三菱地所AR05E表紙_0905 05.9.12 11:19 AM ページ 2

MITSUBISHI ESTATE CO., LTD. ANNUAL REPORT 2005

MITSUBISHI ESTATE CO., LTD. ANNUAL REPORT 2005

三菱地所AR05E表紙_0905 05.9.12 11:19 AM ページ 3

We will strive to create a truly meaningful society through the development of a secure, safe,
comfortable and appealing urban environment in each of our locations, acting as
representatives of the people who live, work, and seek leisure there.
With a core in development, the Mitsubishi Estate Group aims to increase corporate value by
wielding the synergistic effects of its value chain of businesses related to real estate.
To this end, we have positioned compliance and consideration of the global environment as
cornerstones of our efforts to fulfill our corporate social responsibility. We aim to become atrusted partner of society and to meet the expectations of all stakeholders.

MISSION三菱地所AR05E本文_0905 05.9.12 11:24 AM ページ 1

CONTENTS

2.
To Our Shareholders
We provide an overview of our future business strategies outlined in our new
Medium-Term Management Plan commencing the fiscal year ending March
31, 2006.

6.
Special Feature
In this section, we detail the progress to date of the first stage of the
Marunouchi Redevelopment Project, and look at the second stage.
Leveraging the know-how accumulated through this project, we describe ouractivities in areas outside Marunouchi.

13.
Business Information
Guided by the Real Estate Consulting & Solution Department, Mitsubishi Estate
strives to reinforce proposal-oriented marketing capabilities across the Group.
In each of its business activities, Mitsubishi Estate leverages the collective
strengths of the Group in an effort to promote high-value-added businesses.

25.
Financial Review
In the fiscal year ended March 31, 2005, Mitsubishi Estate achieved its primary objective of recording earnings before interest, taxes, depreciation andamortization (EBITDA) of ¥178.4 billion. We will continue to pursue management focusing on increased shareholder value.

29.
Financial Statements

52.
Mitsubishi Estate Corporate Data

55.
Corporate Social Responsibility Initiatives
As corporate social responsibility (CSR) gains in importance with eachpassing year, Mitsubishi Estate is implementing a variety of CSR initiatives
with the aim of securing market confidence as a responsible corporate citizen.

Caution regarding forward-looking statements
Statements made in this annual report with respect to the Mitsubishi Estate Group’s
current plans, estimates and strategies are forward-looking statements about the future
performance of the Mitsubishi Estate Group. These statements are based on management’s assumptions, which are founded on currently available information andtherefore should not be unduly relied upon. The Mitsubishi Estate Group cautions thata number of significant factors could cause future results to differ from forecasts inthe forward-looking statements.
Mitsubishi Estate 2005 1

三菱地所AR05E本文_0905 05.9.12 11:24 AM ページ 2

To Our Shareholders

Mitsubishi Estate Co., Ltd. (“Mitsubishi Estate” or the “Company”)
deeply regrets the inconvenience caused to the customers whopurchased condominiums and all the parties involved in connection with the sale of condominiums at OAP Residence Tower.
Spurred by this unfortunate event, Mitsubishi Estate has implemented customer-oriented measures to resolve all issues in orderto prevent similar incidents from recurring, and to restore market
confidence. In moving forward, the Company will continue toenhance its compliance structure as a key management priority.

Financial Results
During the fiscal year ended March 31, 2005, Mitsubishi Estate Co.,
Ltd. and its consolidated subsidiaries (collectively, the “Mitsubishi
Estate Group” or the “Group”) recorded revenue from operations of¥775,381 million, an increase of 14.0% from the previous fiscal
year. Operating income also climbed 14.0% year on year to ¥118,233
million. In Building Business operations, the closure of certain
buildings as part of the Marunouchi Redevelopment Project negatively
impacted on revenue. In the Residential Development business,
however, results were boosted by an increase in the number ofcondominiums sold, and in International Business operations by thesale of certain overseas-owned properties. Net income for theperiod under review was ¥36,245 million, impacted by the loss on
disposal of businesses, the loss on disposal of fixed assets inThousands of
U.S. dollars

Millions of yen

Years ended March 31

Revenue from operations
Net income (loss)
As a percentage of revenue
from operations
As a percentage ofshareholders’ equity
Total assets
Total shareholders’ equity
Common stock

2000

2001

2002

2003

2004

2005

3.1%

(11.3)%

5.3%

5.1%

4.7%

4.1%
2,285,771
440,731
86,5344.1%
2,535,263
518,766
86,534(10.5)%
3,035,795
832,497
86,5344.3%
3,007,927
839,953
86,5344.0%
3,068,842
897,499
86,534

4.0%
3,124,514
920,930
86,534(Percentage Share)2005¥ 574,396 ¥ 630,990 ¥ 631,564 ¥ 681,726 ¥ 679,918 ¥ 775,381 $ 7,220,234
18,421
19,832(71,058)
36,03934,98936,245337,508
3.2%

Revenue by Segment—

Hotels
4.1%
Custom-Built
Housing
4.7%

Other
1.7%

International
Business
23.1%

Buildings
36.2%—
29,095,018
Urban
8,575,565 Development& Investment
805,791 Management
1.1%

Yen

Per share amounts:
Net income (loss)
Cash dividends applicableto the year

U.S. dollars¥14.18¥15.26¥(54.70)¥27.61¥26.96¥27.93

$0.26

8.00

8.00

8.00

8.00

8.00

8.00

0.07

Note: Yen amounts shown are translated into U.S. dollars, solely for convenience, at the prevailing exchange rate on March 31, 2005,of ¥107.39 to US$1.00.

2 Mitsubishi Estate 2005

Architectural
Design &Engineering
2.4%

Residential
Development
26.7%

三菱地所AR05E本文_0905 05.9.12 11:24 AM ページ 3

connection with the reconstruction of the Shin-Marunouchi Build-subsequent inflow of investment funds. As competition for theing, and other factors.

acquisition of prime properties intensified, particularly in the Tokyo
Metropolitan area which consists of the five central wards of Tokyo,

Operating Environment

property prices increased overall for the first time in 14 years. Buoyed

In the office building market, the negative impact caused by theby continuous strong investment demand both in trust funds andexcess amount of large space supply in 2003 softened, as thereal estate investment trusts (REITs), these favorable conditions arenumber of new office building completions halved. Favorable

expected to spread through to other major cities in regional areas.

conditions were also encouraged by the consolidation of offices

Under these circumstances, the Mitsubishi Estate Group will

and the trend toward relocation, which generated new demandendeavor to foresee changes in its business environment, whileand helped to reduce the vacancy rate. Rising rates offered toenhancing management efficiency and earnings power.

prospective tenants already reflect the upswing in the market.
Renegotiations with existing tenants, however, continue to lag,

New Medium-Term Management Plan

with some time expected before existing contracts contribute to

In its three-year Medium-Term Management Plan announced in

an increase in rental revenues.

March 2002, Mitsubishi Estate identified an EBITDA target of

Despite the continuous supply of condominiums in the Tokyo¥170.0 billion for the final year of the plan. Against this target,

Metropolitan area, demand in the residential market remains steady,

EBITDA for the fiscal year ended March 31, 2005 was ¥178.4

buoyed by a low interest rate environment and demand primarily

billion, mainly owing to continued progress in the Marunouchi

from the post-war baby boom generation and the elderly. In certain

Redevelopment Project, increased earnings power in condominium

areas, however, where supply remains high, competition continues

operations, and growth in the Urban Development & Investment

to be stiff as consumers become increasingly selective, casting aManagement business.

keen eye over the comparative merits of location, product planningand design, and price.

In recent years, the real estate investment market has been
providing new investment alternatives in Japan such as J-REITs andIn the real estate investment market, conditions were bolsteredby an easing of quantitative monetary government policy and theprivate funds. As a result, inflow of funds to the real estate market
has steadily increased, prompting calls for real estate companies

Overview of the New Medium-Term Management Plan
Basic Mission
Creating a truly meaningful society

Operating Environment

Management Policies

Increased demands on companies tofulfill their corporate social responsibility

Increase real corporate value

High expectations for various realestate value creation capabilities•Creative approach toward society•Customer-oriented focus•High-value creation through human resource training•Share value improvement

Basic Objective
FF2007~Foundation for the Future~
Cultivate capabilities for real estate value creation with “development” at the heart of business
operations, and secure a leading position in the industry as a real estate company for the new era

Strategic Policies
Infrastructure Strategy

Rebuild a dynamic and flexible management platform and system

Management Strategy

Optimize business portfolio and improve asset portfolio

Core Growth Strategy

Strategically reinforce capabilities for development-based real estate solutions(Development, real estate service, and Group-wide proposal-oriented marketing capabilities)

Mitsubishi Estate 2005 3

三菱地所AR05E本文_0905 05.9.12 11:24 AM ページ 4

Targets

EBITDAEBITDA/Net Interest Bearing Debt*

Fiscal Year Ending
March 31, 2008

Fiscal Year Ended
March 31, 2005

¥200.0 billion
5 times or less

¥178.4 billion
6.16 times* Net Interest Bearing Debt = Interest Bearing Debt - (Cash + Marketable Securities)

Assumptions:
Revenue from Operations
Operating Income¥863.0 billion¥135.0 billion¥775.3 billion¥118.2 billion

to deliver more sophisticated products and services and to enhanceBusiness Strategies

their value creation capabilities. Under these circumstances,

The goal of the Mitsubishi Estate Group is to effectively combine

Mitsubishi Estate formulated its new three-year Medium-Termthe merits of its development-oriented asset business that strives

Management Plan commencing the fiscal year ending March 31,

to increase asset value through income gain, with those of its non-2006. As a real estate company for the new era with “development

asset business that strives to increase its capital efficiency throughfunction” at the heart of its operations, Mitsubishi Estate will

the introduction of third-party capital as a means to expand capitalleverage its value creation capabilities to achieve a leading position

gain and fee income based on exit strategies.

in the industry. Within its Medium-Term Management Plan, theIn this context, we are working to increase our competitivenessCompany has employed the corporate slogan FF (Foundation forand expand business opportunities by improving the Group’s

the Future) 2007 and established a new EBITDA target of ¥200.0

capabilities across three key functions, namely development, real

billion. Throughout the duration of the plan, Mitsubishi Estate will

estate services and proposal-oriented marketing.

continuously strive to increase its value as a real estate company

In Building Business operations, Mitsubishi Estate will improvebased on the fundamental strategies of rebuilding a dynamic andand enhance its functions through the Marunouchi Redevelopment

flexible management structure, securing an optimal business

Project intending to further distinguish Marunouchi from all otherportfolio, improving its asset portfolio, and strengthening its

areas. At the same time, we will invest in highly profitable, growth-development-based real estate solutions capabilities.

oriented assets and consistently update our property holdings in an

Growth Strategy Overview
Investment properties partiallyowned by Mitsubishi Estate

Investment properties owned
by other companies

Investment properties
owned by Mitsubishi EstateGroup-wide proposal-oriented marketing capabilities
Real estate solution proposal capabilities
Development function
Development business

Real estate service function
AM businesses
PM/Leasing business

Advisory/Corporate
brokerage business

Various otherbusiness domains

Cultivate capabilities for real estate value creation with “development” at the heart of business operations,and secure a leading position in the industry as a real estate company for the new era

Strengthen real estate solution proposal capabilities

Increase the value of wholly and partially owned assets

increase business value

improve real estate value

4 Mitsubishi Estate 2005

三菱地所AR05E本文_0905 05.9.12 11:24 AM ページ 5

effort to enhance asset portfolio quality.

process. At the same time, we established the Strategic Planning

In Residential Development operations, we will continue our

Committee to encourage Group-wide discussion of management

focus on the Tokyo Metropolitan area, which is expected to facestrategies, and the Strategic Investment Committee to assess andongoing population growth, and supply an estimated 3,500 condo-

consider major investment proposals, and as a support organization

miniums to address needs. In addition to this area-based strategy

for the Group’s Executive Committee to raise the quality of man-and an emphasis on product planning to better address the needs

agement resolutions. Furthermore, we created an Advisory Board,of demanding consumers, we will further reinforce our competitive

comprised of externally appointed leading professionals, and inadvantage by strengthening the equity participation in TOWA REAL

June 2005, we set up the specialist Internal Audit Office, reporting

ESTATE DEVELOPMENT CO., LTD., with which a business cooper-

directly to the president, with the aims of enhancing the internal

ation agreement was concluded in March 2005, in order to better

audit function and securing greater management transparency andleverage the complementary position of both companies.

objectivity in the decision-making process.

In the Urban Development & Investment Management operations, we will continue to expand development of income-Compliancegenerating real estate projects beyond exit strategies and strength-

Mitsubishi Estate recognizes that its social responsibility is not limited

en our asset solutions business by providing solutions for ourto compliance with statutory requirements. Of equal importance iscustomers’ property portfolios focused on effective real estate

the Company’s ability to address and satisfy the needs of all

usage, disposal and management. In addition, we will actively

stakeholders. To this end, we acknowledge the need for each anddevelop our fee-based asset management and other businesses

every employee to maintain an acute personal awareness of theirprimarily through Group company, Mitsubishi Jisho Investment

individual responsibilities, and to act with integrity, humility, common

Advisors, Inc.

sense and to the highest ethical standards. Our goal is to create a

By providing a significant risk hedge and working to build atruly meaningful society through honest and open communication

global real estate service network, we are developing Internationalwith all stakeholders and a corporate culture based on teamwork.

Business operations as a strategic activity based on considerationsof risks and return.
In the overall context of its business portfolio, Mitsubishi Estate

Driven by its focus on the growth of development business,
Mitsubishi Estate will endeavor to increase its asset value, and atwill allocate resources to high-potential areas. In addition to thethe same time, to enhance the value of assets held by its customers

operations of Building Business, Residential Development, andand business partners. By leveraging its capabilities to create real

Urban Development & Investment Management, we will strengthen

estate value, the Company will evolve toward a company for the new

our capabilities in businesses that are essential to increasing ourera. Underpinning these activities, we will reposition compliance atdevelopment prowess, leasing and related activities. We will also

the heart of our business platform. With the commitment of eachpursue growth in high-profit areas such as corporate brokerage andand every member of the Mitsubishi Estate Group, we will fulfill

advisory services, and at the same time, further promote selection

our corporate social responsibility, restore market confidence, andand focus initiatives while undertaking drastic measures to shiftenhance corporate value.

away from underperforming operations.

Corporate GovernanceWith a focus on shareholder value, the Mitsubishi Estate Group strives
to rebuild a dynamic and flexible management system with the aim

August 2005

of displaying increasingly efficient and sound management throughout the Group. To this end, we position corporate governance as a toppriority and will strive to achieve the highest standards in governance.
In April 2003, Mitsubishi Estate introduced an executive officer
system. The objectives of the new system are to reinforce themanagement, oversight and executive functions, to increase

Keiji Kimura

management efficiency, and to accelerate the decision-making

President

Mitsubishi Estate 2005 5

三菱地所AR05E本文_0905 05.9.12 11:24 AM ページ 6

Special Feature
Through the Marunouchi Redevelopment Project, Mitsubishi Estate is committed tocreating an attractive and vibrant city center, universally recognized as the global centerof dynamic interaction. To this end, Mitsubishi Estate is endeavoring to renew officebuilding specifications, upgrade infrastructure, entice commercial and retail stores, andenhance facilities and services in cooperation with business and academic institutions.
Boasting a long history of development experience and the know-how accumulated from
the Marunouchi Redevelopment Project, Mitsubishi Estate is working to build attractive
new cities in a variety of locations.

in and outside marunouchi

—f

1894

1923

1959

199

Construction of the
Mitsubishi No. 1 Building
completed, the first officebuilding in Marunouchi

Construction of the
Marunouchi Building
completed

Marunouchi remodelingplans formulatedPlans fof theBuildin6 Mitsubishi Estate 2005

三菱地所AR05E本文_0905 05.9.12 11:25 AM ページ 7—forever on the move
1995

1998

2008

Plans for the rebuildingof the Marunouchi
Building announced

Work for the first stage ofthe Marunouchi
Redevelopment Projectcommenced

Work for the second
stage of the Marunouchi
Redevelopment Project
to commence

Mitsubishi Estate 2005 7

三菱地所AR05E本文_0905 05.9.12 11:25 AM ページ 8

ultimate goal is to build a rich and dynamic city environment.

Marunouchi on the MoveIn addition, plans are in place to restore the red brick station
house at Tokyo Station and improve Gyoko Dori, which connects Tokyo Station and the Imperial Palace. As the gateway toTokyo, this area will serve as the symbol, provide aesthetic
appeal, and epitomize
plans for redevelopment
as a whole. With respect
for both the old and thenew, plans to redevelop
Marunouchi will encompass efforts to maximize
the unique features thatthe area offers. AccordingMitsubishi No. 1 Building

Open cafe on Marunouchi’s Naka Dorily, a key issue is to ensure the optimal mix and use of state-ofthe-art office buildings and heritage structures spread

Marunouchi is the first city center in Japan to house predomi-

throughout the district.

nantly office buildings, and it continues to serve as a hub of

Mitsubishi Estate is conscious of its responsibilities inreal-time global information. In this context, the key feature ofefforts to redevelop the Marunouchi area. Recognizing thethe Marunouchi Redevelopment Project is to maximize thetreasure that is Marunouchi, and its unlimited potential that

potential that the area offers. In a similar vein, the Otemachi/

extends well beyond business use, we will work to create a city

Marunouchi/Yurakucho District City Development Association,center that caters to workers and visitors. Guided by the key-

made up of representatives from the Tokyo Metropolitan Gov-

word, “Interaction,” Mitsubishi Estate is committed to redevel-

ernment, the Chiyoda Ward Government, East Japan Railway

opment in harmony with the environment that delivers a richCompany, local landowners, and leaseholders formulated theand fulfilling experience for all.

