

Leveraging Potential
to Generate Profit
Annual Report 2013

Who We Are...

Our History

Sumitomo Realty & Development Co., Ltd., a core
member of the Sumitomo Group, is one of Japan’s
leading real estate companies.
The Company is well established as a comprehensive developer and supplier of high-quality officebuildings and condominiums in urban areas.
With operations centered on four areas—leasing,sales, construction and brokerage—the Company has
achieved a combination of growth potential and balanced operations that will drive its success in thechallenging markets of the 21st century. Sumitomo
Realty remains committed to the creation of comfortable work and living environments that contribute toa higher quality of life.

1949	Izumi Real Estate Co., Ltd. establishedas the successor to the holding companyof the Sumitomo zaibatsu following the
breakup of the conglomerate.

1957	Izumi Real Estate Co., Ltd. changed its
name to Sumitomo Realty &Development Co., Ltd.

1963	Merged with the holding company of theformer Sumitomo zaibatsu during
its liquidation.

1964	Entered condominium sales businesswith Hama- Ashiya Mansion in Kobe,
Hyogo Prefecture.

1970	Listed on the Tokyo Stock Exchange andOsaka Securities Exchange.

1973	Established Sumitomo Fudosan
Tatemono Service Co., Ltd., a consolidated subsidiary.

1974	Completed construction of 52-story
Shinjuku Sumitomo Building in Shinjuku,
Tokyo; moved Company headquarters
there from Tokyo Sumitomo Building in
Marunouchi, Tokyo.

1975	Established Sumitomo Real Estate Sales
Co., Ltd., a consolidated subsidiary.

1980	Established Sumitomo Fudosan Syscon
Co., Ltd., a consolidated subsidiary.

1949
Global Events
1964 • Tokyo Olympic Games
1973 • First oil crisis
1978 • Second oil crisis
Shinjuku NS Building(Head office)1960

1982	Completed construction of
30-story Shinjuku NS Building inShinjuku, Tokyo; moved Company
headquarters there from Shinjuku
Sumitomo Building.

1995	Commenced American Comfort
custom home construction business.

1996	Commenced Shinchiku Sokkurisan
remodeling business.

1997	Entered high-quality businesshotel market. Opened Villa
Fontaine Nihonbashi and hotels at
two other locations.

1998	Sumitomo Real Estate Sales Co.,
Ltd., a consolidated subsidiary,
listed on the Tokyo Stock Exchange.

1999 Commenced real estate joint
investment trust fund. Launchedsales of Sumitomo Realty &Development Fund (SURF) series.
	Implemented the Sumquest bondissue, which was the first public
issue of real estate securities
in Japan.

2001	‌The number of managed STEP
brokerage offices exceeded 200.

2002	Completed construction of Izumi
Garden Tower (Roppongi 1-Chome
Redevelopment Project).

2003	Commenced sales of J·URBAN
fixed-price urban-stylehousing series.

2004	Commenced sales of World City
Towers in Minato Ward, Tokyo.

2006	Established Sumitomo Fudosan
Reform Co., Ltd., a consolidated
subsidiary.

2008	Established Sumitomo Fudosan
Bellesalle Co., Ltd., a consolidated
subsidiary.
	‌Commenced sales at City Towers
Toyosu (Koto Ward, Tokyo).

2010	Completed construction of
Shinjuku Central Park City
(Shinjuku Ward, Tokyo).

2011	‌Opened Grand Mansion Gallery.
	‌Completed Sumitomo Fudosan
Shinjuku Grand Tower (Shinjuku
Ward, Tokyo).

2012	Completed construction of
Sumitomo Fudosan Shibuya
Garden Tower (Shibuya Ward, Tokyo).
	Launched a Custom-order
Condominium service.
Please refer to page 11.

	Commenced sales of
J·RESIDENCE.
Please refer to page 22.

2013 ‌	‌Commenced construction of
Nihonbashi 2-Chome Project(Chuo Ward, Tokyo).
Please refer to page 8.

Cumulative units contracted
topped 80,000 in Shinchiku
Sokkurisan remodeling operations.‌

2000	Commenced luxury condominium
leasing business. Completed construction of La Tour Shibakoen.

Sumitomo Fudosan Shinjuku
Grand Tower

World City Towers

1970

1980

1985 • The Plaza Accord
1987 • Black Monday
1989 • C ollapse of Berlin Wall	•N
 ikkei Stock Average all-time high1999 • Introduction of euro

1990
2001 • September 11th terrorist attacks
2008 • Lehman crisis

2000

2010
2011	‌• ‌The Great East Japan Earthquake• European‌sovereign debt crisis• Record‌high yen against the U.S. dollar

Sumitomo Realty & Development Co., Ltd.

