsu Center Inc.

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

Leasing and operating management of logistics
and office buildings

56.4

Marunouchi Hotel Co., Ltd.

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

Management and operation of the Marunouchi Hotel

76.9*

Takamatsu Airport Co., Ltd.

1312-7, Oka, Konan-cho, Takamatsu, Kagawa
Prefecture 761-1401+81-87-814-3657

Management and operation of Takamatsu Airport

73.1

RESIDENTIAL BUSINESS(Outside the scope of consolidation)

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

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

Real estate development, sales, leasing,and management

100.0

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.

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

Business management and operations related
to the condominium management business

71.5

Mitsubishi Jisho Community Co., Ltd.

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

Overall condominium and building management,
renovations, and related businesses

100.0

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

MEC Urban Resort Tohoku Co., Ltd.

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

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

100.0

Higashinihon Kaihatsu Co., Ltd.

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

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

100.0

Sakura Golf Development Co., Ltd.

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

Management of Asakura Golf Club

49.0

ARCHITECTURAL DESIGN & ENGINEERING BUSINESS

Custom-Built Housing
Mitsubishi Estate Home Co., Ltd.

Residence Management Business

Recreational Facilities

102

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

* Percentage of voting rights held after acquisition of additional shares through a Tender Offer on April 27, 2018

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

100.0

Otemachi Financial City Grand Cube, 1-9-2,
Chiyoda-ku, Tokyo 100-0004+81-3-3510-8011

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

100.0

MEC Human Resources, Inc.

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

Human resource-related services

100.0

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

Real estate leasing

66.7

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

OTHERS

Note: Percentage of voting rights held is as of March 31, 2018.

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

103

CORPORATE DATA

Corporate History

Organization

History

The Marunouchi site purchased by Mitsubishi Company fromthe Japanese government.
Mitsubishi Goshi Kaisha (limited partnership) established. Achieved further
expansion of business.

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

Major properties

1923

Marunouchi Building completed in front of Tokyo Station.

Office Building Planning Department

Area Brand Management Department

1959

1972

Strategic Planning Committee

Yokohama Landmark Tower completed. Yokohama Royal Park Hotel opened.

President & Chief Executive Officer

Chairman of the Board

Board of Directors

Meeting of Shareholders

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

1995

Strategic Investment Committee

Urban Planning Office
Area Management Promotion Office(Leasing)

Office Leasing and Tenant Relations
Department

Relocation Management Office

xTECH Leasing and Promotion Department

Master Lease Planning and Management OfficeLifestyle Property Business Group
Lifestyle Property Business Planning Department
Retail Property Management Department

Retail Property Leasing Department
Logistics Facilities Development Department

Residential Business Group
Residential Business Planning Department

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

2002

Marunouchi Building opened.

2003

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

2004

Marunouchi Oazo opened.

2005

Tokyo Building opened.

2007

Shin-Marunouchi Building opened.
The Peninsula Tokyo opened.

Internal Audit Office

GOTEMBA PREMIUM OUTLETS® opened.

2001

CSR & Environmental Sustainability
Subcommittee

Investment Management Group
Investment Management Business Department

Hotel & Airport Business Group
Hotel Business Department
Airport Business Department

Corporate Group

Marunouchi Eiraku Building completed.
OTEMACHI FINANCIAL CITY (North Tower, South Tower) opened.
MARK IS shizuoka and MARK IS minatomirai opened.
Grand Front Osaka opened.

2013

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

2014

Singapore CapitaGreen completed.

2015

Dai Nagoya Building completed.
Otemon Tower • JX Building completed.

2016

OTEMACHI FINANCIAL CITY GRAND CUBE completed.

Otemachi Park Building completed.

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

Group IT Planning Office

Corporate Communications Department

Investor Relations Office
Rugby World Cup 2019
Project Promotion Office

Human Resources Department

Risk Management & Compliance
Committee

Human Resources Compliance & Diversity Promotion Office

General Affairs Department

Secretary Office

Legal & Compliance Department

Facility Management Office

CSR & Environmental
Sustainability Department
環境・CSR推進部

Audit Committee Office

Mitsubishi Estate (Shanghai) Ltd. established.

Remuneration Committee

2011

Audit Committee

Mitsubishi Ichigokan Museum opened.

Nominating Committee

2010

Taiwan Representative Office

CSR Committee

Corporate Planning Department

Marunouchi Park Building and Mitsubishi Ichigokan completed.

Residential Value Chain Management OfficeInternational Business GroupInternational Business Planning Department

2008
2009

Retail Property Improvements
Management Office

Retail Property Development Department

Osaka Amenity Park (OAP) completed.

Mitsubishi Jisho Investment Advisors, Inc., established.

2018

Urban Development Promotion Department

Workplace Solutions Office

1998

2017

Ikebukuro Development Office

Asset Management Committee

1990

2012

Toyosu Development Office

Office Building Development Department 2

Tokiwabashi Development Department

1986
1989

Office Building Development Department 1

Marunouchi Development Department

The first phase of the Izumi Park Town Project launched.

1973

2000

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

Open Innovation Promotion Office(Development)

Hokkaido Building completed.

Executive Committee

1996

104

Building Renewal Management Office

Museum Management Office

1993

Head Office relocated to Otemachi Park Building.

Building Safety Management Office

Shin-Marunouchi Building completed.