“Central Ward Area Development Guidelines,” in 2000, a set
through public and private sector cooperation. As a result of

Marunouchi Redevelopment Project—A Transition
from the First Stage to the Second Stagethese initiatives, the district has experienced progressive

Mitsubishi Estate identified the 10-year period beginning inderegulation that has facilitated the redevelopment of certain

1998 as the first stage of the Marunouchi Redevelopmentbuildings to increase site use and to transfer unused air

Project, and has since continued efforts to create a newrights from other sites in the district to increase floor space.

cityscape primarily in the areas in front of Tokyo Station.

As a forum for the creation of new and innovative ideas, theInvestment during thisof common rules that serve to enhance city development

10-year period will total¥500 billion. Together
with the renewal of existing buildings, the plancalls for the reconstruction of six buildings, fromthe redevelopment of the
Marunouchi Building com-

Fashion Show at the Marunouchi Building

pleted in August 2002 to the Shin-Marunouchi Building,scheduled for completion in the fiscal year ending March 31,
2008. The reconstruction will double the leasable floor spaceof the original buildings, and cash flow will increase by 2.5
times.
Marunouchi OAZO

8 Mitsubishi Estate 2005

三菱地所AR05E本文_0905 05.9.12 11:25 AM ページ 9

The first stage is distinguished by a variety of features,Tokyo Station into an even more vibrant and dynamic space.

including the concentration of leading corporations that define

The Marunouchi OAZO was opened near the Marunouchi

both their industries and each new era; communications and IT

North Exit of Tokyo Station in September 2004, and the Tokyo

infrastructure upgrade; and measures that address diverse

Building, near the Marunouchi South Exit of Tokyo Station, isneeds related to business and leisure time, and that fulfill

scheduled for completion in October 2005. These two build-environmental concerns such as energy and resource conserva-

ings offer advanced and luxurious office environments, andtion, as well as calls for a green environment. These measures

also provide the latest in common-use facilities including

are being undertaken from the perspective of the creation of an

security and barrier-free facilities that exits in harmony withurban center suited to the needs of the future. In preserving

the environment. Moreover, in order to create a comfortable

the unique characteristic of the streets and avenues ofwalking path network in the area from Tokyo Station to bothMarunouchi, beginning with Naka Dori, we will foster a newbuildings, we are constructing an integrated underground andflow of workers and visitors, and transform the area adjoining

aboveground walkway featuring free and open spaces, such asr D imu
ra H

i o

1

Hibiyya Park

Imperial Palace
22

3

4

6
7

9

8

Yurakucho
urakucho, Yurakucho Linek

Ginza, Marunouchi
runouch Linerunouc

uc

ho

Tokyo

International
Forum

13

1

JR Yokosuka LineTokyoyeniL oyieK RJ ,oykoT

Yu
ra

12
9

4

r D iatiE

21

Central

Post
Office

5

15

16

2

Tokyo, Marunouchi Line

Tokyo,y

JR Sobu Line3moznaH ,ihcametO

bi H

2

7

11

eniL no

yi

i o

,a

Naka Dori

Otemachiachi, Toeiei Mita Line
Otemachiachi,
ch Chiyoda Line
14
i o

8

10

metO

en
iL
a
bi H
yi

5

6

Hibiya Dori

Nijubashimaeae, Chiyoda Line

Hibiyaiya,yToei Mita LineneeniL iazoT ,ihcada Li

r D okoyG

Chiyo

i o

a,

r D ikasabaB

Hibiy

17

Tokyo Station

18

20

19

To the north and south of the area that connects Tokyo Station and the Imperial Palace lie the Otemachi, Marunouchi, and Yurakucho
districts. Representing Japan’s principal business district, these areas collectively offer unparalleled access and transportation
infrastructure. The area is serviced by nine rail and seven subway lines; each office building is within a three to five minute walking
distance from rail transport. Boasting more than 4,000 offices employing approximately 240,000 workers, it is estimated that the area
has commuter traffic of 1.5 million daily. Of the 98 office buildings in the area, Mitsubishi Estate owns and manages 31 buildings.

Leasing Buildings
1. Hibiya Kokusai Building
2. Yurakucho Denki Building
3. Yurakucho Building
4. Shin-Yurakucho Building
5. Kokusai Building
6. Shin-Kokusai Building
7. Shin-Nisseki Building
8. Fuji Building
9. Shin-Tokyo Building

Reconstruction Projects
17. Shin-Otemachi Building
10. Kishimoto Building
18. Nippon Building
11. Mitsubishi Denki Building
12. Ministry of Education, Culture, 19. Nippon Steel Building
20. JFE Shoji Building
Sports, Science and21. Mizuho Corporate Bank Ltd.
Technology Building
Head Office Building
13. Mitsubishi Building
14. Tokyo Ginko Kyokai Building 22. UFJ Tokyo Building
15. Togin Building
16. Otemachi Building

Completion

First Stage (1998~2007)

1. Marunouchi Building
2. The Industry Club of Japan and
Mitsubishi Trust and Banking Building
3. Marunouchi OAZO
4. Tokyo Building
5. Shin-Marunouchi Building
6. The Peninsula Tokyo (tentative name)

August 2002
February 2003
September 2004
2006*
2008*
2008*

Second Stage (2008~2017)

7. Furukawa Building
8. Mitsubishi Shoji Building
9. Marunouchi Yaesu Building

2010*
2010*
2010*

*Years indicate fiscal years ending March 31.

Mitsubishi Estate 2005 9

三菱地所AR05E本文_0905 05.9.12 11:25 AM ページ 10

atriums and halls. These are examples of our efforts toward
creating safe and optimal environments.

and upgrading infrastructure.
The first phase of the second stage entails rebuilding and

Mitsubishi Estate is working to enhance the Marunouchi

construction work on the site where the Mitsubishi Shoji Build-area’s image as “an attractive and vibrant city center, acknowl-ing, the Furukawa Building and the Marunouchi Yaesu Buildingedged throughout the world as a leading global center ofare currently located, which includes a multi-function high-risedynamic interaction,” and is advancing with this stunning andbuilding and rebuilding the historical Mitsubishi No. 1 Build-ambitious urban redevelopment project. While raising theing on its original 1894 site in Marunouchi. Designed by thearea’s status as a premier business center, we are working toEnglish architect Josiah Conder, who bestowed Japan withtransform the district into a vibrant hub of business, leisuremany Western-style buildings, the Mitsubishi No. 1 Building

and social exchange that is forever on the move.

was the first tenant building in Marunouchi. In light of its

The second stage of the Marunouchi Redevelopment Pro-

historical significance as the wellspring for Marunouchi overject, which begins in 2008, aims to create a leading center forthe past century, and as a place that can bring people together

the knowledge industry in Asia and form an urban tourist

by connecting Marunouchi and Yurakucho, we aim to restore

attraction representative of Japan. The basic theme of thethe site to its original splendor, creating a state-of-the-art

second stage is to accelerate the broadening and deepening of

office building and area management center for disseminating

the Marunouchi Redevelopment Project. While extending theinformation about its history and cultural activities such as thevitality of areas around Tokyo Station, the development focus

fine arts.

in the first stage, to the Otemachi, Marunouchi and Yurakucho

Marunouchi is changing into a downtown area that is attrac-

districts, Mitsubishi Estate plans to comprehensively redevelop

tive for its businesses, retailers and residences, and more

the entire area. We aim to create a more active and open urban

generally, for interaction, education, culture and tourism.

network by linking together pleasantly designed roads between

Leveraging every one of these qualities, we aim to create value

these areas, and creating a town setting with unique character-that is only available in Marunouchi, by providing a rich andistics in each district. During the 10-year period of the second

fulfilling urban lifestyle through the establishment of an area

stage, Mitsubishi Estate plans to invest an additional ¥450

management structure and network that integrates public andbillion to rebuild seven or eight buildings and step up improve-

private services.

ments to downtown facilities by remodeling existing buildings

10 Mitsubishi Estate 2005

三菱地所AR05E本文_0905 05.9.12 11:25 AM ページ 11

Marunouchi and Other Areas—Asset andNon-Asset Businesses
In addition to owning select properties in the Marunouchi area,
Mitsubishi Estate is engaged in asset management activities
with the aim of maximizing asset values. Against the background of significant change in the business environment, suchas the launch in Japan of a real estate investment trust (J-REIT)
market, Mitsubishi Estate is also active in non-asset businesses,
buoyed by increased liquidity in real estate markets. Leveraging
our longstanding experience in property development, we are
pursuing projects in areas outside Marunouchi, and broadening
activities to include properties in which the Company has noownership. As part of its overall activities, Mitsubishi Estate is
engaged in property development earmarked for future income
generation. We limit risk by engaging in developments earmarked
for sale. These comprise limited fund-type developments fromwhich the Company enjoys income gains through rental income
and fees and capital gains from property sale in line withmarket circumstances. Maintaining this stance into the future,
the Mitsubishi Estate Group will work to further enhance its
value by continuing to build an optimal asset portfolio with a

Shiodome Stage I-2 Area Project (tentative name)best-fit mix of stable cash flows from asset businesses andnon-asset businesses that involve income-generating real

meet the owner’s needs. Under this method, a special purpose

estate developments utilizing third-party capital.

company in which Mitsubishi Estate maintains an equity interest
effectively utilizes leasehold land. In addition, benefits accrue
throughout the Group. Mitsubishi Estate’s project management
and architectural design and engineering activities were all
involved in this project. Following construction completion, theproperty has been sublet and the Company commissioned toprovide asset and property management services.
Furthermore, Mitsubishi Estate is pushing forward with anumber of projects including the Kudan-Kita Project (tentativename), the Nagoya Nishiki 2-chome Project (tentative name)and Shiodome Stage I-2 Area Project (tentative name), a largeGENTO YOKOHAMA

scale project located in the 31-hectare mixed commercial zone
I-2 area, which is

In the area of office buildings and retail facilities regarded as

the last of the large-

income-generating real estate, Mitsubishi Estate has participatedscale Shiodome

in projects such as Somerset Azabu East, a serviced apartment

Shiosite redevelop-

complex, GENTO YOKOHAMA, a comprehensive entertainment

ment projects. In

facility located in the Minato Mirai district of Yokohama, and kurax,

the future, along

a commercial facility that opened in Aoba-ku, Sendai City. Amongwith office building,its many activities are properties such as Nibancho Garden

retail facility anda project for which an end-purchaser has been confirmed.

rental housing

As part of Mitsubishi Estate’s asset solution business,

activities, Mitsubishi

construction of the Osaki Front Tower was completed in June

Estate will actively

2005. The Osaki Front Tower is an example of an office building

work to expand its

project that has utilized development securitization methods todevelopment menu

Nibancho Garden

Mitsubishi Estate 2005 11

三菱地所AR05E本文_0905 05.9.12 11:25 AM ページ 12

in directions leading to thecentral London area conducive to office and retail use, andcreation of new businessserviced by Bank Station, St. Paul’s Station and Cheapside.

opportunities.

The project is adjacent to the historical St. Mary-Le-Bow

Overseas, Mitsubishi

Church and is attracting considerable attention. Construction

Estate has commenced awill commence in Autumn 2005 with scheduled completion insecond redevelopment

the beginning of 2007. At present, we are adopting the stanceproject in London, following

to promptly sell the property on completion, thereby recovering

completion in 2003 of thesubstantial funds. Based on the success of the Paternoster

Paternoster Square Redevel-

project and plans for this new development, we are continuing

opment Project. The Bow

to cement our position as a leading developer in London.

Bells (House) Redevelopment Project is a joint

Underpinned by the know-how accumulated through theventure between Mitsubishi

Marunouchi Redevelopment Project, Mitsubishi Estate is

Corporation and Mitsubishi
Estate. Utilizing the land

Nagoya Nishiki 2-chome Project(tentative name)endeavoring to further enhance its capabilities in building andfacility development, as well as in the amenities that supportand existing building owned by Mitsubishi Corporation, plansproperty development, and to realize true value in its fields ofcall for the construction of a new commercial development in a

operation.

Paternoster Square

12 Mitsubishi Estate 2005

三菱地所AR05E本文_0905 05.9.12 11:25 AM ページ 13

Business Information
Maximize asset efficiency Risk management Funds procurement Real estate investment

C O N S U LT I N G
CUSTOMERS

Determinecurrent
statusConduct
researchandanalysisREAL
ESTATE-RELATEDPLANNING,PROPOSALS,AND SERVICES

Considerinitiatives
andproposals

Proposal determination
Real estatedevelopment business● Development method proposals● Financing plan support● Project management● Effective application andcollaboration business(Equivalent exchange,
commission business, termleasehold interest method)● Provisional use● Reconstruction

Real estate investmentrelated business● Real estate investment strategy
formulation support● Market research and analysis● Due diligence● Acquisition support● Property management● Asset management

Real estate liquidity● Real estate-backed financing
support● Securitization● Specified real estate joint
business● Sales and leaseback● Real estate brokerage business

Building operational
management

Implementation

Analysis and review

SOLUTION● Operational management plan
analysis and proposals● Long-term maintenance plan
consulting● Building, retail facility, and hotel
operational management
consignment● Sub-leasing● Tenant marketing

Comprehensive
building analysis

Design and supervision● Earthquake resistance analysis● Facility management● Energy conservation and
IT-oriented construction
and facilities● Interior and exterior renovation● Barrier-free facility construction● Aging-prevention construction
and facilities● Conversion

Construction● Office building and retailfacility construction● Detached-housing, leased
residence, company dormitory
and housing construction● Temple, hospital, and otherspecialized building construction● Residence and office building
renovation● Environmental assessment
and research● Urban development
planning-related, PFI consulting● Environmental and civilengineering-related consulting,design and supervision● Construction management● Various construction building
design and supervision● Interior, exterior, and otherdesign and supervision

Lifestyle services● Complex housing, company
dormitory and housing operationand management● Community residence operation
for the elderly● Complex housing and other
Internet connection services

Real Estate Consulting & Solution Department
Mitsubishi Estate is strengthening efforts toward proposal-based marketingwith the aim of cultivating business opportunities across the Group

Standing at the heart of Mitsubishi Estate’s strategic marketing
structure, the Real Estate Consulting & Solution Department
works to strengthen proposal-based marketing across the Group
as a whole. Underpinned by its wealth of accumulated realestate development, planning and management know-how andexpertise, the Real Estate Consulting & Solution Department is
active in its efforts to realize maximum value for its corporateclients.

The Mitsubishi Estate Group’s Marketing Structure
The Mitsubishi Estate Group is a comprehensive real estate development Group engaged in activities across eight business operations comprising Building Business, Residential Business, Urban
Development & Investment Management, International Business,
Architectural Design & Engineering, Custom-Built Housing, HotelBusiness, and Real Estate Service operations. Independent of theaforementioned eight business operations, the Real EstateConsulting & Solution Department promotes proposal-based marketing on a cross-sectional basis across the entire Group.
Leveraging the collective strengths of the Group, the Real EstateConsulting & Solution Department provides a full range of best-fit,
customer-oriented consulting services and solutions including
effective real estate acquisition and usage.

Large-Scale Joint Development and Private FinanceInitiative Businesses
The Real Estate Consulting & Solution Department is pursuing initiatives in response to large-scale joint developments and theincrease in recent years of private finance initiatives (PFIs) as ameans to create new business opportunities. Against this background, and supported by its know-how and expertise accumulated
over many years, the Real Estate Consulting & Solution
Department actively pursues development securitization and othernew business methods.

Mitsubishi Estate 2005 13

三菱地所AR05E本文_0905 05.9.12 11:25 AM ページ 14

1.

Building Business Operations
Enhancing Urban Functions from the Perspective ofArea Management

Building Business operations primarily handle the development,
leasing and property management of office buildings in Japan'smajor cities, as well as management of large-scale shopping
centers, operation of parking lots and operation of heating andcooling services throughout Japan, enhancing urban functions
from the perspective of area management.

1. Marunouchi OAZO
A multi-function development comprising
office buildings, retail facilities and a
hotel, Marunouchi OAZO opened in
September 2004.

Promoting Increased Interaction in the Marunouchi District
The Marunouchi district, with its overwhelming infrastructure andcorporate scale, offers a variety of business opportunities. For its
part, Mitsubishi Estate strives to transform Marunouchi into aworld-class center of dynamic interaction, thereby creating thepotential for even more opportunity. In the Marunouchi Building,which opened in September 2002, Mitsubishi Estate establishedTokyo 21c Club, a facility to allow professionals and business persons from a variety of fields to interact and exchange views.
Interaction is not limited to the corporate sector: Mitsubishi Estate
has also introduced the “Marunouchi Academic Suites,” which
serve as a common communication forum for private, public andacademic circles.

The Second Stage of the Marunouchi Redevelopment
In an effort to raise awareness of Tokyo as an international city
among business people all over the world, to maximize its fullpotential, and to deliver new functions that meet today's andtomorrow's business needs, Mitsubishi Estate is acting beyond therole of developer to that of a producer. In 1998, we commenced
the first stage of the Marunouchi Redevelopment, a 10-year program encompassing the upgrade, reconstruction and renovation ofmuch of the Marunouchi district. Beginning with the Marunouchi
Building, Mitsubishi Estate has made steady progress in the
14 Mitsubishi Estate 2005

三菱地所AR05E本文_0905 05.9.12 11:25 AM ページ 15

2.

3.

5.

4.

2. The Shin-Marunouchi Building
Rebuilding plans are proceeding onschedule for the completion of the ShinMarunouchi Building by the fiscal year
ending March 31, 2008. Completion of
construction will coincide with the close of
the first stage of the Marunouchi
Redevelopment.