1Key Figures

Revenue from Operations during Sixth Management Plan

2,500

billion yen
Ordinary Profit during Sixth Management Plan

Please refer to page 6.

400

ROE

10.1

billion yen

Please refer to page 6.

%
Condominium Units, Detached Houses and Land Lots Delivered

Please refer to page 33.

Office Buildings for Leasing

Over

200

4,688

units

Please refer to page 18.

buildings

Please refer to page 14.

Contents Annual Report 20133

C‌ onsolidated
Financial Highlights

4‌A Message from
the Management

7‌Sixth Management Plan
—Key Initiatives

12

At a Glance

14 Review of Operations
14 Leasing
18 Sales20 Construction
23 Brokerage
24 CSR
26 Corporate Governance28	‌B oard of Directors andStatutory Auditors

2

Annual Report 2013

29

Financial Section‌Corporate Data /63
Investor Information
Cautionary Statement with Respect
to Forward-looking Statements
Statements made in this annual report with respect toplans, targets and future performance that are not historicalfact are forward-looking statements. These statements are
based on management’s assumptions and beliefs in light of
the information currently available. Sumitomo Realty &Development Co., Ltd., cautions that a number of factors
could cause actual results to differ materially from those
discussed in the forward-looking statements. Such factors
include but are not limited to macroeconomic conditions,
supply and demand in the real estate market and interest
rate trends.

Consolidated Financial Highlights
Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
Years ended March 31

Overview of March 2013 Fiscal Year
We recorded revenue and profit growth, with increases from the previous year in revenue from operations,operating income, ordinary profit and net income. This was also the third consecutive year in which werecorded increases in both operating income and ordinary profit.

Millions of yen

Thousands of U.S. dollars*1

2013

2012

2011

2013

¥  736,652¥  688,662¥  744,756$ 7,835,890

For the Year
Revenue from operations
Operating income

151,345

147,465

138,463

1,609,882

Ordinary profit*2

114,916

107,912106,296

1,222,381

Net income

59,82553,23650,908636,368¥4,105,500¥3,859,698¥3,234,203$43,670,886

At Year-end
Total assets
Shareholders’ equity*3

Interest-bearing debt

627,012553,844526,227

6,669,631

2,650,707

2,554,115

2,021,599

28,196,012¥   126.18¥   112.28¥   107.35$      1.34

1,322.52

1,168.11

1,109.78

14.07

20.00

20.00

20.00

0.21

Per Share Data (Yen and U.S. dollars)
Net income
Shareholders’ equity
Cash dividend applicable to the year

*1. U.S. dollar amounts in this report are translated, for convenience only, at the rate of ¥94.01 = U.S.$1, the prevailing exchange rate at March 31, 2013.
*2. Ordinary profit, which equals operating income after adjustment for non-operating gains/losses, is a management index that is widely used in Japan.
Due to differences in accounting standards, ordinary profit is not broken out in the Company’s English-language financial statements, but it is included here because it plays animportant role in the calculation of incentive payments for directors.
*3. Shareholders’ equity = Net assets – Minority interests

Revenue from Operations

Operating Income

Ordinary Profit*2

Net Incomein the March 2013 fiscal year

in the March 2013 fiscal year

in the March 2013 fiscal year

in the March 2013 fiscal year

Billions of Yen

Billions of Yen

Billions of Yen

Billions of Yen

900

180

150

75

600

120

100

50

300

60

50

25

12

13

14

(Forecast)

0

68.0

11

59.8

10

53.2

09

50.9

0

52.7

14

(Forecast)

46.2

13

125.0

12

114.9

11

107.9

10

106.3

09

100.5

0

113.6

14

(Forecast)

160.0

13

151.3

760.0

12

147.5

736.7

11

138.5

688.7

10

134.0

744.8

09

146.4

719.6

0

695.2

¥736.7 billion ¥151.3 billion ¥114.9 billion ¥59.8 billion

09

10

11

12

13

14

(Forecast)

Sumitomo Realty & Development Co., Ltd.