1953

1984

Transitioned to a “Company with Nominating Committee, etc.”
organizational structure.
Tokyo Ryutsu Center Inc. became a Mitsubishi Estate consolidated subsidiary.
Hirotaka Sugiyama and Junichi Yoshida appointed chairman of the board andpresident & chief executive officer, respectively.
Taiwan Representative Office established.

Group Companies Management Office

Office Building Management Department

Mitsubishi Estate Home Co., Ltd., established.

Mitsubishi Jisho Residence Co., Ltd., established.

Office Building Group(Asset Management)

1983

Sunshine City Corporation became a Mitsubishi Estate consolidated subsidiary.
Mitsubishi Estate Asia Pte. Ltd. commenced operations.
Chelsea Japan Co., Ltd., became a Mitsubishi Estate consolidated subsidiary(renamed Mitsubishi Estate·Simon Co., Ltd., in February 2013).

Business Development, Consulting & Solutions Department 3

1937

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

Began first stage of Marunouchi redevelopment.

Business Development, Consulting & Solutions Department 2

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

1969

Reconstruction of Marunouchi Building announced.

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

1894

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.
Branches established in Sapporo (renamed Hokkaido Branch in November2017), Sendai (renamed Tohoku Branch in July 1989), Nagoya (renamed
Chubu Branch in April 2018), and Osaka (renamed Kansai Branch in April 2016).
Strengthened business in major Japanese cities.

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

Business Development, Consulting & Solutions Planning Department

1893

1962

MEC UK Limited established.
Yokohama Office established (reorganized as Yokohama Branch in April 2000).
Hiroshima Branch (renamed Chushikoku Branch in November 2017) andKyushu Branch established.

Business Development, Consulting & Solutions Group

1890

1952
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.

As of April 1, 2018

Risk Management &Compliance Subcommittee

Business Creation Department
Hokkaido Branch
Tohoku Branch
Yokohama Branch

Minato Mirai 21 Office

Chubu Branch
Kansai Branch

GRAND FRONT OSAKA Office

Chushikoku Branch
Kyushu Branch

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

105

CORPORATE DATA

Corporate Information

As of March 31, 2018


Stock Information
Stock Details
Number of authorized shares: 1,980,000,000 shares
Number of shares issued and outstanding: 1,390,685,105
 (222,133 increase in number of shares from the previous fiscal year-end)
Number of shareholders: 	67,881(Increase of 11,826 shareholders comparedwith the end of the previous fiscal year)

Shareholder Composition (Percentage of shares held)
Individuals and other

6.87%

0.00%

¥141,898 million
Business Activities
Development, leasing, and management of officebuildings, retail, and other facilities

Management of leisure and other facilities

36.09%

Sale and brokerage of real estate and related
consulting services

Mitsubishi Estate Group Corporate Website
http://www.mec.co.jp/index_e.html


Number of Employees (Excluding temporary staff)
Non-consolidated: 806
Consolidated: 8,856
URL
http://www.mec.co.jp/index_e.html


1.82%
11.28%

Number ofshares held(Thousands of shares)

Shareholding
percentage(%)

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

96,182

6.92

Japan Trustee Services Bank, Ltd.
(Trust account)

59,1394.26

JP MORGAN CHASE BANK 380072

48,2103.47

Meiji Yasuda Life Insurance Company

46,882

3.37

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

28,054

2.02

STATE STREET BANK WEST CLIENTS- TREATY 505234

27,244

1.96

STATE STREET BANK - WEST PENSION FUND
CLIENTS - EXEMPT 505233

23,937

1.72

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

22,267

1.6

Japan Trustee Services Bank, Ltd. (Trust account 1)

20,832

1.5

Asahi Glass Co., Ltd.

20,821

1.5

Notes:
1. The investment ratio is calculated after deducting the shares of treasury stock from theissued shares of the Company.
2. The Bank of Tokyo-Mitsubishi UFJ, Ltd., has changed its trade name to MUFG Bank, Ltd.,as of April 1, 2018.
3. Asahi Glass Co., Ltd., has changed its trade name to AGC Inc. as of July 1, 2018.

106
Paid-in Capital

Financial institutions

Operating and othercompanies

Major Shareholders

May 7, 1937

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

Financial instruments
business operators

43.94%

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

Development of real estate for investment purposes
and asset management

Government and local public authorities

Foreign individuals
and companies

About Our Website

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018

Head Office
Otemachi Park Building, 1-1, Otemachi 1-chome, Chiyoda-ku,
Tokyo 100-8133
Phone: +81-3-3287-5100
Hokkaido 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
Chubu Branch
Nagoya Hirokoji Building, 3-1, Sakae 2-chome, Naka-ku,
Nagoya, Aichi Prefecture 460-0008
Phone: +81-52-218-7755
Kansai Branch
OAP Tower, 8-30, Tenmabashi 1-chome, Kita-ku,
Osaka, Osaka Prefecture 530-6033
Phone: +81-6-6881-5160

CSR Information

IR Information

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

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

Our website contains CSR-related data
for the entire Group and CSR reportsthat summarize initiatives based on
important CSR themes.

In addition to financial information,
the site contains various IR explanatory materials
and an “Asset Book.”

Chushikoku 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

MITSUBISHI ESTATE CO., LTD. Integrated Report 2018107

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

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