3. The Peninsula Tokyo (tentative name)Constructed by Mitsubishi Estate, thePeninsula Tokyo will be leased andoperated by The Hongkong and Shanghai
Hotels, Limited. Scheduled to open in thefiscal year ending March 31, 2008, thisworld-class luxury hotel is attracting
considerable expectations and interest.

ensuing period. In February 2003, the Industry Club of Japan and
Mitsubishi Trust and Banking Building was completed. This wasfollowed in September 2004 by the completion of Marunouchi
OAZO, which faces Tokyo Station on the former site of Japan
National Railways Headquarters. The planned completion of theTokyo Building in October 2005 and the Shin-Marunouchi
Building and The Peninsula Tokyo (tentative name) by the fiscal
year ending March 31, 2008, will bring the first stage of the
Marunouchi Redevelopment to a close. Thereafter, we will commence the second stage of the project, which involves the simultaneous redevelopment of the Mitsubishi Shoji Building, theFurukawa Building and the Marunouchi Yaesu Building. This willserve as the hub that joins the Marunouchi and Yurakucho districts. Based on the achievements of the Marunouchi
Redevelopment Project to date, the second stage will encompass
broader and more comprehensive plans to rejuvenate theOtemachi, Marunouchi and Yurakucho districts, an area of approximately 111 hectares. Mitsubishi Estate will not only focus on providing renewed infrastructure, but will also provide intangible
benefits to create a fresh, appealing and comfortable environment.
We are committed to creating a dynamic Marunouchi district thatoffers a variety of functions and caters to diverse needs.

4. Toki Premium Outlets
The Toki Premium Outlets, which opened
in March 2005, is the fifth premium outlet
in Japan operated by Chelsea Japan Co.,
Ltd., a joint venture among Mitsubishi
Estate, U.S.-based Chelsea Property
Group, Inc. and Sojitz Corporation.

5. The Tokyo Building
Completion of the Tokyo Building isscheduled for October 2005. This is thefirst development in Japan to takeadvantage of regulations allowing unused
air rights to be transferred from within the
Marunouchi side of the Tokyo station
house, to increase floor space.

Expanding the Shopping Center Business Throughout
Japan
Building Business operations include shopping centers in Tokyo (inOdaiba), Yokohama, Hakata and other locations, and work is also
proceeding on the commercialization of Marunouchi Naka Dori, aspart of its redevelopment. In addition, Mitsubishi Estate is in apartnership with U.S.-based Chelsea Property Group, Inc. andSojitz Corporation. The partnership vehicle, Chelsea Japan Co.,
Ltd., operates outlet malls in Gotemba (Shizuoka Prefecture),
Izumisano (Osaka Prefecture), Sano (Tochigi Prefecture) and Tosu
(Saga Prefecture), and opened Toki Premium Outlets in Toki (Gifu
Prefecture) in March 2005.

Mitsubishi Estate 2005 15

三菱地所AR05E本文_0905 05.9.12 11:25 AM ページ 16

1.

Residential Business Operations
In Partnership with TOWA REAL ESTATE DEVELOPMENT
CO., LTD., Mitsubishi Estate is Pushing Forward to the
Next Stage in Residential Business Operations

Residential Business operations aim to provide ideal living
environments in concert with a healthy and fulfilling lifestyle, bydeveloping and marketing condominiums, single-unit homes andresidential land, as well as engaging in businesses such as
condominium administration and consulting services for the
optimal use of real estate. At the same time, Mitsubishi Estate
manages fitness clubs.

Condominium Sales
3,451

2,437
1,955

2001/3

2,096

2002/3

2003/32,299

2004/316 Mitsubishi Estate 2005

2005/3

1. Minami-Aoyama Terrace Tokiwamatsu Forest
Mitsubishi Estate, Sumitomo Corporation and other parties areconstructing the Minami-Aoyama Terrace Tokiwamatsu Forest, a
196-condominium joint development located in Minami Aoyama,
Minato Ward. The development offers stately external tiling, twocourtyards, nestled in a leafy natural environment. Facilities
include a 24-hour heating and cooling ventilation system, which
contribute to an optimal lifestyle.

Growth in the Condominium Business Spurred byMarket-Oriented Products and Services
Sales of condominiums, particularly in the Tokyo Metropolitanarea, continued to increase as a result of the supply of marketoriented properties that fulfill the diverse needs of customers.
Underpinned by its product planning capabilities, Mitsubishi
Estate strives for competitive advantage by focusing on properties
in popular urban areas that offer superior and convenient location,
large-scale properties with comprehensive communal facilities
built with the environment in mind, high-rise condominiums thatprovide spectacular views, and collaboration with leading designers
and firms from a variety of industries to distinguish itself fromcompetitors.
To further address the growing variety in customer demand, wedeveloped and are marketing full order-made condominiums under
the STYLE HOUSE brand. To further these efforts, Mitsubishi
Estate established the Detached Housing Office in the current fiscal year with the aim of cultivating a new housing market thatcaters to the second-generation of baby boomers.
As an adjunct to its existing activities, Mitsubishi Estate is reinforcing its focus on quality assurance. Utilizing its proprietary disclosure system, we provide an easy-to-understand written record ofproperty features, facilities and quality, at each stage of design,

三菱地所AR05E本文_0905 05.9.12 11:26 AM ページ 17

2.

4.

3.

2. PARK HOUSE IKEDAYAMA KOEN, SHIROKANEDAI NO
MORIPark House Ikedayama Koen, Shirokanedai no Mori is a 148condominium joint development project between Mitsubishi
Estate and Nippon Oil Real Estate Co., Ltd. Located in Higashi
Gotanda, Shinagawa Ward, the complex is set in a natural
green environment and is comprised of two towers, one tower
facing Ikedayama Koen (Parkside Court), the other facing
Hatakeyama Memorial Museum Hannya-en (Hillside Court).

3. M.M. TOWERS FORESIS
In collaboration with leading companies including Tokyu
Corporation, Mitsubishi Estate is currently constructing a
twin-tower, 1,226-condominium complex located in the
Yokohama Minato Mirai district. Taking into consideration location, the environment, safety and comfort, thisdevelopment offers a spacious green location, energyconservation facilities, seismic isolation and the latest in
security facilities.

construction and completion. This information is supplemented bya maintenance report after individual property owners takeoccupation.

Equity Participation and Business Collaboration with
TOWA REAL ESTATEIn March 2005, Mitsubishi Estate formed an equity partnershipwith TOWA REAL ESTATE DEVELOPMENT CO., LTD. At the sametime, the two companies executed a business cooperation agreement. Under this agreement, both companies will work to leverage
their unique capabilities and strengths. With little overlap in customer base and operating areas, the two companies are expected
to maximize synergy benefits. Based on the move toward businessintegration between Towa Community Service Co., Ltd., a TOWAREAL ESTATE subsidiary, and Mitsubishi Jisho Community Service
Co., Ltd., Mitsubishi Estate acquired 51% of Towa Community
Service’s shares. Accordingly, Towa Community Service wasincluded in Mitsubishi Estate’s scope of consolidation. With a
combined stock of approximately 137,000 properties, the twocompanies enjoy the leading position in Japan’s condominium
management market. Based on these measures, Mitsubishi Estateis building a highly competitive condominium, housing and related
property business. Focusing on core competencies such as condo-

4. Sanbancho Park Terrace Ouen
Sanbancho Park Terrace Ouen is a joint residential development project between Mitsubishi Estate and Mitsubishi
Corporation for the construction of a 102-condominium
complex in Sanbancho, Chiyoda Ward. In harmony with anenvironment that includes 50 year old cherry-blossom trees andexisting forestation, the development boasts undergroundparking, a standard ceiling height of 2,700mm, 24-hourcaretaker services and the latest in home security.

minium dvelopment, brokerage and property management, we will
endeavor to maintain a balanced business portfolio.

Contributing to a Healthy Lifestyle through the Fitness
Business
Mitsubishi Estate is also engaged in a number of leisure services
such as the management of golf courses, fitness clubs and businesses associated with increased leisure time and the promotion ofgood health. Against the background of a rapidly aging society, Liv
Sports Co., Ltd. in particular is actively expanding activities in thefitness business. With the opening of Fitness Club Liv Hashimotoin August 2004, Liv Sports has expanded its network to includenine branches of its fitness clubs. In addition, Liv Sports operates
futsal clubs and massage facilities, as well as other fitness clubs in
the Tokyo Metropolitan area. In the future, Liv Sports will actively
pursue family-oriented branches in suburban areas around Tokyo.

Mitsubishi Estate 2005 17

三菱地所AR05E本文_0905 05.9.12 11:26 AM ページ 18

1.

2.

Urban Development & Investment
Management Operations
Prioritizing Development and Management in Business
Opportunity Expansion

Based on the fundamental policy of developing and managing
quality real estate, Urban Development & Investment Management operations are responding to increasing demand forincome-generating real estate for investment purposes among
investors. We are developing business through optimal application of the development and management functions.

18 Mitsubishi Estate 2005

1-2. OSAKI FRONT TOWERThe OSAKI FRONT TOWER is an office buildingin Osaki, which has been designated as an urgent
urban revitalization area. The building is one
example of our asset solutions that used
development-based securitization methods tomeet the owners’ needs to effectively utilize land.

Actively Promoting the Development Business byStrengthening Asset Solutions Capabilities
In the context of the development function, we optimize the timingof supply of prime investment products soon after construction
completion and the commencement of operations. In this manner,
we are fostering the development business of income-generating
real estate.
At the end of June 2005, construction of the OSAKI FRONTTOWER in Osaki, Shinagawa Ward, was completed. Through its
Urban Development & Investment Management operations,
Mitsubishi Estate is also active in a number of development projects including the Shiodome Stage I-2 Area (tentative name),
which forms part of the large-scale Shiodome Shiosite redevelopment project, the Kudan-Kita and the Nagoya Nishiki 2-chome
Projects (tentative names). Mitsubishi Estate does not limit its
activities solely to office buildings: it also engage in the development of a broad range of real estate, including retail facilities, residential properties and serviced apartments, in an effort to address
the diverse needs of the investment market. In its retail facility
activities, Mitsubishi Estate participated in the development of
GENTO YOKOHAMA, a comprehensive entertainment facility located in the Minato Mirai 21 district of Yokohama and which opened
in November 2004. Another example is kurax, a commercial

三菱地所AR05E本文_0905 05.9.12 11:26 AM ページ 19

3.

4.

5.

3. Kudan-Kita Project (tentative name)
This project uses development-based securitization methods to procure
development funds through non-recourse loans and equity financing fromjoint-venture partners. The Kudan-Kita Project provides commuting
convenience as well as an ideal environment located next to Kudanshita
Station, Ushigafuchi and Kitanomaru Park. A multi-purpose project, thebuilding houses offices, retail stores and condominiums.

4. kurax
Kurax is a commercial facility that openedin Aoba-ku, Sendai City in February 2005.
A total of 12 stores have opened in thefacility, including stores opening for the
first time in Sendai.

facility that opened in Sendai in February 2005. Leveraging our
performance and accumulated know-how in residential property
development, and the renowned Park House brand in condominium developments, we are pushing forward with the development of
the PARK HABIO brand of condominium complex for leasing purposes. Conscious of the recent growth in investment funds including real estate investment trusts, our intention is to sell eachcomplex as a whole upon construction completion.
In September 2004, construction was completed on PARKHABIO KYOBASHI, the first building of the series of condominiums. In February 2005, we completed two more buildings, the
PARK HABIO MEGURO FUDOMAE and PARK HABIO GAKUGEIDAIGAKU. Mitsubishi Estate plans to continue supplying highquality condominiums in central city locations that meet various
needs.
In its development projects, Mitsubishi Estate plans to use
special-purpose companies to limit business investment risk in theinvestment of approximately ¥20 billion per year raised throughequity financing. Looking forward, Mitsubishi Estate is making
every effort to secure more business opportunities by strengthening
asset solutions capabilities to maximize asset value for real estatecustomers.

5. PARK HABIO GAKUGEI DAIGAKUPARK HABIO GAKUGEI DAIGAKU wascompleted in March 2005. Located 7
minutes on foot from Gakugei Daigaku
Station on the Tokyu Toyoko Line, all unitsof this designer condominium complex
face south towards Himonya Park.

Providing a Broad Range of Specialized Services for Real
Estate Investment
Mitsubishi Estate is developing a fee-based business throughMitsubishi Jisho Investment Advisors, Inc., which provides comprehensive services related to real estate investment, and Japan
Real Estate Asset Management Co., Ltd., which engages in asset
management for Japan Real Estate Investment Corporation.
Earnings from fund management are steadily growing at Mitsubishi
Jisho Investment Advisors, which is building the MJ Retail Fund, areal estate private equity fund comprising commercial facilities,
and also a rental-housing fund. Continuing to secure management
opportunities, Mitsubishi Jisho Investment Advisors aims toincrease the number of funds it manages and expand the balanceof assets under management.
Focusing on both development and management, Mitsubishi
Estate aims to expand business opportunities through growth in
the real estate investment market and by responding to socioeconomic needs for urban redevelopment.

Mitsubishi Estate 2005 19

三菱地所AR05E本文_0905 05.9.12 11:26 AM ページ 20

1.

1. Bow Bells House Redevelopment Project
Located in the heart of London’s financial district, the Bow Bells House
Redevelopment Project calls for the construction of a 20,000m2 office building.

2. The McGraw-Hill Building
With 51 floors above ground and five floors below ground, the McGraw-Hill
Building boasts total floor space of 237,000m2. Located in Manhattan, New
York, this office building was completed in March 1972. Mitsubishi Estate
acquired an interest in the building in April 1990.

2.

International Business Operations
Comprehensive, Worldwide Real Estate Services

In International Business operations, Mitsubishi Estate operates
mainly through Rockefeller Group, Inc. (RGI), which owns,
leases and manages office buildings in such locations as New
York (the Time-Life and McGraw-Hill buildings) and London(Paternoster Square), and is active in real estate development
across the United States and in London. In addition, Cushman &Wakefield, Inc. (C&W), an RGI subsidiary, offers global comprehensive real estate services, centered mainly on real estate
brokerage, primarily in the United States and Europe.

20 Mitsubishi Estate 2005

Bow Bells House Redevelopment Project Commences
Operating mainly from the state of New Jersey, RGI is active in thereal estate development business across the United States. In
2004, RGI sold to investors the 777 Tower in Los Angeles and certain development properties in New Jersey. In addition to securing
profits from developments, RGI has procured funds for future
investment.
Following in the footsteps of the Paternoster Square
Redevelopment Project, completed in 2003, Mitsubishi Estate has
embarked on a second redevelopment project in London. In
Autumn 2005, construction will commence on the Bow Bells
House Redevelopment Project, a joint venture with Mitsubishi
Corporation, with completion scheduled in early 2007. The projectcalls for the demolition of an existing building owned by Mitsubishi
Corporation to be followed immediately by joint construction of a
new building. Located in an area conducive to office and retailuse, and adjacent to the historic St. Mary-Le-Bow Church, the site
is attracting significant attention.
Focusing mainly on the bullish U.S. real estate investment market, C&W is continuing to produce solid results. The company ispushing toward further growth spurred by a steady expansion inmarket share.

三菱地所AR05E本文_0905 05.9.12 11:26 AM ページ 21

1.

1. Osaka Securities Exchange Building
Located in Osaka, this building was completed in November 2004. Twofloors are below ground and 24 floors above ground.

2. Minato Mirai Business Square
Located in Yokohama, Kanagawa Prefecture, this building was completedin August 2004. Two floors are below ground and 14 floors above ground.

2.

Architectural Design & Engineering Operations
Leveraging Accumulated Know-How to Expand Peripheral Businesses

At the core of Mitsubishi Estate’s Architectural Design & Engineering operations is Mitsubishi Jisho Sekkei Inc., a businessengaged in the design and administration of construction andcivil engineering projects, building renovation work, projects
related to urban and regional development, as well as comprehensive consulting.

Robust Architectural Design & Engineering Operations
Coupled with Peripheral Business Expansion
The major projects that were completed during the fiscal year
ended March 31, 2005 included the Osaka Securities Exchange
Building, Marunouchi OAZO’s Marunouchi Hotel and the Minato
Mirai Business Square. The Tokyo Building, the Mitsubishi
Corporation new office building, and Kudan-Kita Project (tentativename) are planned for completion in the fiscal year ending March
31, 2006. In the future we will continue efforts to secure orders inarchitectural design and engineering for office buildings, condominiums and retail facilities, and actively pursue business expansion by cultivating new business domains in refurbishment,
construction management, PFIs and district heating and cooling,
all areas earmarked for potential growth.

Continuous Efforts to Enhance Customer Satisfaction
Mitsubishi Jisho Sekkei consistently endeavors to improve its planning, design and technical capabilities in an effort to swiftly andaccurately address the varied and increasingly sophisticated needsof its clients. In addition, Mitsubishi Jisho Sekkei, together with
MEC Design International Corporation, a company that provides
interior design services, fully utilize the technological strengths
that support the entire Mitsubishi Estate Group to deliver highquality products and services. Furthermore, as part of the quality
management system, Mitsubishi Jisho Sekkei conducts periodic
customer satisfaction surveys. The results are shared in-house toensure consistent and continuous improvement in customer
satisfaction.

Mitsubishi Estate 2005 21

三菱地所AR05E本文_0905 05.9.12 11:26 AM ページ 22

1.

1. TRESTELLA
TRESTELLA, a new concept in open-style kitchen
created in conjunction with the renowned Italianindustrial design company Giugiaro Design.

2. Master
A new product with a distinctive external facade.

2.

Custom-Built Housing Operations
New Ideas for Every Lifestyle

Custom-Built Housing operations seek to supply the kind of
quality housing that is the foundation of a rewarding life.
Through Mitsubishi Estate Home Co., Ltd., our principal vehicle
in these activities, we undertake construction contracts forcustom-built housing for individuals as well as housing development companies.