3

A Message from the Management

We will redouble our efforts toachieve the targets of the
Sixth Management Plan in
the pursuit of continued growth.
Junji Takashima

Kojun Nishima

ChairmanPresident​Introducing our New President

operations grew to ¥736.7 billion, operating income rose toFirst, we would like to report that Kojun Nishima has officially¥151.3 billion and ordinary profit increased to ¥114.9 billion, forsucceeded Kenichi Onodera as President of the Company.

the third consecutive year of profit growth.

With the conclusion of the Fifth Management Plan at the end

In line with our emphasis on the continued payment ofof the March 2013 fiscal year, we have embarked on a newstable dividends, we maintained annual dividends at ¥20 per

Sixth Management Plan from April 2013, and to implement

share, including an interim dividend of ¥10 per share. Further,

this new management plan, we have decided to install a newin the March 2014 fiscal year we intend to maintain annual divi-

president to strengthen the management structure and reju-

dends of ¥20 per share, including an interim dividend of ¥10

venate the executive structure.

per share.

After serving as president for three 2-year terms,
Mr. Onodera has taken the position of Vice Chairman, and​Achievements under the Fifth Management Plan

together with Chairman Junji Takashima he will add strong

The Fifth Management Plan, launched in April 2010, wassupport to the new executive team.

based on the twin aims of “Getting back on track toward

With this new executive team led by the President

increased revenue and profit” and “Targeting record-setting

and Vice Presidents, we are dedicated to continuing andbusiness results in the March 2013 fiscal year.” A challenging

accelerating growth that has come to be expected as theCompany’s strength.

Initial Targets and Results of Fifth Management Plan
(April 2010 to March 2013)​Overview of Results for the March 2013 Fiscal YearIn the March 2013 fiscal year, the final year under the Fifthı ‌Getting back on track toward increased revenue and profitı ‌Targeting record-setting business results in the
March 2013 fiscal year

Management Plan, we were able to achieve revenue and profit
growth, with revenue and profit both surpassing our initial fore-

Targets of
5th Plan*

2011

2012

2013

Results of Results vs.
5th Plan Targets

2,300

745

689

737

2,170

(130)

casts. Driven by an increasing sense of the office building mar-

Operating income

430

138

147

151

437

+7

ket having bottomed out in leasing operations, and growth inOrdinary profit

320

106

108

115

329

+9

condominium units delivered in sales operations, revenue from4

Billions of yen

Annual Report 2013

Revenue from operations* Announced on May 12, 2010

operating environment continued during the period coveredin the March 2013 fiscal year. The Roppongi 3-Chome Project*

by the plan, however, with the occurrence of the Great Eastis also proceeding on track, and we expect to commence

Japan Earthquake during the first year, followed by problems

construction in the March 2014 fiscal year. We also have sev-

at nuclear power plants, the European debt crisis and theeral large projects planned from the Seventh Management

yen’s strong appreciation.

Plan. For condominiums in sales operations, we have acquired

Against this backdrop, as shown in the table on page 4,sites equivalent to 30,000 units to deliver during or after thealthough we fell short of our revenue from operations target,

Sixth Management Plan.

we were able to surpass our targets for operating income and* Please refer to “Sixth Management Plan—Key Initiatives” starting on page 7.

ordinary profit.

​Start of the Sixth Management Plan

Although we did not quite reach our goal of “recordsetting business results,” we achieved increases in operating

Under the Sixth Management Plan, which begins with theincome and ordinary profit in each of the three years under

March 2014 fiscal year, we aim to quickly surpass the record

the plan, and have been able to get “back on track toward

single-year results recorded in the March 2008 fiscal year, andincreased profit.” We did surpass our cumulative profit target

have also set targets for cumulative record revenue and profit,

for the 3-year period and reached our initial targets under theraising the goal for cumulative ordinary profit for the 3-year

Fifth Management Plan, and we therefore consider our achieve-

period to ¥400 billion.

ments under the Fifth Management Plan to have been rather
successful.