“Aerotech,” an Innovative Open-Design Housing Concept
Focusing on the two-by-four construction method, the principal
method for single unit custom-built housing, Mitsubishi Estate
Home strives to deliver living safety and comfort. Leveraging its
accumulated technical know-how and expertise, the company
boasts stringent quality standards, offering maximum protection
from earthquakes, durability and energy efficiency. The company isalso renowned for its “Aerotech” mainstay brand. As well as providing a 24-hour central heating, cooling and ventilation system,
Aerotech delivers the best in comfortable living, with an opendesign concept that fully satisfies the diverse needs of customers.
Based on the theme of communication that starts and is centered around the kitchen, Mitsubishi Estate Home launched“TRESTELLA” in April 2005, a concept that positions an open-

22 Mitsubishi Estate 2005

style kitchen at the core of communication and family life.
On the theme of home safety and security, Mitsubishi Estate
Home markets the “Prote” series of security-conscious residences
and for the senior demographic, the “Master” brand, distinguished
for its elegant and sophisticated external facade. In addition to the
new TRESTELLA, the Prote and Master brands, Mitsubishi Estate
offers a wealth of variations.
Mitsubishi Estate Home is also active in fostering business
opportunities with housing development companies and in houserenovations. Based on its residential design know-how, accumulated over a number of years, the company endeavors to create comfortable living environments on an individual and town-wide basis.

Air Mascot Fu-san

三菱地所AR05E本文_0905 05.9.12 11:26 AM ページ 23

1.

1. Royal Park Shiodome Tower
Located in Shiodome Media City, Tokyo, this new style of hotel
was created around the concepts of stylish space, a convenientenvironment and flexible service.

2. Sendai Royal Park HotelThis beautifully designed hotel is located near Sendai City.
Within the seasonally expressive gardens that surround the hotel,
are wedding facilities for hotel and other guests. Wedding
facilities include a garden chapel and other facilities such as an
esthetic salon directly operated by the hotel.

2.

Hotel Business Operations
Enhancing Brand Power and Management Efficiency

In Hotel Business operations, Royal Park Hotels and Resorts Co.,
Ltd. integrates the administration and management of each hotel
to ensure consistency throughout the hotel chain, to enhance
management efficiency and to improve the level of management.
With hotels in Tokyo, Yokohama, Sendai and other locations,
the Royal Park chain comprises a network of seven hotels
offering 2,235 guestrooms.

A New Style of Hotel that Supports Business
Opened in July 2003 in Shiodome, Tokyo, the Royal Park
Shiodome Tower offers a new paradigm in hotel services, including
Japan’s first Mandara Spa for relaxation, and the use of a timesharing service where members are able to use guestrooms on anhourly basis. These unique services have sustained a high rate ofoccupancy. Mitsubishi Estate plans to use the development andmanagement know-how gained from the Royal Park Shiodome
Tower to create new business opportunities.

Increasing the Brand Value of Royal Park Hotels ThroughManagement Focused on Customer Satisfaction
Based on the “Best for the Guest” philosophy of the Royal Park
Hotels, we take one step beyond customer satisfaction by aiming
to delight our guests.
As part of an initiative to enhance the hotel chain, in July 2004
we launched a central reservation office, a first for a locally owned
hotel chain in Japan. Using this system, it is possible to directly
make reservations on a Web site for rooms at hotels in Japan andother countries around the world. We will aggressively promote theuse of this online reservation system to hotels outside the Royal
Park Hotels group.

Mitsubishi Estate 2005 23

三菱地所AR05E本文_0905 05.9.12 11:26 AM ページ 24

1.

2.

Real Estate Service Operations
Placing Further Strategic Focus on Real Estate
Brokerage Operations

1. Nabeaure Yokohama Tower Residence*
A joint development between Mitsubishi Logistics Corporation and Mitsubishi
Estate, Nabeaure Yokohama Tower Residence is a 390 condominium high-riseluxury complex currently under construction in Kanagawa-ku, Yokohama.
2. Forton Hills*
A joint development among a number of companies including TOWA REALESTATE DEVELOPMENT CO., LTD., Forton Hills is a large-scale 888
condominium complex currently under construction in Totsuka-ku, Yokohama.
*Mitsubishi Real Estate Services Co., Ltd. acts as sales agent.

Real Estate Service operations, which provide real estate brokerage, condominium sales agency, and office and residential
property leasing services, are primarily handled by Mitsubishi
Real Estate Services Co., Ltd. Real Estate Service operations iscommitted to delivering customer-oriented services that meet
every conceivable requirement and need.

Real Estate Brokerage Services
Mitsubishi Real Estate Services strives to deliver a comprehensive
range of consulting services that support customers in the optimal
application of real estate. It is mainly engaged in the real estate
brokerage business, active in the purchase, sale and leasing ofcondominiums and single-unit homes and residential land for individuals, and building and factory sites for the corporate sector.
Mitsubishi Real Estate Services also boasts a nationwide network
Real Estate Brokerage Transactions
1,811

2001/324 Mitsubishi Estate 2005

1,787

2002/3

1,808

1,835

of branches and sales offices, as well as a comprehensive online
database. Through these means, Mitsubishi Real Estate Services is
consistently able to provide the latest in real estate information.

Sales Agency Services for Properties such as Condominiums
Qualified staff, who are well versed in the unique features andcharacteristics of individual properties, as well as real estate
finance, law, taxation and related matters, are on hand to assist
customers in sale of properties such as condominiums. Mitsubishi
Real Estate Services also offers specialist staff to assist customers
in peripheral procedures such as property registration, real estate
finance and other administrative matters. In the area of property
development and sales, the Company is on hand to provide total
support to property owners and developers. We offer a full range ofservices including property information, surveys and appraisal,market data, product planning, and advertising and promotional
planning.

1,901

Office and Residential Leasing Services

2003/3

2004/3

2005/3

Mitsubishi Real Estate Services is engaged in a full range of office
and residential property leasing services. Mitsubishi Real Estate
Services offers a sublease system, under which it leases an entire
property from the owner and under a master-lease agreement, sublets to tenants. It also provides a property agency system that
includes a comprehensive range of leasing services.

三菱地所AR05E本文_0905 05.9.12 11:26 AM ページ 25

Financial Review
BUILDINGS SEGMENT
Buildings segment revenues are derived
mainly from building development andleasing in Japan. This segment is also
engaged in building management, parking
facilities, district heating and cooling, andother operations.

Revenue from operations

2005/3Operating income(Millions of yen)

286,959

83,785

2004/3

287,281

86,615RESIDENTIAL DEVELOPMENT SEGMENT
Residential Development segment revenues
are derived from the construction and saleof condominiums and single-unit homes;
the development and sale of residential,
resort, and commercial lots; the management of condominiums and homes, and;related activities.

Revenue from operations

Operating income(Millions of yen)

211,088

2005/3

17,651

2004/3

148,410

16,313

ARCHITECTURAL DESIGN & ENGINEERING SEGMENT
Architectural Design & Engineering
segment activities are primarily conducted
through Mitsubishi Jisho Sekkei Inc.
Segment revenues are derived from thedesign and project supervision of construction and civil engineering projects.

Revenue from operations

2005/3Operating income(Millions of yen)

18,859(364)

18,3292004/3

1,038

URBAN DEVELOPMENT & INVESTMENT MANAGEMENT SEGMENT
Urban Development & Investment Management segment revenues are derived fromthe development of income-generating realestate for investment purposes; asset
management, and; related activities.

Revenue from operations

Operating income

2005/3
2004/3(Millions of yen)

8,609

3,946
2,984
305

INTERNATIONAL BUSINESS SEGMENT
International Business segment activities
are primarily conducted through U.S.based Rockefeller Group, Inc. Segment
revenues are derived from real estatedevelopment and leasing; brokerage, and;related activities.

Revenue from operations(Millions of yen)

183,185

2005/3
2004/3Operating income

26,445
153,819
13,968CUSTOM-BUILT HOUSING SEGMENT
Customer-Built Housing segment activities
are primarily conducted through Mitsubishi
Estate Home Co., Ltd. Segment revenues
are derived from contract construction ofcustom-built housing.

Revenue from operations

2005/3
2004/3Operating income(Millions of yen)

37,456(1,470)41,318(350)

HOTELS SEGMENT
Hotels segment revenues are derived fromthe operation of Royal Park Hotels.

Revenue from operations

2005/3
2004/3Operating income(Millions of yen)

32,111
912
31,134321

OTHER SEGMENT
Other segment revenues are derived fromthe management of leisure-related operations
such as golf courses and fitness clubs.

Revenue from operations(Millions of yen)

13,4802005/3
2004/3operating income

589
(572)

10,685

Mitsubishi Estate 2005 25

三菱地所AR05E 財務_0905 05.9.12 11:22 AM ページ 26

Financial Review

Summary
In the fiscal year ended March 31, 2005, revenue from operations
showed an increase. In Building Business operations, results were
impacted by the closure of buildings in connection with the
Marunouchi Redevelopment Project and a drop in revenues fromexisting buildings. This was more than offset by growth in Residential Development operations, driven by an increase in the numberof condominiums sold and contributions from the sale of overseas
property holdings. Operating income increased mainly from profits
generated through the sale of overseas buildings. Results were
further boosted by an increase in profits in Residential Development operations and from Urban Development & Investment
Management operations. Income before income taxes and minority
interests also grew on the back of improvements in the Company’s
net other income and expenses position. This was mainly attributed to the drop in interest expenses reflecting the low interest
rate environment that extended throughout the period.
Additional items of significance within other income andexpenses included gains on the sale of fixed assets and investment
securities and losses on disposal of its ski and golf resort
ONIKOUBE business, disposal of fixed assets relating to thereconstruction of the Shin-Marunouchi Building, sales of fixed
assets, and valuation of inventories. As a result, net income for the
fiscal year under review amounted to ¥36,245 million.

Analysis of Revenue
Revenue from operations for the fiscal year ended March 31, 2005
was ¥775,381 million, an increase of 14.0% compared with theprevious fiscal year. Details of results and operating conditions foreach business segment are provided as follows.

In the Buildings segment, occupancy rates for existing buildings improved significantly, while the Marunouchi OAZO Building,which was completed in September 2004, commenced full operations. However, results were impacted by the closure of the ShinMarunouchi Building for reconstruction as part of the Marunouchi
Redevelopment Project, and a decline in revenue from existingbuildings. Accounting for these factors, total revenue in thissegment edged down 0.1% compared with the previous fiscal year,to ¥286,959 million.
In the Residential Development segment, revenue climbed
substantially by 42.2% year on year, to ¥211,088 million. Thiswas due to a jump in the number of condominiums sold particularly in the Tokyo Metropolitan area, and an increase in the numberof real estate brokerage transactions by Mitsubishi Real Estate
Services Co., Ltd.
Revenue from the Architectural Design & Engineering segmentrose 2.9% to ¥18,859 million. This was attributable to increasing
revenues from interior and design work.
In the Urban Development & Investment Management segment, revenue surged 188.5% year on year to ¥8,609 million. In
April 2004, construction of Nibancho Garden was completed andthe building became fully operational. This contributed significantly to the segment’s robust performance. Results were also buoyed
by benefits from anonymous associations investments underpinnedby the Company’s use of special purpose companies in its development business.
Focusing mainly on the robust U.S. real estate market, revenue
from Mitsubishi Estate’s International Business segment rose
19.1% to ¥183,185 million. This was primarily attributed to theincrease in profit at Cushman & Wakefield, Inc. and to the sale of

Net Income

Net Income per Share

(Billions of yen)

(yen)

36.0

27.61

36.2
35.0

15.26

19.8

(54.70)(71.1)

2001/326 Mitsubishi Estate 2005

27.93
26.96

2002/3

2003/3

2004/3

2005/3

2001/3

2002/3

2003/3

2004/3

2005/3

三菱地所AR05E 財務_0905 05.9.12 11:22 AM ページ 27

the 777 Tower located in Los Angeles.
In the Custom-Built Housing segment, revenue declined
10.3% to ¥37,456 million. Despite an increase in orders throughefforts to promote product differentiation with enhanced features
such as “Aerotech,” a 24-hour central heating, cooling and ventilation system, the drop in revenue reflects the delays in property
settlement, which caused a fall in the number of completions,.
No longer affected by the Iraq conflict and the SARS outbreakof the pervious year, results in the Hotels segment were steady.
Performance was also spurred by a full-year contribution from theRoyal Park Shiodome Tower, which opened during the previous
year. As a result, revenue in this segment increased 3.1% to¥32,111 million.
Revenue from the Other segment climbed 26.2% to ¥13,480
million. This healthy performance was the result of increases inrevenues at Shiki Resorts Company, Limited, in recreational
facility accommodation businesses, and in the fitness club business of Liv Sports Co., Ltd.

significant 89.3% jump in operating income from the International
Business segment following the sale of the 777 Tower.

Other Income (Expenses)
Other income (expenses) for the fiscal year under review amounted
to net other expenses of ¥42,300 million. This was a decline of¥4,506 million compared with the previous fiscal year. Within
other income, Mitsubishi Estate reclassified profits from silent
partnerships, which were transferred to operating income (expenses). Other, net totaled expenses of ¥20,912 million. This included
loss on disposal of fixed assets of ¥6,733 million relating to thereconstruction of the Shin-Marunouchi Building, and loss on salesof fixed assets of ¥4,730 million. The Company also reported
gains on sales of fixed assets and investment securities of ¥1,196
million and ¥2,644 million, respectively. During the fiscal year
under review, Mitsubishi Estate also incurred loss on valuation of
inventories of ¥5,102 million, loss on disposal of resort and golf
businesses of ¥6,390 million, mainly reflecting the sale of the
ONIKOUBE business, and other, net expenses of ¥1,799 million.

Analysis of Income
Compared with the previous fiscal year, operating income
increased 14.0% to ¥118,233 million.
Operating income in the Buildings segment declined 3.4% due
to a drop in income from existing buildings. Losses in the CustomBuilt Housing segment continued to deteriorate owing to thedelays in property settlement resulting in a drop in completions,and the increase in cost of sales. Despite these results, theincrease in overall operating income is attributed to a year-on-yearincrease in the Residential Development segment, underpinned by
the increase in the number of condominiums sold, and to the

Net Income
Compared with the previous fiscal term, income before income
taxes and minority interests increased ¥18,990 million to ¥75,933
million. Net income in the period under review rose ¥1,256
million to ¥36,245 million, and net income per share was ¥27.93.

Analysis of Financial Position(1) Consolidated Cash Flows
On a consolidated basis, cash and cash equivalents (hereafter“cash”) at end of the fiscal year declined ¥38,739 million to

Total Assets

Shareholder’ Equity(Billions of yen)(Billions of yen)

3,035.8

3,007.9

3,068.8

3,124.5
897.5
832.5

840.0

2002/3

2003/3920.9

2,535.3

518.8

2001/3

2002/3

2003/3

2004/3

2005/3

2001/3

2004/3

2005/3

Mitsubishi Estate 2005 27

三菱地所AR05E 財務_0905 05.9.12 11:22 AM ページ 28¥97,324 million. The main sources of cash were income before
income taxes and minority interests, depreciation and amortization,
increase in commercial paper, and increase in long-term borrowings,
while the main uses of cash were purchases of property andequipment, repayments of corporate bonds and long-term borrowings.

Cash Flows from Operating Activities
Net cash provided by operating activities was ¥88,900 million, up¥11,192 million compared with the previous fiscal year. In the
period under review, income before income taxes and minority
interests of ¥75,933 million and non-cash items such as depreciation and amortization of ¥55,545 million were recorded. In addition,
Mitsubishi Estate reported an increase in cash from recovery of thecost of inventories.

Cash Flows from Investing Activities
In the fiscal year under review, net cash used in investing activitieswas ¥92,409, an increase of ¥31,764 million from the previous fiscal
year. This was mainly attributed to capital investment in connection
with construction work related to the Marunouchi Redevelopment
Project, including Marunouchi OAZO and the Tokyo Building.

Cash Flows from Financing Activities
Net cash used in financing activities totaled ¥33,485 million, an
increase of ¥1,827 million. While Mitsubishi Estate received cashfrom the increase in long-term borrowings and the increase incommercial paper, this was more than offset by outflows attributed
to repayments of long-term borrowings and corporate bonds.

(2) Consolidated Balance Sheets¥55,672 million to ¥3,124,514 million as a result of theoperating, investing, and financing activities previously mentioned.
Liabilities, when compared with the previous fiscal year-end,rose ¥29,040 million to ¥2,168,280 million. Minority interests
climbed ¥3,201 million to ¥35,303 million. Total shareholders’equity stood at ¥920,930 million, an increase of ¥23,431 million.
This was mainly attributed to net income and the increase in land
revaluation reserve.

Management Initiatives and Financial Strategies
In its three-year Medium-Term Management Plan (April 1, 2002
through March 31, 2005), the Company set a goal for earnings
before interest, taxes, depreciation and amortization (EBITDA) of¥170 billion, to be achieved by the fiscal year ended March 31,
2005. Against this target, EBITDA for the fiscal year under review
was ¥178.4 billion.
Looking to the future, Mitsubishi Estate has identified an
EBITDA goal of ¥200 billion in its new three-year Medium-Term
Management Plan, which covers the period from April 1, 2005
through March 31, 2008. To this end, the Company has formulated
the fundamental strategies of rebuilding a dynamic and flexible
management structure, securing an optimal business portfolio,
improving its asset portfolio, and strengthening its developmentbased real estate solutions capabilities.
Recognizing the long-term nature of cash flows in its mainstay
Building Business operations, Mitsubishi Estate has adopted afinancial strategy based on stable interest rate long-term funds
procurement. At the present time, Mitsubishi Estate is taking
advantage of favorably low interest rates through the issue of longterm corporate bonds with maturity dates of more than 10 years.

Compared with the previous fiscal year-end, total assets increased

Interest-Bearing Debt

EBITDA(Billions of yen)(Billions of yen)

1,271.5

1,260.2

1,227.5

1,211.9

1,198.4
178.4
167.4
157.6
150.6

2001/328 Mitsubishi Estate 2005

2002/3

2003/3

2004/3

2005/3

2001/3

146.4

2002/3

2003/3

2004/3

2005/3

三菱地所AR05E 財務_0905 05.9.12 11:22 AM ページ 29

Financial Statements
Consolidated Statements of Income
Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2005, 2004 and 2003

Thousands of
U.S. dollars(Note 3)

Millions of yen
2005

2004

2003

2005

Revenue from operations (Note 2)¥775,381¥679,918¥681,726$7,220,234

Cost of revenue from operations

606,957

530,729

538,105

5,651,894

Selling, general and administrative expenses

50,19045,43847,598467,361

Operating income

118,233

103,749

96,023

1,100,968

Other income (expenses):
Interest and dividend income
Interest expense
Equity in earnings of unconsolidated subsidiaries and affiliates
Other, net (Note 14)

2,046

2,240

2,618

19,052(26,102)(27,482)(29,647)(243,058)

2,670

2,164

1,811

24,862(20,912)(23,729)(942)(194,729)(42,300)(46,806)(26,159)(393,891)

75,93356,94369,864707,077

Current

11,525

10,97011,925

107,319

Deferred

20,956

7,872

18,786

195,139

32,482

18,84230,711

302,467

Income before income taxes and minority interests
Income taxes (Notes 1 and 9):

Minority interests
Net income

7,205

3,111

3,114

67,091¥ 36,245¥ 34,989¥ 36,039$337,508

See accompanying notes to consolidated financial statements.

Mitsubishi Estate 2005 29

三菱地所AR05E 財務_0905 05.9.12 11:22 AM ページ 30

Consolidated Balance Sheets
Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
March 31, 2005 and 2004

Thousands of
U.S. dollars(Note 3)

Millions of yen

Assets
2005

2004

2005

Current assets:
Cash (Note 15)¥

83,226

Notes and accounts receivable—trade

75,063Marketable securities (Note 4)
Allowance for doubtful receivables¥

127,185$

774,988

60,497

698,975

12,547

7,612

116,835(3,127)(3,041)(29,118)

Inventories (Note 5)

263,566

276,4452,454,288

Equity investments (Notes 2 and 4)

103,761—

966,207

Deferred income taxes (Note 9)36,54550,073

340,301

Other current assets

34,00637,027

316,658

605,590555,799

5,639,165

Total current assets

Investments:
Investments in and advances to unconsolidated subsidiaries and affiliates

50,52026,526

470,434

Investment securities (Note 4)

176,068

190,040

1,639,519

128,641

151,230

1,197,886

355,231367,798

3,307,859

Other investments (Notes 6 and 7)
Total investments

Property and equipment (Note 7):Land1,365,534

1,341,932

12,715,653

Buildings and structures

1,509,040

1,492,552

14,051,960

Machinery and equipment

94,36989,995

878,750

Construction in progress

22,77830,119212,105

2,991,723

2,954,600

27,858,487(890,762)(867,778)(8,294,645)

Property and equipment, net

2,100,961

2,086,821

19,563,842

Intangible and other assets

62,73158,422584,141¥3,124,514¥3,068,842$29,095,018

Less accumulated depreciation

Total assets
See accompanying notes to consolidated financial statements.

30 Mitsubishi Estate 2005

三菱地所AR05E 財務_0905 05.9.12 11:22 AM ページ 31

Thousands of
U.S. dollars(Note 3)

Millions of yen

Liabilities and shareholders’ equity
2005

2004

2005

Current liabilities:
Short-term borrowings and current portion of long-term debt (Note 7)
Notes and accounts payable—trade¥218,60382,192¥

300,328$ 2,035,599

59,270765,359

Accrued income taxes (Note 9)

7,291

5,913

67,892

Advances and deposits

80,477

72,208749,390

Accrued expenses and other current liabilities (Note 9)

60,07542,920559,409

Total current liabilities

448,639

480,641

4,177,660

Long-term debt (Note 7)

979,768

911,559

9,123,456

Lease deposits received

298,388309,2092,778,545

Accrued employees’ retirement benefits (Note 8)

10,5909,644

98,612

Deferred income taxes (Note 9)

388,516

383,484

3,617,804

Other non-current liabilities

42,37544,700394,589

2,168,280

2,139,240

20,190,706

35,30332,102

328,736

Total liabilities
Minority interests
Shareholders’ equity (Note 10):
Common stock, without par value:
Authorized—1,980,000,000 shares;

86,53486,534805,791

Capital surplus

Issued—1,299,185,054 shares in 2005 and 2004

115,236

115,216

1,073,060

Land revaluation reserve424,785421,663

3,955,535

Retained earnings

243,577

220,178

2,268,153

Unrealized holding gain on securities

68,86570,296641,260

Foreign currency translation adjustments(16,268)(15,016)(151,485)

922,730

898,872

8,592,327

Less treasury stock, at cost; 1,865,364 shares in 2005 and
1,471,130 shares in 2004
Total shareholders’ equity(1,800)(1,373)(16,761)

920,930

897,499

8,575,565¥3,124,514¥3,068,842$29,095,018

Contingent liabilities (Notes 13 and 18)
Total liabilities and shareholders’ equity

Mitsubishi Estate 2005 31

三菱地所AR05E 財務_0905 05.9.12 11:22 AM ページ 32

Consolidated Statements of Shareholders’ Equity
Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2005, 2004 and 2003

Millions of yen

Commonstock

CapitalsurplusLand
revaluation
reserve

Retainedearnings

Unrealized
gain onsecurities

Balance at March 31, 2002
Net income
Foreign currency translation
adjustments
Net decrease in unrealized
gain on securities
Land revaluation reserve (Note 1)
Changes in consolidated subsidiaries
and companies accounted forby the equity method
Cash dividends paid
Directors’ and statutory
auditors’ bonuses
Treasury stock¥86,534—¥115,216—¥399,769—¥182,529
36,039¥48,709
—

—

—

—

—

—
—

—
—

—
10,837

—
—

—
—

—
—

Balance at March 31, 2003
Net income
Foreign currency translation
adjustments
Net increase in unrealized
gain on securities
Land revaluation reserve (Note 1)
Changes in consolidated subsidiaries
and companies accounted forby the equity method
Cash dividends paid
Directors’ and statutory
auditors’ bonuses
Treasury stock

Foreigncurrencytranslation
adjustments

Treasury
stock

Total
shareholders
equity(144)—¥ (116)—¥832,497
36,039—(6,312)—(6,312)—(1,421)(20,350)
—

—
—

—
—

(20,350)
9,416

—
—

61
(10,392)

—
—

—
—

—
—

61
(10,392)

—
—

—
—

(3)
—

—
—

—
—

—
(1,003)(3)(1,003)86,534—

115,216—

410,606—

206,81334,98928,359—(6,456)—(1,119)—839,953
34,989

—

—

—

—

—

(8,560)—(8,560)

—
—

—
—

—
11,056—(11,056)

41,937—————41,937
—

—
—

—
—

—
—

1
(10,383)

—
—

—
—

—
—

1
(10,383)

—
—

—
—

—
—

(184)
—

—
—

—
—

—
(254)

(184)
(254)

Balance at March 31, 2004
Net income
Foreign currency translation
adjustments
Net decrease in unrealized
gain on securities
Gain on sales of treasury stock
Land revaluation reserve (Note 1)
Changes in consolidated subsidiaries
and companies accounted forby the equity method
Cash dividends paid
Directors’ and statutory
auditors’ bonuses
Treasury stock

86,534—

115,216—

421,663—

220,178
36,24570,296—(15,016)—(1,373)—

897,499
36,245

—

—

—

—

—

(1,252)—(1,252)

—
—
—

—
20
—

—
—
3,121

—
—
(2,739)(1,430)
—
—

—
—
—

—
—
—

(1,430)
20
382

—
—

—
—

—
—

278
(10,381)

—
—

—
—

—
—

278
(10,381)

—
—

—
—

—
—

(5)
—

—
—

—
—

—
(427)

(5)
(427)

Balance at March 31, 2005

¥86,534¥115,236¥424,785¥243,577¥68,865¥(16,268)¥(1,800)¥920,930

Balance at March 31, 2004
Net income
Foreign currency translation
adjustments
Net decrease in unrealized
gain on securities
Gain on sales of treasury stock
Land revaluation reserve (Note 1)
Changes in consolidated subsidiaries
and companies accounted forby the equity method
Cash dividends paid
Directors’ and statutory
auditors’ bonuses
Treasury stock$805,791 $1,072,874 $3,926,464 $2,050,265———
337,508$654,586—$(139,826)—$(12,785) $8,357,379—
337,508

Balance at March 31, 2005¥

Thousands of U.S. dollars (Note 3)

—

—

—

—

—

(11,658)—(11,658)

—
—
—

—
186
—

—
—
29,062——(25,505)(13,315)
—
—

—
—
—

—
—
—

(13,315)
186
3,557

—
—

—
—

—
—

2,588
(96,666)

—
—

—
—

—
—

2,588
(96,666)

—
—

—
—

—
—

(46)
—

—
—

—
—

—
(3,976)(46)(3,976)$805,791 $1,073,060 $3,955,535 $2,268,153$641,260$(151,485)

See accompanying notes to consolidated financial statements.
32 Mitsubishi Estate 2005$(16,761) $8,575,565

三菱地所AR05E 財務_0905 05.9.12 11:22 AM ページ 33

Consolidated Statements of Cash Flows
Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2005, 2004 and 2003

Thousands of
U.S. dollars(Note 3)

Millions of yen
2005

Operating activities
Income (loss) before income taxes and minority interests
Depreciation and amortization
Loss (gain) on sales or disposal of property and equipment
Loss (gain) on sales of beneficial interests in trust of property
and equipment
Gain on sales of securities
Valuation loss on securities
Valuation loss on inventories
Equity in net income of affiliates
Increase (decrease) in allowancesInterest and dividend income
Interest expense
Increase in notes and accounts receivable
Decrease (increase) in inventories
Increase in equity investments
Increase (decrease) in notes and accounts payable
Decrease in lease deposits received
Other
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities
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 beneficial interests in trust of property
and equipment
Other
Net cash used in investing activities
Financing activities
Net 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
Cash dividends paid
Other
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Increase in cash and cash equivalents arising from mergers
and acquisitions
Cash and cash equivalents at end of year (Note 15)¥¥

75,93355,545
11,434

2004¥

56,94356,982
12,8092003¥

69,86456,739(10,508)

2005$

707,077
517,152
106,471(0)(2,644)346
5,102(2,670)958(2,047)
26,105(15,237)
17,005(70,960)
29,462(10,818)
4,603
122,1112,814(25,195)(10,830)
88,900174(7,074)1,059
4,008(2,164)(3,324)(2,240)27,482(8,126)(614)—(7,529)(10,989)(4,705)
112,692
3,457(26,991)(11,449)
77,708—(1,887)
3,957
5,915(1,811)(225)(2,619)29,649(7,342)
12,917—
17,518(2,907)
1,816
171,076
3,010(29,854)(9,626)
134,606(0)(24,620)
3,221
47,509(24,862)
8,920(19,061)
243,085(141,884)
158,348(660,769)
274,345(100,735)(617,906)
1,137,079
26,203(234,612)(100,847)
827,823

2,025(1,899)7,304(79,793)
5,498(25,705)

10,028(8,200)3,459(70,205)
9,292(7,149)41,946(20,093)
29,325(128,807)
6,689(4,609)18,856(17,683)
68,013(743,020)
51,196(239,361)

58
101(92,409)954
1,175(60,645)—
3,238(72,311)540
940(860,499)(1,487)58,000152,513(133,234)
51,489(146,618)(10,381)(3,764)(33,485)(1,977)(38,971)
136,063(39,609)—
139,960(78,737)
85,190(115,406)(10,383)(12,672)(31,658)(1,801)(16,397)
152,450(5,566)(1,877)
61,972(42,760)
132,538(171,723)(10,391)(1,094)(38,901)(2,431)
20,963
131,374(13,846)
540,087
1,420,178(1,240,655)
479,458(1,365,285)(96,666)(35,049)(311,807)(18,409)(362,892)
1,266,998

233
97,3249¥ 136,063

113¥ 152,450$

2,169
906,266

See accompanying notes to consolidated financial statements.
Mitsubishi Estate 2005 33

三菱地所AR05E 財務_0905 05.9.12 11:22 AM ページ 34

Notes to Consolidated Financial Statements
Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
March 31, 2005 and 2004

1.
Significant Accounting Policies
Basis of preparation
The accompanying consolidated financial statements of Mitsubishi
Estate Co., Ltd. (the “Company”) and consolidated subsidiaries areprepared on the basis of accounting principles generally accepted inJapan, which are different in certain respects as to the applicationand disclosure requirements of International Financial ReportingStandards, and are compiled from the consolidated financial statements prepared by the Company as required by the Securities andExchange Law of Japan.
In addition, 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 Securities and Exchange Law, amounts ofless than one million yen have been rounded off. As a result, thetotals shown in the accompanying consolidated financial statements(both in yen and U.S. dollars) do not necessarily agree with the sumsof the individual amounts.
Principles of consolidation
The accompanying consolidated financial statements include theaccounts of the Company and the subsidiaries that it controls directly
or indirectly. Companies over which the Company exercises significant influence in terms of their operating and financial policies havebeen included in the consolidated financial statements on an equity
basis.
All significant intercompany balances and transactions have been
eliminated in consolidation.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to makecertain estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. The actual
results could differ from those estimates.
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.
Cash equivalents
The Company considers 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 thebalance sheet and cash equivalents at March 31, 2005, 2004 and2003 is presented in Note 15.
Marketable securities and investment securities
Securities other than those of subsidiaries and affiliates are classified into three categories: trading, held-to-maturity or other

34 Mitsubishi Estate 2005

securities. Trading securities are carried at fair value and held-tomaturity securities are carried at amortized cost. Marketable securities classified as other securities are carried at fair value with any
changes in unrealized holding gain or loss, net of the applicable
income taxes, included directly in shareholders’ equity. Nonmarketable securities classified as other securities are carried atcost. Cost of securities sold is determined by the moving averagemethod.
Inventories
Inventories are mainly stated at cost, determined by the identified
cost method; however, when the fair value is substantially less thancost and the decline in fair value is considered to be permanent,
inventories are revalued at fair value.
Property and equipment, depreciation and impairment
Property and equipment, except for land as discussed below, isstated at cost less accumulated depreciation. Depreciation is calculated principally by the declining-balance method, except for buildings acquired in Japan subsequent to March 31, 1998 and 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 has
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 fairvalue, pursuant to Article 2 of the “Enforcement Ordinance for the
Law Concerning Revaluation Reserve for Land” and its amendments(the “Law”). The related unrealized gain, net of applicable income
taxes, has been recorded as “Land revaluation reserve” in shareholders’ equity.
The Company reviews its property and equipment (including land)
for impairment whenever events or changes in its business circumstances indicate that the carrying amount of the assets may not be
fully recoverable. The Company performs cash flow analyses todetermine if an impairment exits. If impairment is determined toexist, any related loss on impairment is calculated based on the cash
flow analyses.
Leases
Noncancelable leases are primarily accounted for as operating leases(whether such leases are classified as operating or finance leases)
except that leases that stipulate the transfer of ownership of theleased assets to the lessee are accounted for as finance leases.
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, except for any goodwill and any indefinite lived
intangible assets of subsidiaries in the United States acquired in abusiness combination completed after June 30, 2001, which havenot been amortized. A loss is recognized if the fair value falls below
the carrying amount. Land use rights are stated on a cost basis.

三菱地所AR05E 財務_0905 05.9.12 11:22 AM ページ 35

Retirement benefits
The Company and most consolidated subsidiaries havenoncontributory funded and unfunded defined benefit plans covering
most of their employees. Employees of the Company and its consolidated subsidiaries are entitled under most employment termination
circumstances to annuity payments or lump-sum payments, theamounts of which are determined principally by reference to theirbasic rates of pay, length of service, and the conditions under which
the termination occurs.
Accrued employees’ retirement benefits are provided mainly at an
amount calculated based on the retirement benefit obligation and thefair value of the pension plan assets as of the balance sheet date, as
adjusted for unrecognized actuarial gain or loss and unrecognizedprior service cost. The retirement benefit obligation is attributed toeach period by the straight-line method over the estimated years ofservice of the employees.
The net retirement benefit obligation at transition incurred at theCompany and its domestic consolidated subsidiary was charged tooperations as incurred. The net retirement benefit obligation attransition incurred at certain foreign subsidiaries is amortized over
20 years.
Actuarial gain and loss are amortized in the year following theyear in which the gain or loss is recognized by the straight-line
method over the period of the range from 5 years to 15 years which
are shorter than the average remaining years of service of theemployees.
Prior service cost is being amortized as incurred by the straightline method over the period of 6 years or 10 years which are shorter
than the average remaining years of service of the employees.
In addition, directors and statutory auditors are customarily
entitled to lump-sum payments under the Company’s internal regulations. Accrued severance benefits for these officers of the Company
have been provided at estimated amounts and are included in othernoncurrent liabilities.

portion or all of the deferred tax assets will not be realized.

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 toreduce deferred tax assets if it is more likely than not that the some

Appropriation of retained earnings
Under the Commercial Code of Japan, the appropriation of retained
earnings with respect to a given financial year is made by resolutionof the shareholders at a general meeting held subsequent to theclose of such financial year. The accounts for that year do not,therefore, reflect such appropriations.

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 weather (weather derivatives), 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.
Revenue recognition
The consolidated statements of income reflect revenue from operations in the following manner:(a) Revenue from the leasing of office space is recognized as rent
accrued over the leasing period.
(b) Revenue from sales of condominiums, residential houses and land
is recognized when the units are delivered and accepted by thecustomers.
(c) Revenue from real estate brokerage is recognized when an underlying lease agreement goes into force or the underlying units aredelivered.
(d) Revenue from architectural design and supervision is recognizedat the date of completion of each relevant project, except thatcertain long-term projects over ¥500 million in total revenue arerecognized by the percentage of completion method.
(e) Revenue from construction contracts is recognized at the date ofcompletion of each relevant project, except that certain long-term
projects over ¥5,000 million in total revenue are recognized by
the percentage of completion method.
(f) Other operating revenue is recognized on an accrual basis.