Looking at the economy, hopes for the new government’s
policies known as “Abenomics” have led to a turnaround to a

Using land that had been acquired by the end of the Fifth

weaker yen and higher stock prices, creating higher expecta-

Management Plan, our leasing operations plan to complete

tions for an end to deflation and an economic recovery. At thedevelopment of projects with a gross floor area of 140,000

same time, however, faced with scheduled increases in con-tsubo during the period of the Sixth Management Plan.

sumption tax, we still cannot be optimistic regarding theConstruction began on the main Nihonbashi 2-Chome Project*future direction of the economy. Our outlook is that even if

Progress under Mid-term management Plans
Billions of Yen

Billions of Yen

0(Years ended March 31)

1st Plan*

2nd Plan

3rd Plan

4th Plan

5th Plan

6th Plan

1999–2001

2002–2004

2005–2007

2008–20102011–20132014–2016 (Forecast)

1,270

1,606

1,939

2,107

2,170

2,500

Operating income (right scale)

202

265

350

435

437

500

Ordinary profit (right scale)

87

170

274

339

329

400

Revenue from operations

400

500

2,500

329

437

2,170

339

435

2,107

274

350

1,939

170

200

265

1,000

1,606

400

87

2,000

202

600

1,270

3,000

0

Note: The figures represent cumulative totals for the period covered by each plan.
* The figures shown for the 1st Plan are the cumulative totals for the final three years of the plan.

Sumitomo Realty & Development Co., Ltd.

5

A Message from the Management

Sixth Medium-Term Management Plan (April 2013 to March 2016)
single-year record and achieve 3-year
1 Surpass
cumulative ordinary profit of ¥400 billion
For single-year business results, we will work to surpass, at an early date, our record high for ordinary profit, which was set in the
March 2008 fiscal year (ordinary profit of ¥125.2 billion). In addition,
we will aim for a further increase in the level of cumulative ordinary
profit under the new plan, compared with what we achieved under
the previous management plans, to ¥400 billion.

Three-Year Cumulative Targets
vs. 5th Plan

Billions of Yen

2,500+ 15.2%‌Operating income500+ 14.3%

Ordinary profit

400+ 21.5%

Revenue from operations

2 Strengthen financial position

We will strengthen our financial position bybolstering internal reserves and extending
repayment periods. We have not set specificnumerical targets, but aim to maintaincontinuously higher credit ratings.

3 Diversify our businesses

We will look for new directions and develop
new businesses (including overseas development) in our four existing areas of operations(leasing, sales, construction and brokerage).
We will also pursue completely new areas ofoperations.

the Japanese economy emerges from deflation and moves​Outlook for the March 2014 Fiscal Year

toward gradual inflation, bringing about higher office rents and

For the first year under the new management plan, we are

prices for condominiums and other housing, the full effectaiming for revenue and profit growth in all four main areas ofwill not be reflected in our business results until the period

operations, and are forecasting revenue from operations ofcovered by the Seventh Management Plan. Therefore, under¥760 billion, with operating income of ¥160 billion, ordinary

the Sixth Management Plan we will first aim for profit growth

profit of ¥125 billion and net income of ¥68 billion. The entire

by reviewing, expanding and strengthening the bases for ourgroup will make a comprehensive effort to achieve these tar-existing operations.

gets and meet our goal of “surpassing our single-year record”

With regard to our financial position, our policy of building
up shareholders’ equity by achieving annual profit targets andin the first year under the new plan.
In this way, we will redouble our efforts to achieve thesteadily enhancing our financial position is unchanged.

targets of the Sixth Management Plan in the pursuit of con-At the same time, we will prepare for investment for further

tinued growth. We ask for the continued support of share-

growth during and after the Seventh Management Plan.

holders as we work toward these goals going forward.

Furthermore, to lay the foundation for continued, accelerated growth from the period under the Seventh Management

June 2013

Plan, we will look for new directions and develop new businesses in existing operations, while also pursuing completely
new areas of operations.

6

Annual Report 2013

Junji Takashima

Kojun Nishima

ChairmanPresidentSixth Management Plan—Key Initiatives

Leasing
Principal Projects (2014–2016*1)
Gross floor
Location(Tokyo CBD*2) area (Tsubo*3)

Name

Expected
completion

Sumitomo Fudosan Motoakasaka Building

Minato Ward

1,800

Jan. 2014

Sumitomo Fudosan Chiyoda First Wing

Chiyoda Ward

2,700

Jan. 2014

Sumitomo Fudosan Onarimon-eki Mae Building

Minato Ward

2,700

Jan. 2014

Total: 2014*1

Projects scheduled for completion in
March 2014 fiscal year
Sumitomo Fudosan
Motoakasaka
Building
Location
Minato Ward

Gross floor area

7,200

1,800 tsubo

Hanzomon Rebuilding Project

Chiyoda Ward

3,700

Dec. 2014

Mita Rebuilding Project

Minato Ward

7,400

Feb. 2015

Jan. 2014

Chuo Ward

42,000Feb. 2015

No. of floors

Nihonbashi 2-Chome Project
Total: 2015*1

53,100Nibancho Project

Chiyoda Ward

6,000

Sept. 2015

Roppongi 3-Chome Project

Minato Ward

61,000Mar. 2016

Expected completion

9 above ground
1 below ground3 Other Buildings

13,000Sumitomo Fudosan
Chiyoda First Wing

Total: 2016*1

80,000Chiyoda Ward

Total: 6th Management Plan

140,300

Location
Gross floor area
2,700 tsubo*1. Fiscal year ending March 31*2. ‌Tokyo CBD (Central Business District): 7 wards, comprising Chiyoda, Minato, Chuo, Shinjuku, Shibuya,
Shinagawa and Bunkyo

Expected completion*3. 1 tsubo = 3.3 m2

No. of floors

Jan. 2014
7 above ground
1 below ground

Gross Floor Area (Years ended March 31)
Thousands of tsubo
2,000+140,000
tsubo

+11%

1,500

Sumitomo Fudosan
Onarimon-eki Mae
Building
Location
Minato Ward

1,000

Gross floor area
2,700 tsubo
870

1,020

1,160

1,250

1,390

0

680

500

1st Plan

2nd Plan

3rd Plan

4th Plan

5th Plan

6th Plan

2001

2004

2007

2010

2013

Expected completion
Jan. 20142016 (Forecast)

No. of floors
11 above ground​Outlook for Leasing Operations
Under the Sixth Management Plan, we are aiming for cumula-the period of the Sixth Management Plan, we expect to maketive revenue and profit growth for the 3-year period, witha solid contribution to business results with the addition ofrecord profit as well as record-setting business results on a

140,000 tsubo of gross floor area. Going forward, we will

single-year basis. Including redevelopment projects incontinue to work for profit growth by expanding the earnings

Nihonbashi and Roppongi scheduled for completion duringbase and enhancing the quality of our buildings.

Sumitomo Realty & Development Co., Ltd.

7

Sixth Management Plan—Key Initiatives

Leasing

Nihonbashi 2-Chome Project

BunkyoShinjuku
ChiyodaContributing to redevelopment in the Nihonbashi area

ShibuyaChuo
MinatoLocated at Nihonbashi intersection, one of Japan’s leading business districts,
this site is about 8,800 square meters. This large-scale project will have

Shinagawaa gross floor area of approximately 138,000 square meters, or 42,000 tsubo,

Asakusa Line, Nihonbashi Stationand include office space, commercial space and multipurpose halls.

Eitai St.

Section 7

Section 8

Chuo

Location
Chuo Ward

Showa St.

Gross floor area
Chuo St.

Ginza Line, Nihonbashi Station

Tozai Line, Nihonbashi Station

42,000 tsubo

Expected completion
Feb. 2015

No. of floors
Project site

35 above ground / 4 below ground

Project Features‌‌‌ 1 Enhanced functionality as a transportation hub
To make it easier to transfer and relieve congestion at Nihonbashi Station, where three different subway lines intersect, the project will feature an underground open space that connects the building andthe station, as well as an open space of approximately 1,500m2 facing Nihonbashi intersection.

‌‌‌ 2 Abundant space for pedestrians
The building will be set back to preserve an open space in front of the station, and with barrierfree access between the station and street level, the area will become safer and easier for pedestrians to navigate.

‌‌‌ 3 Enhanced community disaster preparedness
In addition to fireproofing and earthquake resistance, the building will have an emergency generator
that can provide power for 72 hours, as well as a storage facility for emergency provisions. In theevent of a disaster, the open space in front of the station can be used as a first aid station and supply
center, and has room for portable toilets.

‌‌‌ 4 Place for meeting and exchange
A facility displaying tourist information will be installed near Nihonbashi Station, which offers easy access to and from Narita and Haneda airports. The project will also include the area’s largest multipurpose hall (more than 1,000m2), which will have an exhibition area and reception desk,and can be used for seminars and symposiums.

‌‌‌ 5 State-of-the-art office specifications
The facility will incorporate business continuity planning (BCP) with an earthquake-resistant structure
and a 72-hour supply of backup power, using a range of the latest equipment to prepare for an earthquake or power outage. The office floors will have approximately 820 tsubo of leasable floor space on
standard floors, and the rooms are designed without internal pillars, creating an open feeling and highly efficient layout.