Reclassifications
Certain reclassifications have been made to the 2004 and 2003
financial statements in order to conform them to the 2005

2.
Accounting Change
Effective April 1, 2004, the Company has changed its presentationof income and loss concerning real estate business using special
purpose companies from non-operating income and loss to operating
income and loss. This change was made in order to achieve a moreaccurate presentation of the operating results of the Company. The
effect of this change was to increase revenue from operations by¥3,656 million. There was no effect to income before income taxes
and minority interests for the year ended March 31, 2005.
According to the above change, the Company reclassified

investments in silent partnerships, preferred investments and realestate trust investments relating to the real estate business to theaccount of Equity investments in the balance sheet as of March 31,
2005. At the last year end, March 31, 2004, those investments were
included in and presented as Other investments (investments insilent partnership of ¥21,870 million) and Investment securities(preferred investments and real estate trust investments totaled¥11,463 million).

Mitsubishi Estate 2005 35

三菱地所AR05E 財務_0905 05.9.12 11:22 AM ページ 36

3.
U.S. Dollar Amounts
Translation of yen amounts into U.S. dollar amounts is included
solely for convenience, as a matter of arithmetic computation only, atthe rate of ¥107.39 = U.S.$1.00, the approximate rate of exchange
prevailing on March 31, 2005. The inclusion of such amounts is notintended 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.

4.
Marketable Securities and Investment Securities
Marketable and investment securities classified as other securities at March 31, 2005 and 2004 are summarized as follows:
2005
Millions of yen

Thousands of U.S. dollars

Cost

Fair value

Unrealized
gain (loss)¥60,139¥176,341¥116,202$560,005$1,642,061$1,082,056

60,139176,341

116,202560,005

1,642,061

1,082,056

66
108

49
108

(17)
—

614
1,005

456
1,005

(158)
—

Subtotal

175

157

(17)

1,629

1,461

(158)

Total

¥60,314¥176,498¥116,184$561,635$1,643,523$1,081,888

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

Cost

Fair value

Unrealized
gain (loss)

2004
Millions of yen

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

Cost

Fair value

Unrealized
gain (loss)¥60,088¥178,687¥118,599

392

392

—

60,480179,079

118,599———

Subtotal

—

—

—

Total

¥60,480¥179,079¥118,599

Proceeds from sales of securities classified as other securities totaled¥3,752 million ($34,938 thousand) in 2005 and ¥8,755 million in
2004. Gross realized gain was ¥2,644 million ($24,620 thousand)

36 Mitsubishi Estate 2005

in 2005 and ¥7,160 million in 2004 and ¥86 million in 2003,
respectively.

三菱地所AR05E 財務_0905 05.9.12 11:22 AM ページ 37

Marketable debt securities classified as held-to-maturity securities at March 31, 2005 and 2004 are summarized as follows:
2005
Millions of yen

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

Amortized
cost

Fair value

¥

¥

197

Thousands of U.S. dollars
Unrealized
gain (loss)

Amortized
cost

Fair value

Unrealized
gain (loss)

199

¥1

$ 1,834$ 1,853

$9

197

199

1

1,834

1,853

9

9
1,899

9
1,898

(0)
(0)

83
17,68383
17,673(0)(0)

Subtotal

1,909

1,908

(0)

17,776

17,767(0)

Total¥2,106¥2,107¥0$19,610$19,620$(0)

2004
Millions of yen

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

Amortized
cost

Fair value

¥

¥

222
222

Unrealized
gain (loss)

224

¥1

224

1

1,899

1,898

(1)

Subtotal

1,899

1,898

(1)

Total

¥2,121¥2,122¥0Marketable and investment securities recorded at cost at March 31, 2005 and 2004 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

Other securities:
Nonmarketable equity securities(other than equity securities listed on the over-the-counter market)
Mutual funds
Commercial paper
MMF
Other
Corporate bonds
Other:
Investments in silent partnerships
Held-to-maturity securities:
Commercial paper
Total

2005

2004

2005

¥ 18,948
343
10,181———¥10,831
448
2,142
9
20
1,000

84,299—$176,441
3,193
94,803———784,979

—

1,999

—

¥113,771¥16,449$1,059,418

Mitsubishi Estate 2005 37

三菱地所AR05E 財務_0905 05.9.12 11:22 AM ページ 38

The redemption schedule for securities classified as other securities at March 31, 2005 is summarized as follows:
Millions of yen
Due after
five years
or more

40
160
1,900
—

¥160
—
—
—

¥10
—
—
—

$

¥2,100¥160¥10Due within
one yearor less

Bonds:
Government bonds
Corporate bonds
Other bonds
Other
Total

Thousands of U.S. dollars

Due after
one yearthroughfive years¥

The Company recognized losses on other securities considered otherthan-temporary amounting to ¥346 million ($3,221 thousand) andDue after
one yearthroughfive years

Due after
five years
or more372
1,489
17,692—$1,489
—
—
—

$93
—
—
—

$19,554$1,489$93

Due within
one yearor less¥1,059 million for the years ended March 31, 2005 and 2004,
respectively.

5.
Inventories
Inventories at March 31, 2005 and 2004 are summarized as follows:
Millions of yen

Real estate for saleLand and housing projects in progress
Land held for development
Other
Total

Thousands of
U.S. dollars

2005

2004

2005

¥128,853
109,600
13,616
11,495¥141,443
109,668
14,262
11,070$1,199,860
1,020,579
126,790
107,039¥263,566¥276,445$2,454,288

6.
Other Investments
Other investments at March 31, 2005 and 2004 were as follows:
Millions of yen

Lease deposits
Long-term prepaid expenses and other
Total

Thousands of
U.S. dollars

2005

2004

¥ 72,625
56,016¥ 74,691
76,539$2005¥128,641¥151,230$1,197,886

676,273
521,612

7.
Short-Term Borrowings and Long-Term Debt
At March 31, 2005 and 2004, short-term borrowings and the current portion of long-term debt consisted of the following:
Millions of yen

Loans, principally from banks
Commercial paper
Current portion of long-term debt
Total

38 Mitsubishi Estate 2005

Thousands of
U.S. dollars

2005

2004

¥ 45,971
58,000114,631¥ 47,325—
253,003$2005¥218,603¥300,328$2,035,599

428,075
540,087
1,067,427

三菱地所AR05E 財務_0905 05.9.12 11:22 AM ページ 39

The weighted-average interest rates per annum on short-term borrowings outstanding at March 31, 2005 and 2004 were 0.68% and0.46%, respectively. Short-term borrowings are principally
unsecured.

At March 31, 2005 and 2004, long-term debt consisted of the following:
Millions of yen
2005

Zero coupon convertible bonds due 2006
5.6% mortgage bonds due 2004
5.275% mortgage bonds due 2005
4.8% mortgage bonds due 2005
0.9% unsecured bonds due 2004
2.55% unsecured bonds due 2004
2.125% unsecured bonds due 2005
2.21% unsecured bonds due 2006
1.325% unsecured bonds due 2006
3.4% unsecured bonds due 2006
3% unsecured bonds due 2006
2.975% unsecured bonds due 2007
2.575% unsecured bonds due 2008
0.37% unsecured bonds due 2008
2.525% unsecured bonds due 2008
3.1% unsecured bonds due 2008
1.82% unsecured bonds due 2009
3.075% unsecured bonds due 2009
2% unsecured bonds due 2009
1.985% unsecured bonds due 2009
0.72% unsecured bonds due 2009
1.9% unsecured bonds due 2010
1.55% unsecured bonds due 2011
1.44% unsecured bonds due 2011
1.16% unsecured bonds due 2011
3.275% unsecured bonds due 2012
1.47% unsecured bonds due 2012
1.58% unsecured bonds due 2012
1.395% unsecured bonds due 2012
1.2% unsecured bonds due 2012
1% unsecured bonds due 2013
0.785% unsecured bonds due 2013
1.675% unsecured bonds due2014
1.349% unsecured bonds due 2014
1.65% unsecured bonds due 2014
1.75% unsecured bonds due2014
1.655% unsecured bonds due 2014
1.409% unsecured bonds due2015
3.125% unsecured bonds due 20173% unsecured bonds due 2018
2.5% unsecured bonds due 2020
2.42% unsecured bonds due 2022
1.50% unsecured bonds due 2022
2.28% unsecured bonds due2024
2.9% unsecured bonds due 2032
2.615% unsecured bonds due 2032
2.04% unsecured bonds due 2032
1.72% unsecured bonds due 2033
7.37% unsecured bonds due 2008 (payable in U.S. dollars)
Floating rate bonds due 2004 (payable in U.S. dollars)
Floating rate bonds due 2005 (payable in U.S. dollars)
Loans from banks and insurance companies:
SecuredUnsecured¥Less current portion
Total

¥

100,000——
50,000——10,00010,00010,00010,00010,00030,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00020,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00020,00010,000
2,977
—
2,261

¥

Thousands of
U.S. dollars

2004

2005

100,000 $50,00050,00050,00010,00010,00010,00010,00010,00010,00010,00030,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00020,00010,00010,00010,00010,000—10,00010,000—10,000—10,00010,00010,00010,00010,000—10,00010,00020,00010,0003,826
14,0242,324

931,185——
465,592——
93,118
93,118
93,118
93,118
93,118279,355
93,118
93,118
93,118
93,118
93,118
93,118
93,118
93,118
93,118
93,118
93,118
93,118
93,118
93,118
93,118186,237
93,118
93,118
93,118
93,118
93,118
93,118
93,118
93,118
93,118
93,118
93,118
93,118
93,118
93,118
93,118
93,118
93,118
93,118186,237
93,11827,721—21,05478,821
400,340

72,599381,788733,969
3,727,907

1,094,399(114,631)

1,164,561(253,002)

10,190,883(1,067,427)

979,768¥

911,559 $ 9,123,456
Mitsubishi Estate 2005 39

三菱地所AR05E 財務_0905 05.9.12 11:22 AM ページ 40

Certain bonds have call options that may be exercised at the respective
expiry dates.
The agreements under which the zero coupon convertible bonds
were issued provide for conversion of the bonds into shares of common

stock at the current conversion prices per share of ¥1,200 ($11)
subject to adjustment in certain cases, for example, the Company
issues stock at a price which is lower than market value.

The aggregate annual maturities of long-term debt subsequent to March 31, 2005 are summarized as follows:
Millions of yen

Year ending March 31:
2006
2007
2008
2009
2010 and thereafter

¥

Total

Thousands of
U.S. dollars

114,631 $ 1,067,427
244,876
2,280,249
93,248868,31160,653564,791
580,990
5,410,094¥1,094,399 $10,190,883

The assets pledged as collateral for short-term borrowings of ¥1,846 million ($17,189 thousand), and long-term debt of ¥78,821 million($733,969 thousand) at March 31, 2005 were as follows:
Millions of yen

Land
Buildings and structures
Machinery and equipment
Other investments
Total

Additionally, all assets of the Company are subject to the terms of anenterprise mortgage for mortgage bonds, which amounted to¥50,000 million ($465,592 thousand) at March 31, 2005.
As is customary in Japan, collateral must be given if requested bylending institutions under certain circumstances, and banks, inThousands of
U.S. dollars¥ 12,979
73,19013,31027,975$

120,858
681,534
123,940
260,499¥127,276$1,185,175

general, have the right to offset cash deposited with them against
any debt or obligations payable to a bank which become due in casesof default or certain other specified events. The Company has neverreceived any such requests nor does it expect that any such requests
will be made.

8.
Pension and Severance Plans
The following table sets forth the funded status of the plans, and the amounts recognized in the consolidated balance sheets at March 31, 2005
and 2004 for the Company’s and its consolidated subsidiaries’ defined benefit pension plans:
Thousands of
U.S. dollars

Millions of yen
2005

2004

Retirement benefit obligation
Plan assets at fair value¥(80,222)
62,062¥(77,622)
63,190$(746,987)
577,912

Unfunded retirement benefit obligation
Unrecognized net benefit obligation at transition
Unrecognized actuarial loss
Unrecognized prior service cost
Unrecognized gain of plan assets(18,159)391
10,869922—(14,432)453
10,397
1,083(2,903)(169,066)
3,640
101,182
8,585—

Net amounts recognized in the consolidated balance sheet
Prepaid pension expenses(5,976)
4,614(5,402)
4,241(55,647)
42,964¥(10,590)¥ (9,644)$ (98,612)

Accrued employees’ retirement benefits

40 Mitsubishi Estate 20052005

三菱地所AR05E 財務_0905 05.9.12 11:22 AM ページ 41

The components of expenses related to the pension and severance plans for the years ended March 31, 2005 and 2004 were as follows:
Millions of yen

Service cost
Interest cost
Expected return on plan assets
Amortization of net retirement benefit obligation at transition
Other
Total

Thousands of
U.S. dollars

2005

2004

¥ 3,740
1,982(1,194)48
1,700¥ 3,470
2,210(1,105)54
3,202$ 34,826
18,456(11,118)446
15,8302005¥ 6,277¥ 7,833$ 58,450

The assumptions used in accounting for the pension and severance plans for the years ended March 31, 2005 and 2004 were as follows:

Discount rate
Expected rate of return on plan assets

2005

2004

2.0–6.0%
1.0–7.5%

2.0–6.25%
2.25–7.5%

9.
Income Taxes
Income taxes in Japan applicable to the Company and its domestic
consolidated subsidiaries consist of corporation tax, inhabitants’taxes and enterprise tax which, in the aggregate, resulted in statutory
tax rates of 40.69% for the year ended March 31, 2005 and42.05% for the years ended March 31, 2004 and 2003. Income
taxes of the foreign consolidated subsidiaries are based generally on
the tax rates applicable in their countries of incorporation.

The effective tax rates reflected in the consolidated statements of income for the three years ended March 31, 2005 differ from the statutory
tax rate for the following reasons:
2005

2004

2003

Statutory tax rate
Increase (decrease) in income taxes resulting from:
Change in valuation allowance
Different tax rates applied
Revenues deductible for income tax purposes
Expenses not deductible for income tax purposes
Undistributed earnings of affiliates
Adjustment of deferred tax assets to reflect change in effective tax rate
Other

40.69%

42.05%

42.05%(2.26)
1.88(0.26)
0.48
2.53—(0.27)(15.95)1.41(0.22)
0.77
4.86
—
0.17

(7.62)
1.07(0.10)
0.65
2.69
1.41
3.81

Effective tax rates

42.79%

33.09%

43.96%

Mitsubishi Estate 2005 41

三菱地所AR05E 財務_0905 05.9.12 11:22 AM ページ 42

The significant components of deferred tax assets and liabilities as of March 31, 2005 and 2004 were as follows:
Thousands of
U.S. dollars

Millions of yen
2005

Deferred tax assets:
Net operating loss carry forwards
Accrued retirement allowances and pension costs
Valuation loss on inventories
Unrealized loss on property and equipment
Land revaluation reserve
Other

¥

Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Reserves under Special Taxation Measures Law
Land revaluation reserve
Unrealized gain on property and equipment
Unrealized gain on securities
Other

2004

22,362
14,81323,192
46,50598,555
17,419¥28,72011,92530,21349,139100,885
18,995

2005$

208,231
137,936
215,960
433,047
917,729
162,203

222,850(14,366)

239,880(14,776)

2,075,146(133,774)

208,483

225,104

1,941,363(63,127)(389,720)(33,062)(47,282)(24,498)(63,616)(390,170)(31,161)(48,258)(23,349)(587,829)(3,629,015)(307,868)(440,283)(228,121)(5,193,127)

Total deferred tax liabilities(557,690)(556,555)

Net deferred tax liabilities¥(349,207)¥(331,451) $(3,251,764)

10.
Shareholders’ Equity
In accordance with the Commercial Code of Japan (the “Code”), theCompany has provided a legal reserve, which was included inretained earnings. The Code provides that an amount equal to atleast 10% of the amount to be disbursed as distributions of earnings
be appropriated to the legal reserve until the total of such reserveand the additional paid-in capital account equals 25% of the common stock account. The legal reserve amounted to ¥21,663 million($201,722 thousand) and ¥21,658 million as of March 31, 2005
and 2004, respectively.

The Code provides that neither additional paid-in capital nor thelegal reserve is available for dividends, but both may be used toreduce or eliminate a deficit by resolution of the shareholders or may
be transferred to common stock by resolution of the Board of Directors. The Code also provides that if the total amount of additional
paid-in capital and the legal reserve exceeds 25% of the amount ofcommon stock, the excess may be distributed to the shareholders
either as a return of capital or as dividends subject to the approval of
the shareholders.

11.
Amounts Per ShareYen

U.S. dollars

Year ended March 31,

2005

2004

2003

Net income:
Basic
DilutedCash dividends applicable to the year

¥27.9326.24
8.00¥26.9625.33
8.00¥27.61
25.87
8.00

Yen

2005

$0.26
0.24
0.07
U.S. dollars

March 31,

Net assets

42 Mitsubishi Estate 2005

2005

2004

¥709.83¥691.60

2005

$6.60

三菱地所AR05E 財務_0905 05.9.12 11:22 AM ページ 43

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

and stock subscription rights.
Amounts per share of net assets are computed based on net
assets available for distribution to the shareholders and the numberof shares of 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.