Roppongi 3-Chome Project

Offering diverse functions at our largest redevelopment project
On a large site of about 2.7 hectares adjacent to both Roppongi 1-chome Station and our flagship property Izumi
Garden Tower, this large-scale project will have a gross floor area of approximately 200,000 square meters, or 61,000

Ro
p

po

MinatoLocation

Commercial
building

Officebuilding

Minato Ward

Gross floor area
61,000 tsubo

Roppongi 1-chome Station

ng
iS

t.

tsubo. It will include three types of facilities—office, residential and commercial—in north and south sections.

Izumi
GardenTower

Residentialbuilding

Expected completion
Mar. 2016

No. of floors
40 above ground / 5 below ground

Project site

Project Features‌‌‌ 1 Location next to subway station
Encircled by a broad (4-meter) walkway and with two large, green, open spaces (1,400m2 and
1,000m2), the project will feature an attractive, composite urban topography.

‌‌‌ 2 Greater convenience for pedestrians
An underground passageway connecting to Roppongi street and Roppongi 1-chome Station will makeit easier for pedestrians to go from the west side of the complex to the station, and design features,such as elevators, will provide a barrier-free environment.

Pedestrian Flow

OfficeOpen space

Entrance
Commercial

EV

EV

EV
Underground passageway

EV
A new West Exit ticket gate
at Roppongi 1-chome Station

Roppongi
1-chome
Station* EV = Elevator‌‌‌ 3 Enhanced community disaster preparedness
The underground open space in front of the station (750m2) can be used as a temporary evacuationarea, enhancing the community’s disaster preparedness.

Sixth Management Plan—Key Initiatives

SALES
City Tower Kobe
Sannomiya

Principal Projects (2014–2016)
Name

No. of units
for sale

Location

Scheduleddelivery*

Location

City Terrace Kaga

Itabashi Ward, Tokyo

385

2014

City Terrace Yoyogi-koen

Shibuya Ward, Tokyo

114

2014

City Tower Ageo-eki Mae

Ageo

291

2014

City Tower Kobe Sannomiya

Kobe

594

2014

City Terrace Imafuku Tsurumi

Osaka

294

2014

City Towers Maruyama

Kobe

No. of units for sale594

No. of floors
54 above ground
1 below ground

Sapporo101

2014

The Grand Millennia Tower & Suite

Toshima Ward, Tokyo

412

2015

Tokyo Bay City Tower

Minato Ward, Tokyo

171

2015

Oedo Tower Residence

Taito Ward, Tokyo

124

2015

Chofu-eki Mae Project

Chofu, Tokyo

161

2015

City Terrace Toda-koen

Toda

497

2015

Nagareyama

168

2015

City Terrace Kaga

Chuo Ward, Tokyo

1,666

2016

Location

Kawasaki

800

2016

Itabashi Ward, Tokyo

Tennoji Project

Osaka

413

2016

No. of units for sale

City Tower Sendai Ichibancho Residence

Sendai

144

2016

385

Central Residence Otakanomori
Deux Tours Canal & Spa
City Tower Musashi Kosugi

Scheduled delivery
Apr. 2013

No. of floors* Fiscal years ending March 31

15 above ground
1 below ground

Revenue from Operations and Units Delivered (Years ended March 31)
Billions of Yen

Scheduled delivery

Thousands of Units

1,000

Record high

750

Jan. 2014

40

Tokyo Bay City Tower
30

Location
Minato Ward, Tokyo

18

500

13

11

15
12

20

14

437

567

660

605

670

820

1st Plan

2nd Plan

3rd Plan

4th Plan

5th Plan

6th Plan

2001

2004

Revenue from Operations

2007

2010

171

No. of floors
10

250

0

No. of units for sale2013

2016 (Forecast)

030 above ground
1 below ground

Scheduled delivery
Dec. 2014

Units Delivered* Cumulative totals for the period covered by each plan.

​Outlook for Sales Operations
Under the Sixth Management Plan, we aim to increase sales
volume to achieve growth in cumulative revenue and profit for

we launched the Grand Mansion Gallery and Custom-orderthe 3-year period. We are targeting cumulative sales of 18,000

Service as new initiatives to strengthen our product planningcondominium units under the Sixth Management Plan, a roughly

and sales structure. We aim to achieve our new targets by

30% increase from 14,000 units sold during the period of the

making maximum use of the results of these initiatives.

Fifth Management Plan. This target is equivalent to sales ofroughly 6,000 units annually, which would be a record level
for the Company.

10

During the period covered by the Fifth Management Plan,

Annual Report 2013

New Initiatives in the Condominium Business
Custom-order Service Announced January 2012
We have launched initiatives aiming to raise customer satisfaction by providing
a detailed response to their needs. A new Custom-order Service is one ofthese initiatives.
Generally in Japan, condominiums are provided to customers with limited
floor plans and customers cannot choose or change the floor plan to better fit
their lifestyle.
Our Custom-order Service, however, enables customers to partially personalize interior designs suited to various lifestyles in new condominiums.
In addition to being able to select the interior color, customers can reposition plumbing for the kitchen, bathroom, and other parts of a condominium freeof charge, even after completion.
With such initiatives, we are aiming to expand cumulative sales to 18,000
condominium units under the Sixth Management Plan.
Details of custom-order service
Past

Present

Interior design, including
floor plan, options available
for one condominium unit

2 or 3 types

Up to 13 types (3 color options
are available for room
interiors)

Selection period for interior
design, including floor plan

Short time after construction
begins (before completion)

Selection possible after building
completion

Fee for selection after
building completion

Option not available

Available free of charge

Principal Condominiums
that offer custom-order service

City House Urawa Takasago
Location
No. of units for sale

The Grand Millennia
Tower & Suite

95

Location

No. of floors

Toshima Ward, Tokyo

18 above ground / 1 below groundNo. of units for sale

Scheduled delivery*

412

2013

No. of floors

Saitama

31 above ground / 1 below ground

Scheduled delivery*
2015* Fiscal year ending March 31

Sumitomo Realty & Development Co., Ltd.

11

At a Glance

Balanced Portfolio
Our achievement of sustained growth has been the result of our well-balanced operations. We have a balanced
portfolio in four operational fields—leasing, sales, construction and brokerage—that have different risk profiles andcapital requirements.

​Characteristics of Our Four Operational Fields

Nonetheless, revenue and profit are both relatively high. Our

Leasing and sales are our traditional main fields of business.

housing construction operations and brokerage operations are

These are capital-intensive fields; returns and risk are bothorder-based businesses with low capital requirements and nohigh and substantial upfront investment is required, but thesales risk but substantial human resources requirements.

level of human resources is relatively low. In leasing, the period

These operations have been developed more recently. In hous-from the initial investment to the generation of revenue—theing construction, the operational cycle is short, about six months

operational cycle—is long, but once a building is opened for

to a year, but product development capabilities are very impor-occupancy it provides a stable, sustained source of revenue.

tant. Brokerage operations have the shortest operational cycle

The sales business, however, is characterized by a shorterof our fields of business but require strong, highly competitive

operational cycle with volatile market conditions.

service networks.

LEASING

SALES

Office building, condominium and other property leasing andMid- and high-rise condominium, detached house andmanagement and related activities

housing lot development and sales and related activities

Revenue from Operations

Revenue from Operations

Billions of Yen

Billions of Yen

300

240

200

160

12

13

38.9

09

10

11

12

13

235.0

232.1

11

14

(Forecast)

Operating Income
Billions of Yen

120

45

80

30

23.6%
89.6

94.2

10

11

12

13

Major Consolidated Subsidiaries
Sumitomo Fudosan Tatemono Service Co., Ltd.
Sumitomo Fudosan Villa Fontaine Co., Ltd.
Sumitomo Fudosan Bellesalle Co., Ltd.

14

(Forecast)

0

41.0

88.2

09

97.0

97.6

0

15

105.3

40

Annual Report 2013

10

Billions of Yen

57.1%

12

198.2

Operating Income

09

37.9

0

14

(Forecast)

239.7

13

33.4

12

219.7

278.3

11

19.6

271.8

10

191.2

292.9

09

80

280.0

293.5

0

298.4

100

30.7

31.0%

37.2%

14

(Forecast)​Taking Steps to Maintain Well-balanced Operations

long term. In the future, our basic strategy will entail taking

Sumitomo Realty’s four operational fields have complementary

steps to maintain well-balanced growth in our operational port-

operational cycles and market characteristics, and in the pastfolio. Moreover, to further reinforce our growth prospects, wethe adverse effects of changing market conditions on a particu-

will endeavor to develop a strong market presence in a fifth

lar field have generally been offset by favorable performances

core field of operations, and are currently searching for the fieldin others. As a result, the Company has been able to continuethat would best complement our existing operations.