12.
Leases
The following pro forma amounts represent the acquisition costs,
accumulated depreciation and net book value of the leased assets asof March 31, 2005 and 2004, which would have been reflected in

the consolidated balance sheets if finance lease accounting had been
applied to the finance leases currently accounted for as operatingleases:Millions of yen

March 31, 2005
Buildings and structures
OthersTotal
March 31, 2004
Buildings and structures
Others
Total

Thousands of U.S. dollars

Acquisition
costs

Accumulated
depreciation

Net bookvalue

Acquisition
costs

Accumulated
depreciation

Net bookvalue¥ 7,881
8,746¥1,6464,378¥ 6,234
4,366$ 73,386
81,441$15,327
40,767$58,050
40,655¥16,629¥6,026¥10,602$154,846$56,113$98,724¥ 4,322
8,432

¥

888
3,864

¥3,434
4,567¥12,756¥4,753¥8,002

Lease payments relating to finance leases accounted for as operatingleases in the accompanying consolidated financial statements
amounted to ¥2,683 million ($24,983 thousand), ¥2,105 millionand ¥1,864 million for the years ended March 31, 2005, 2004 and2003, respectively.

Future minimum lease payments subsequent to March 31, 2005 on noncancelable operating leases and finance leases accounted for as operating leases are summarized as follows:
Millions of yen

Year ending March 31:
20062007 and thereafter
Total

Thousands of U.S. dollars

FinanceleasesOperatingleasesFinanceleasesOperatingleases¥ 2,801
7,801¥ 5,661
39,139$26,082
72,641$ 52,714
364,456¥10,602¥44,800$98,724$417,171

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, 2005 from noncancelable operating leases are summarized as follows:
Millions of yen

Year ending March 31:
20062007 and thereafter
Total

Thousands of
U.S. dollars¥105,993
573,069$

986,991
5,336,334¥679,062$6,323,326

Mitsubishi Estate 2005 43

三菱地所AR05E 財務_0905 05.9.12 11:22 AM ページ 44

13.
Contingent Liabilities
At March 31, 2005, the Company and its consolidated subsidiaries had the following contingent liabilities:

Guarantees of affiliates’ loans from banks
Guarantees of employees’ housing loans from banks and others
Other
Total

Millions of yen

Thousands of
U.S. dollars¥1,011534
68$ 9,414
4,972
633¥1,613$15,020

14.
Other Income (Expenses)
The components of “Other, net” in “Other income (expenses)” for each of the years ended March 31, 2005, 2004 and 2003 were as follows:
Thousands of
U.S. dollars

Millions of yen

Loss on disposal of fixed assets
Loss on sales of fixed assets
Gain on sales of fixed assets
Gain on sales of investment securities
Loss on valuation of investment securities
Loss on cancellation of sublease contracts
Loss on valuation of inventories
Loss on disposal of resort and golf businesses
Other, net
Total

2005

2004

2003

2005

¥ (6,733)(4,730)
1,196
2,644
—
—
(5,102)(6,390)(1,799)¥(18,002)(4,562)—
7,160(1,059)(5,061)(4,008)—
1,806¥(7,541)—
18,427
1,872(3,957)—(5,915)—(3,828)$ (62,696)(44,045)
11,136
24,620——(47,509)(59,502)(16,733)¥(20,912)¥(23,729)¥$(194,738)

(942)

15.
Supplemental Cash Flow Information
The following table represents a reconciliation of cash and cash equivalents as of March 31, 2005, 2004 and 2003:
Thousands of
U.S. dollars

Millions of yen
2005

2004

2003

Cash
Time deposits with maturities of more than three months
Marketable securities with maturities of three months or lessResell agreements with maturities of three months or less

¥83,226(1,375)
10,4725,000¥127,185(1,665)
5,543
5,000

¥143,553(1,925)
10,822—$774,988(12,803)
97,51346,559Cash and cash equivalents¥97,324¥136,063¥152,450$906,266

44 Mitsubishi Estate 20052005

三菱地所AR05E 財務_0905 05.9.12 11:22 AM ページ 45

16.
Derivatives
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 weather (weather derivatives), but do notenter into such transactions for speculative or trading purposes.
The Company is exposed to credit loss in the event of

nonperformance by the counterparties to the derivatives, but any loss
would not be material because the Company enters into such transactions only with financial institutions with high credit ratings. The
notional amounts of the derivatives do not necessarily represent theamounts exchanged by the parties and, therefore, are not a direct
measure of the Company’s related risk exposure.

Summarized below are the notional amounts and the estimated fair value of the interest-related derivative positions outstanding at March 31,
2005 and 2004:
Millions of yen
Notional
amountMarch 31, 2005
Interest rate swaps:
Receive/floating and pay/fixed
Receive/fixed and pay/floating
Total
March 31, 2004
Interest rate swaps:
Receive/floating and pay/fixed
Receive/fixed and pay/floating
Total

Fair value

Thousands of U.S. dollars
Unrealized
gain (loss)

Notional
amountFair value

Unrealized
gain (loss)¥ 5,000
5,000

¥(49)
75

¥(49)
75

$46,559
46,559$(456)
698$(456)
698¥10,000

¥ 25

¥ 25

$93,118

$ 232

$ 232

¥ 5,000
5,000

¥(86)
138

¥(86)
138

¥10,000

¥ 51

¥ 51

The notional amounts and estimated fair value of the derivatives to which hedge accounting has been applied have been excluded from thepresentation in the above table.

17.
Segment Information
Business segments
The Company and its consolidated subsidiaries are primarily engaged
in the real estate business. Effective the year ended March 31,
2005, the Company reorganized its corporate structure and changed
its business segmentation from seven segments to newly establishedeight segments in order to present and disclose the group businesses
more appropriately. Their business segments are newly reclassified interms of the nature of each operation or service and consist of eightsegments: (1) buildings; (2) residential development; (3) architectural design & engineering; (4) urban development & investment management; (5) international business; (6) custom-built housing; (7)hotels; and (8) other businesses.

Mitsubishi Estate 2005 45

三菱地所AR05E 財務_0905 05.9.12 11:22 AM ページ 46

The business segment information of the Company and its consolidated subsidiaries for the years ended March 31, 2005, 2004 and 2003 aresummarized as follows:
Millions of yen
2005

Buildings

Residential
development

Urban
Architectural development
design && investment International Custom-built
engineering management businesshousing

Hotels

Other

Total

Eliminations
or corporate

Consolidated

Revenue and operating income
Revenue from:
External customers¥ 281,454 ¥210,681

Intersegment or transfers
Total revenue
Operating expense
Operating income (loss)¥¥12,435¥8,501¥183,185¥35,723¥31,974¥11,426¥ 775,381 ¥

5,504

407

6,423

108

—

1,733

136

2,054

16,369(16,369)—

286,959

211,088

18,8598,609

183,185

37,45632,111

13,480791,750(16,369)

775,381203,173

193,436

83,785 ¥ 17,651¥

19,224

4,662

156,740

38,926

31,19912,891(364)¥3,946¥ 26,445¥ (1,470)

¥

¥

912

589

—

¥ 775,381

660,255(3,107)657,147¥ 131,495¥(13,261)¥ 118,233¥2,960,257 ¥164,256¥3,124,514

Total assets, depreciation,and capital expenditures¥16,415¥88,268¥302,049¥14,812¥33,069¥73,277

Depreciation

43,702

689

113

539

7,793

161

1,312

730

55,042502

55,545

Capital expenditures

67,398

945

22

5,374

9,121

333

1,634

911

85,742(954)

84,787

Eliminations
or corporate

Consolidated

Assets¥2,063,603 ¥368,760

Thousands of U.S. dollars
2005

Buildings

Residential
development

Urban
Architectural development
design && investment International Custom-built
engineering management businesshousing

Hotels

Other

Total

Revenue and operating income
Revenue from:
External customers$ 2,620,858 $1,961,830

Intersegment or transfers
Total revenue
Operating expense
Operating income (loss)$$115,792$ 79,160$1,705,791$332,647$297,737$106,397$ 7,220,234 $

51,252

3,789

59,810

1,005—

16,137

1,266

19,126

152,425(152,425)—

2,672,120

1,965,620

175,61280,165

1,705,791

348,784

299,012125,523

7,372,660(152,425)

7,220,234

1,891,917

1,801,247

179,011

6,148,198

780,193 $ 164,363—$ 7,220,234

43,411

1,459,539

362,473

290,520

120,039(28,931)

6,119,256$ (3,389) $ 36,744$ 246,251$ (13,688)$ 8,492$ 5,484$ 1,224,462 $(123,484)$ 1,100,968$27,565,480 $1,529,527$29,095,018

Total assets, depreciation,and capital expenditures$152,854$821,938$2,812,636$137,927$307,933$682,344

Depreciation

406,946

6,415

1,052

5,019

72,567

1,499

12,217

6,797

512,543

4,674

517,226

Capital expenditures

627,600

8,799

204

50,041

84,933

3,100

15,215

8,483

798,416(8,883)

789,524

Assets$19,215,969 $3,433,839

To conform to the segmentation used in the year ended March 31, 2005, the segment information for the year ended March 31, 2004 has been
restated in accordance with the new segments.
Millions of yen
2004 (renewal segment)

Buildings

Residential
development

Urban
Architectural development
design && investment International Custom-built
engineering management businesshousing

Hotels

Other

Total

Eliminations
or corporate

Consolidated

Revenue and operating income
Revenue from:
External customers¥ 281,606 ¥147,993 ¥14,172 ¥ 2,825

Intersegment or transfers
Total revenue
Operating expense
Operating income (loss)¥¥153,819 ¥39,560¥30,986 ¥ 8,954 ¥ 679,918 ¥— ¥ 679,918

5,675

417

4,156

158

—

1,757

148

1,731

14,045(14,045)—

287,281

148,410

18,3292,984

153,819

41,31831,134

10,685693,964(14,045)679,918

200,666

132,097

17,291

2,678

139,850

41,66830,813

11,258576,324(155)

576,168305¥ 13,968 ¥

86,615 ¥ 16,313 ¥ 1,038 ¥(350) ¥

321 ¥(572) ¥ 117,639 ¥(13,890) ¥ 103,749

Total assets, depreciation,and capital expenditures
Assets¥1,996,856 ¥298,395 ¥16,831 ¥59,676¥314,790 ¥14,871¥32,272 ¥70,039 ¥2,803,733 ¥265,109 ¥3,068,842

Depreciation

44,328

701

122

198

8,852

167

1,265

845

56,482542

57,024

Capital expenditures

48,856

821

81

4,373

24,597

164

2,381

338

81,614(489)

81,12546 Mitsubishi Estate 2005

三菱地所AR05E 財務_0905 05.9.12 11:22 AM ページ 47

Millions of yen
2004 (former segment)
Architecturaldesign &Real estate Custom-built
engineering
brokerage
housing

Buildings

Residential
development¥ 345,519¥143,383¥14,172¥83,266

5,727

363

4,156

151

351,246

143,747

18,32983,417

Eliminations
or corporate

Hotels

Other

Total

Consolidated¥39,560¥30,986¥ 23,028¥ 679,918

1,757

148

1,864

14,169(14,169)—

41,31831,13424,893694,087(14,169)

679,918

30,81325,535574,327

1,840

576,168

Revenue and operating income
Revenue from:
External customers
Intersegment or transfers
Total revenue
Operating expense
Operating income (loss)

250,004

128,506

17,29180,50841,668¥ 101,242¥ 15,240¥ 1,038¥ 2,908¥ (350) ¥321¥(641) ¥ 119,760¥—¥ 679,918¥ (16,010) ¥ 103,749

Total assets, depreciation,and capital expenditures
Assets¥2,224,297¥306,393¥16,831¥63,836¥14,871¥32,272¥127,891¥2,786,395¥282,447¥3,068,842

Depreciation

49,402

655

122

2,909

167

1,265

1,794

56,317707

57,024

Capital expenditures

69,331

701

81

1,390

164

2,381

7,062

81,113

11

81,125

Millions of yen
2003 (former segment)
Architecturaldesign &Real estate Custom-built
engineering
brokerage
housing

Buildings

Residential
development¥ 347,661¥158,168¥11,596¥81,108

5,916

348

6,892

183

353,577

158,516

18,48881,291Eliminations
or corporate

Consolidated¥¥ 681,726

Hotels

Other

Total

¥32,623¥29,131¥ 21,439¥ 681,726

1,472

177

2,160

17,148(17,148)—

34,09529,30823,599698,874(17,148)

681,726

34,971

28,78525,484

587,479

Revenue and operating income
Revenue from:
External customers
Intersegment or transfers
Total revenue
Operating expense
Operating income (loss)¥

254,950

146,006

18,24679,037

98,626¥ 12,510¥

242¥ 2,254¥(875) ¥

523—

(1,776)585,703¥ (1,885) ¥ 111,395¥ (15,372) ¥96,023

Total assets, depreciation,and capital expenditures
Assets¥2,277,103¥276,459¥17,287¥70,299¥16,209¥31,197¥100,647¥2,789,201¥218,726

Depreciation

48,261

674

94

3,168

171

1,155

1,913

55,436686¥3,007,927
56,122

Capital expenditures

133,269

915

365

2,352

113

786

3,425

141,225

1,550

142,775

Geographical segments
The Company and its consolidated subsidiaries operate primarily in Japan, the United States and certain other areas. The geographical segment
information of the Company and its consolidated subsidiaries for the years ended March 31, 2005, 2004 and 2003 is summarized as follows:
Millions of yen
2005

Revenue and operating income
Revenue from:
External customers
Intersegment or transfers
Total revenue
Operating expenses
Operating income
Total assets

Japan

UnitedStatesOther592,791590
593,381
489,133
104,247¥148,420—
148,420
126,799¥ 21,621¥34,169—
34,16929,453¥ 4,715¥¥2,652,657¥207,870¥93,811¥2,954,338

¥

¥

Total

¥

775,381590
775,972
645,386
130,585

Eliminations
or corporate

Consolidated

¥

¥

—
(590)
(590)
11,761¥ (12,351)

775,381—775,381
657,147
118,233¥¥170,175¥3,124,514

Mitsubishi Estate 2005 47

三菱地所AR05E 財務_0905 05.9.12 11:22 AM ページ 48

Thousands of U.S. dollars
2005
Japan

UnitedStates

Revenue and operating income
Revenue from:
External customers
Intersegment or transfers
Total revenue
Operating expenses
Operating income$ 5,519,983
5,493
5,525,477
4,554,735$
970,732$1,382,065—
1,382,065
1,180,733$ 201,331$318,176 $ 7,220,234—
5,493
318,176
7,225,737
274,2626,009,740$ 43,905 $ 1,215,988$

Total assets$24,701,154$1,935,655$873,554 $27,510,364$1,584,644 $29,095,018

Other

Eliminations
or corporate

Total

Consolidated— $ 7,220,234(5,493)—(5,493)7,220,234
109,516
6,119,256$ (115,010) $ 1,100,968

Millions of yen
2004
Japan

UnitedStatesOther

Eliminations
or corporate

Total

Consolidated

Revenue and operating income
Revenue from:
External customers
Intersegment or transfers
Total revenue
Operating expenses
Operating income¥

526,598594
527,193423,862
103,331¥110,043—
110,043
97,927¥ 12,116¥43,276
4
43,28039,169¥ 4,111¥

679,918599
680,517560,959
119,558

—
(599)
(599)
15,209¥ (15,809)¥

Total assets¥2,482,924¥219,673¥77,921¥2,780,519¥288,323¥3,068,842

Eliminations
or corporate

Consolidated

¥

¥

¥

¥

679,918—
679,918
576,168
103,749

Millions of yen
2003
Japan

UnitedStates

Other

Total

Revenue and operating income
Revenue from:
External customers
Intersegment or transfers
Total revenue
Operating expenses
Operating income¥

531,044943
531,987439,555
92,432¥126,666
85
126,751
110,047¥ 16,704¥24,016202
24,21822,711¥ 1,507¥

681,726
1,230
682,956
572,313
110,643—(1,230)(1,230)13,390¥ (14,620)¥

Total assets¥2,445,190¥316,421¥19,786¥2,781,397¥226,530¥3,007,927¥

Unallocatable operating expenses
Unallocatable operating expenses included under “Eliminations or
corporate” for the years ended March 31, 2005, 2004 and 2003
amounted to ¥12,778 million ($118,986 thousand), ¥15,729
million and ¥14,806 million, respectively, and consisted of operating
expenses incurred in the Administration Department of the Company.
Corporate assets included under “Eliminations or corporate” for theyears ended March 31, 2005, 2004 and 2003 amounted to¥303,660 million ($2,827,637 thousand), ¥378,598 million and¥248,536 million, respectively, and consisted principally of cash,
marketable securities, investments in other securities, deferred tax
assets and other assets allocated to the Administration Departmentof the Company.

48 Mitsubishi Estate 2005

¥

¥

¥

681,726—
681,726
585,703
96,023

Overseas revenue
The following table represents overseas revenue earned by theCompany’s consolidated subsidiaries in foreign countries during theyears ended March 31, 2005, 2004 and 2003:
Millions of yen
2005

Overseas revenue
Overseas revenue
Consolidated revenue% of overseas revenue
to consolidated revenue

UnitedStates

Other
areas

¥148,428¥34,170¥182,598
775,381

19.1%

4.4%

23.5%

Total

三菱地所AR05E 財務_0905 05.9.12 11:22 AM ページ 49

Thousands of U.S. dollars

Overseas revenue
Overseas revenue
Consolidated revenue$1,382,139

Millions of yen

Millions of yen
2004

UnitedStatesOverseas revenue
Overseas revenue
Consolidated revenue% of overseas revenue
to consolidated revenue

2003$318,186 $1,700,325$7,220,234

Other
areas

Total

¥112,568¥40,665¥153,233¥679,918

16.6%

6.0%

22.5%

Overseas revenue
Overseas revenue
Consolidated revenue% of overseas revenue
to consolidated revenue

UnitedStates

Other
areas

¥104,177¥24,029¥128,207¥681,726

15.3%

3.5%

18.8%

Total

18.
Subsequent Events
The Company has seriously continued negotiations with relatedparties to resolve the issue on how to treat the contaminated soil andunderwater of the OAP Residence Tower in Kita-ku, Osaka. In thismatter, the entrepreneurs participated in the development project(Mitsubishi Materials Corporation, the Company, OBAYASHI CORPORATION, and Mitsubishi Materials Real Estate Corporation) and the
OAP Residence Tower Management Association achieved on May 8,
2005, an agreement on making proposals regarding monetary solution and other matters to the current owners who purchased the OAP
Residence Tower condominiums from the entrepreneurs, and enteredinto a confirmation. The Company formally decided the confirmation
at the Board of Directors meeting held on May 12, 2005, to theeffect as described below.
1. Proposal to purchasers who intend to continuously own theircondominiums
The entrepreneurs shall pay a 25% amount of the purchase price toeach purchaser. If any objection will be raised after investigation
results are revealed and the subsequent countermeasure works are
determined, the purchaser side may be able to make a proposal for
negotiations. If the negotiations between the entrepreneurs and thepurchasers cannot reach an amicable agreement, the final solution
shall be handed to a public conflict-solving organization.

2. Proposal to purchasers who intend to sell their condominiums
An appraisal of the real property shall be requested to a real estateappraiser whom both parties shall agree with on the supposition that
there is no problem regarding soil and underground water, then theentrepreneurs shall repurchase the relevant condominiums at theappraised prices. The entrepreneurs shall pay an extra amount of
10% the appraised price other than the repurchase price to eachpurchaser.
3. Proposal to purchasers who wish any solutions other than theabove two proposals
The method of resolving the soil and underwater problems shall be
negotiated in good faith. If the negotiations cannot reach an amicable agreement, the final solution shall be handed to a public conflictsolving organization. The entrepreneurs shall pay 5% of the purchaseprice to each purchaser. This value shall be included in and form apart of the settlement money to be paid by the entrepreneurs to thepurchasers.
Based on the substance of the confirmation described above as abasic guideline, the intention of all the owners who bought thecondominiums will be checked from now onward and the agreement
along with the guidelines will be pursued individually. At this time,
the final amount of influence is undeterminable.

Mitsubishi Estate 2005 49

三菱地所AR05E 財務_0905 05.9.12 11:22 AM ページ 50

Report of Independent Auditors

The Board of Directors
Mitsubishi Estate Co., Ltd.

We have audited the accompanying consolidated balance sheet of Mitsubishi Estate Co., Ltd. and consolidated subsidiaries as of March
31, 2005, and the related consolidated statements of income, shareholders’ equity, and cash flows for the year ended March 31, 2005,
all expressed in yen. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of
Mitsubishi Estate Co., Ltd. and consolidated subsidiaries at March 31, 2005, and the consolidated results of their operations and their
cash flows for the year ended March 31, 2005 in conformity with accounting principles generally accepted in Japan.
Supplemental Information
1. As described in Note 2, effective April 1, 2004, the Company has changed its presentation of income and loss concerning realrestate business using specific purpose companies, etc. from non-operating income and loss to operating income and loss.
2. As described in Note 17, effective April 1, 2004, the Company has changed its business segmentation.
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31, 2005 are presented solely for convenience. Our audit also included the translation of yen amounts into U.S. dollar amounts and, in our opinion, suchtranslation has been made on the basis described in Note 3.

Tokyo, Japan
June 29, 2005

50 Mitsubishi Estate 2005

三菱地所AR05E 財務_0905 05.9.12 11:22 AM ページ 51

Independent Auditors’ Report

To the Shareholders and Board of Directors of
Mitsubishi Estate Co., Ltd.:We have audited the consolidated balance sheets of Mitsubishi Estate Co., Ltd. and consolidated subsidiaries as of March 31, 2004 and2003 and the related consolidated statements of operations, shareholders’ equity and cash flows for each of the years in the three-year
period ended March 31, 2004, all expressed in Japanese yen. These consolidated financial statements are the responsibility of theCompany’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As more fully described in Notes
2 and 16 to the consolidated financial statements, effective in the year ended March 31, 2002, the Company has changed its methodof accounting for revenue recognition policy concerning certain long-term projects from the completion method to the percentage ofcompletion method. Furthermore, as more fully described in Note 16 to the consolidated financial statements, effective in the year ended March 31, 2002, the Company has changed its classification of certain personnel expenses in the segment information.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of
Mitsubishi Estate Co., Ltd. and consolidated subsidiaries as of March 31, 2004 and 2003, and the results of their operations and their
cash flows for each of the years in the three-year period ended March 31, 2004 in conformity with accounting principles and practices
generally accepted in Japan consistently applied during the period except for the changes, with which we concur, as described in thepreceding paragraph.
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31, 2004 are presented solely for convenience. Our audits also included the translation of Japanese yen amounts into U.S. dollar amounts and, in our
opinion, such translation has been made on the basis described in Note 3 to the consolidated financial statements.

Tokyo, Japan
June 29, 2004
See Note 1 to the consolidated financial statements which explains the basis of preparation of the consolidated financial statements of
Mitsubishi Estate Co., Ltd. and consolidated subsidiaries under Japanese accounting principles and practices.

Mitsubishi Estate 2005 51

三菱地所AR05E 財務_0905 05.9.12 11:22 AM ページ 52

Mitsubishi Estate Corporate Data

Directors andStatutory Auditors

Corporate Information

Chairman of the Board
Takeshi Fukuzawa

Head Office:Otemachi Building, 6-1, Otemachi 1-chome, Chiyoda-ku,
Tokyo 100-8133, JapanWeb site: http://www.mec.co.jp
Phone: (03) 3287-5100

President and Chief Executive Officer
Keiji Kimura*
Director/Deputy President
Nobuyuki Iizuka*
Directors/Executive Vice Presidents
Takayuki Hara
Terutake Miyamoto*Kazuo Odagawa
Hiroharu Koinuma
Satoshi Oyama*
Toshio Nagashima*
Hiroshi Danno*
Director/Executive Counsel
Shigeru Takagi
Senior Executive Officers
Takaya Endo
Seiichiro Suzuki
Mitsuo Iwai
Toyohisa Miyauchi
Masaaki Kono
Takao Yagihashi
Hiroyoshi Ito
Yutaka Yanagisawa
Executive Officers
Toshihide Yoshimura
Kazuo Takahashi
Yuzuru Shibagaki
Hiroshi Nakajima
Masao Ouchi
Hirotaka Sugiyama
Yasuo Fujiwara
Ichiro Watarai
Megumu Ono
Statutory Auditors
Eiji Tan
Kunihiro Inoue
Kenjiro Hata
Kazuya Okamoto
Toyoshi Nakano

Date of Establishment:
May 7, 1937
Paid-in Capital:¥86,534 million
Number of Shares of Common Stock Issued:
1,299,185,054 shares
Number of Shareholders:
83,385 (excluding shareholders with less than 1,000 shares)
Major Shareholders:
The Master Trust Bank of Japan, Ltd. (Trust Account)
Meiji Yasuda Life Insurance Company
Japan Trustee Services Bank, Ltd. (Trust Account)
State Street Bank and Trust Company 505103
The Bank of Tokyo-Mitsubishi, Limited
Tokio Marine & Nichido Fire Insurance Co., Ltd.
State Street Bank and Trust Company
The Chase Manhattan Bank, N.A. London, S.L. Omnibus Account
Taisei Corporation
Takenaka Corporation
Major Consolidated Subsidiaries:
Mitsubishi Real Estate Services Co., Ltd.
Mitsubishi Estate Home Co., Ltd.
Mitsubishi Jisho Sekkei Inc.
Yokohama Royal Park Hotel Co., Ltd.
Mitsubishi Estate Building Management Co., Ltd.
Marunouchi Heat Supply Co., Ltd.
Yokohama Sky Building Co., Ltd.
Royal Park Hotel Co., Ltd.
Towa Community Service Co., Ltd.
Rockefeller Group, Inc.
Stock Exchange Listings:
Tokyo Stock Exchange and other major Japanese stock exchanges
Transfer Agent and Registrar:
The Mitsubishi Trust and Banking Corporation
4-5, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-8212, Japan*Representative Director

Auditor:Ernst & Young ShinNihon(as of June 29, 2005)(as of March 31, 2005)

52 Mitsubishi Estate 2005

% of total
4.54
4.42
4.22
4.03
3.33
3.12
2.53
2.35
2.25
2.17

三菱地所AR05E 財務_0905 05.9.12 11:22 AM ページ 53

Organization•Business Planning Department•Group Companies Management Office•Leasing Department•Real Estate Consulting &Solution Department•Agency Leasing Office•Relocation Management Office•Property Management Department•Commercial Real Estate Division•Building Management Advisory Office•Building Safety Management Office•Marunouchi-Otemachi Area Building Management Department•Meeting of Shareholders•Yurakucho Area Building Management Department•Tokyo Metropolitan Area Building Management Department•Board of Directors•Area Brand Management Department•Chairman of the Board•Retail & Shopping Center Department•Area Brand Promotion Office•Development Department•Compliance Advisory Committee•President•Area Planning Office•Strategic Planning
Committee•CSR
Committee•Residential Development Promotion Department•Condominium Development Department•Compliance
Subcommittee•Environmental
Subcommittee•Residential Business Division•Master-Planned Development Department•Detached housing Office•PARTNER System Department•Residential Planning & Marketing Department•Internal
Audit Office•Customer Service Office•Executive Committee•Recreational Facility Office•Strategic Investment
Committee•Advisory Board*•Urban Development &Investment Management Division•Planning & Promotion Department•International Business Division•International Business Department•Statutory Auditor•Board of Statutory Auditors•Development & Investment Department•Corporate Planning Department•Personnel Planning Department•Finance & Accounting Department•Corporate Communications Department•Investor Relations Office•Office of Statutory Auditors•Corporate Planning &Administration Division•General Affairs Department•Secretary Office•CSR Department•Sapporo Branch•Tohoku Branch•Yokohama Branch•Nagoya Branch* Advisory bodies comprising external influential professionals.
(The Compliance Advisory Committee has been established fora fixed term commencing July 2005 through December 2005.)•Osaka Branch•Chugoku Branch•Kyushu Branch(as of September 1, 2005)

Mitsubishi Estate 2005 53

三菱地所AR05E 財務_0905 05.9.12 11:22 AM ページ 54

Mitsubishi Estate Group

Building Business
Building Leasing Business

Building Management Business

Parking Business

IMS Co., Ltd.
Aqua City Co., Ltd.
Yokohama Sky Building Co., Ltd.
Tokyo Kotsu Kaikan Co., Ltd.
Chelsea Japan Co., Ltd.

Mitsubishi Estate Building
Management Co., Ltd.
MEC Building Facilities Co., Ltd.
Ryoei Building Management Co., Ltd.
Hokuriku City Management Co., Ltd.
Hokuryo City Service Co., Ltd.
Hibiya City Co., Ltd.
MJ Building Service Co., Ltd.
Yuden Building Kanri Co., Ltd.
O.A.P. Management Co., Ltd.

Marunouchi Parking Co., Ltd.
Grand Parking Center Co., Ltd.
Hibiya City Parking Co., Ltd.
Tokyo Garage Co., Ltd.

Marunouchi Direct Access Limited
Marunouchi Hotel Co., Ltd.

District Heating
and Cooling Business
Marunouchi Heat Supply Co., Ltd.
O.A.P. D.H.C. Supply Co., Ltd.
Minato Mirai 21 D.H.C Co., Ltd.

International Business

Urban Development &Investment Management

Rockefeller Group, Inc. (RGI)
185 other companies
22 other companies

Mitsubishi Jisho Investment Advisors, Inc.
Ascott International Management Japan Co., Ltd.
Japan Real Estate Asset Management Co., Ltd.

Custom-Built Housing
Mitsubishi Estate Home Co., Ltd.
Mitsubishi Estate Housing
Components Co., Ltd.
Prime Truss Co., Ltd.

Architectural Design & Engineering
Mitsubishi Jisho Sekkei Inc.
MEC Design International Corporation

Mitsubishi EstateCo., Ltd.

Real Estate Services
Mitsubishi Real Estate Services Co., Ltd.

Hotel BusinessRoyal Park Hotels and Resorts Co., Ltd.
Ryoei Kanko Development Co., Ltd.
Royal Park Inn Nagoya Co., Ltd.
Tohoku Royal Park Hotel Co., Ltd.
Royal Park Shiodome Tower Co., Ltd.
Yokohama Royal Park Hotel Co., Ltd.
Royal Park Hotel Co., Ltd.

OthersMEC Information Development Co., Ltd.
MEC Human Resources, Inc.
Keiyo Tochi Kaihatsu Co., Ltd.
Shiki Resorts Company, Limited(4 other companies)

Residential Business
Real Estate Sales

Residence Management Business

TOWA REAL ESTATE DEVELOPMENT CO., LTD.

Izumi Park Town Service Co., Ltd.
Mitsubishi Jisho Community Service Co., Ltd.
Towa Community Service Co., Ltd.
Towa Life Service Co., Ltd.

Recreational Facility
Higashinihon Kaihatsu Co., Ltd.
MEC Urban Resort Tohoku Co., Ltd.
Liv Sports Co., Ltd.
Ryoei Life Service Co., Ltd.
Tsunagu Network Communications, Inc.
Consolidated Subsidiaries
Equity-Method Affiliates(as of June 29, 2005)
54 Mitsubishi Estate 2005

三菱地所AR05E 財務_0905 05.9.12 11:22 AM ページ 55

Corporate Social Responsibility Initiatives

In the recent past, Corporate Social Responsibility (CSR) has
continued to attract increased interest in Japan. In addition, with thegrowing trend toward a global economy, companies have redoubled
efforts to review and upgrade existing internal control systems, toincorporate international standards in their CSR activities and tofulfill certain domestic accounting disclosure requirements. Under
these circumstances, the Mitsubishi Estate Group has continued tofoster the unwavering trust of society and to implement CSR
initiatives as a good corporate citizen.

Compliance Measures
Underpinned by the support of its stakeholders, Mitsubishi Estate
has formulated its “Code of Corporate Conduct,” a set of guidelines common throughout the Group. At the same time, Mitsubishi
Estate endeavors to enhance its compliance systems and structure
in an effort to fulfill its corporate social responsibility.

CODE OF CORPORATE CONDUCT

Code of Corporate Conduct as of September 1, 2005.

Mitsubishi Estate 2005 55

三菱地所AR05E 財務_0905 05.9.12 11:22 AM ページ 56

Social Contributions and Environmental Efforts
Mitsubishi Estate established the Corporate Philanthropy & Environmental Affairs Promotion Department (the predecessor to thecurrent CSR Department) in 1994 and has continued to reinforce
its in-house promotion systems and to promote educational activities. Based on Article 2, “Being Good Citizens,” and Article 3,“Caring about the Environment,” of its Code of Corporate Conduct,
Mitsubishi Estate is leveraging the collective strengths of theGroup in an effort to realize a sustainable society.
Mitsubishi Estate has positioned environmental preservation,
support for the arts and culture, the welfare of society and community events as cornerstones of its social contribution activities. In
cooperation with employee volunteer and other programs, Mitsubishi Estate is committed to contributing to the society that itserves. Mitsubishi Estate established the Marunouchi Bird Song
Plaza in 1999 in cooperation with the Wild Bird Society of Japanas a base for its environmental preservation activities in the
Marunouchi district. The Marunouchi Bird Song Plaza represents
an oasis in the heart of Tokyo’s central business districts, where
workers and visitors can experience the wonders of nature in arelaxed and comfortable atmosphere. Along with the wild fowl, thePlaza also provides information on various flora and fauna, andserves as an educational resource to further increase environmental awareness within the general community.
In support of cultural activities and the arts, Mitsubishi Estateis a co-sponsor of the NHK Symphony Orchestra and provides
street galleries that exhibit sculptures in locations such as
Marunouchi’s Naka Dori. In an effort to support the entire

Rooftop garden at Marunouchi OAZO

56 Mitsubishi Estate 2005

community, we produce a nature cassette tape for the visually
impaired and invite the handicapped and the elderly to Mitsubishi
Estate organized local concerts. Mitsubishi Estate is also proud tosponsor an art contest for physically disabled children, publishingall exhibits on a Web site.
Based on the principles of its Code of Corporate Conduct, theMitsubishi Estate Group is active in implementing environmental
preservation measures and efforts to reduce environmental impact.
Mitsubishi Estate was also the first in its industry to begin publishing an Environmental Report in 2000 and has actively introduced
Environmental Management Systems (EMS) across the Group. Of
its various activities, Mitsubishi Estate’s Buildings segment has
the largest impact on the environment. Standing at the forefront of
its industry, in 1999 the Building Business Division was one of thefirst to acquire ISO 14001 certification. In quick succession,
Mitsubishi Estate has acquired accreditation in Residential Development, Architectural Design & Engineering, Custom-Built Housing and Hotel Business operations. While having relatively little
impact on the environment, Mitsubishi Estate’s administrative
offices have introduced EMS and continue to promote preservation
activities.
Mitsubishi Estate recognizes environmental preservation measures to be a key CSR issue and will continue efforts to enhance
activities through the Group’s urban redevelopment programs. The
Group is committed to further educating all employees on theimportance of environmental preservation and heightening awareness through information disclosure.

Offering increased space and comfort, the Marunouchi Bird Song Plaza was relocatedto the Shin-Yurakucho Building in March 2005.

三菱地所AR05E表紙_0905 05.9.12 11:19 AM ページ 56

三菱地所AR05E表紙_0905 05.9.12 11:19 AM ページ 1

MITSUBISHI ESTATE CO., LTD. ANNUAL REPORT 2005

Mitsubishi Estate Company, Limited
Otemachi Building, 6-1, Otemachi 1-chome, Chiyoda-ku, Tokyo 100-8133, Japan
http://www.mec.co.jp

Printed on recycled paper
Printed in Japan