to record increases in revenue and profit over the medium to
Sumitomo Realty’s Balanced Portfolio
CapitalLEASINGSALESHigh level of capital,
low level of human resources

Relatively high level of capital,
relatively low level of humanresources

CONSTRUCTION
Relatively low level of capital,
relatively high level of humanresources

BROKERAGE
Low level of capital,
high level of human resources
Human Resources

CONSTRUCTIONBROKERAGE

Custom home construction and remodeling andBrokerage and sales on consignment of real estate andrelated activities

related activities by Sumitomo Real Estate Sales Co., Ltd.

Revenue from Operations

Revenue from Operations

Billions of Yen

Billions of Yen

210

60

140

40

6.8%
51.0

10

11

12

13

14.5

09

10

11

12

13

55.0

49.4

09

14.5

Operating Income

46.4

0

14

(Forecast)

12.2

13

44.6

12

10.8

11

43.1

171.1

10

8.8

166.0

09

20

185.0

162.9

0

158.2

70

160.1

22.9%

14

(Forecast)

Operating Income
Billions of Yen

Billions of Yen

18

18

12

12

9.5%

8.8%
16.5

15.8

10

11

12

13

14

(Forecast)0

Major Consolidated Subsidiaries

Major Consolidated Subsidiaries

Sumitomo Fudosan Syscon Co., Ltd.
Sumitomo Fudosan Reform Co., Ltd.

Sumitomo Real Estate Sales Co., Ltd.

16.0

16.7

09

18.0

17.1

0

6

13.0

6

14

(Forecast)

Sumitomo Realty & Development Co., Ltd.

13

Review of Operations

LEASINGIn leasing operations, Sumitomo Realty has worked to create new opportunities by implementing innovative initiatives. In this way, the Company has established a position of leadership in the leasing industry. Our leasing business is characterized by an outstanding
portfolio that includes many upscale buildings in central Tokyo and by a direct involvementin operations.

Sumitomo Realty’s
Strengths
The Company made its full-scale entry

Office Buildings Opened in the March 2013 Fiscal Year
Name

No. of floors
Location
Gross floor
Completion(Tokyo CBD) (Above ground/area (m2)Below ground)

Sumitomo Fudosan Tamachi First Building

Minato Ward

11/1

Apr. 1221,802

Sumitomo Fudosan Shibuya Garden Tower

Shibuya Ward

24/3

Jun. 1259,417

into the leasing business in the latter
half of the 1970s. In 1995, following thecollapse of Japan’s economic bubble,
we were the first company in the industry to restart construction work on officebuildings. We paid particular attention
to large-scale projects in the Tokyo CBD(Central Business District), especiallythose areas legally designated forredevelopment.
We currently operate over 200 buildings for lease. The advanced interior features of our buildings are complemented
with distinctive exterior designs, including hotel-like entranceways and all-glass
exteriors. Sumitomo Realty creates
innovative buildings with a strong market presence.

Sumitomo Fudosan Tamachi First Building

14

Annual Report 2013

Sumitomo Fudosan Shibuya Garden Tower

Revenue from Operations

Operating Income andOperating Margin

Gross Floor Area

Billions of Yen

Billions of Yen%

Thousands of m2

300

120

90

4,500

200

80

60

3,000

100

40

30

1,500

0

0

13

Operating Income

Overview of the Fiscal Year

14

(Forecast)

4,145

12

4,160

11

3,977

10

97.0

09

3,825

0

3,461

14

(Forecast)

94.2

13

89.6

12

88.2

278.3

11

97.6

271.8

10

105.3

292.9

09

280.0

293.5

0

298.4

35.3 33.3
33.8 34.6
30.1 33.0

09

10

11

12

13

Operating Margin (right scale)

The vacancy rate for existing buildings continually improved

In the Tokyo office building market, which represents morefrom 7.8% at the end of the previous fiscal year to 7.1% at thethan 90% of our portfolio, we saw an improvement in the bal-end of the year under review. Tenant solicitations for new build-ance of supply and demand through the second half of the fis-ings completed during the year under review were also solid,

cal year under review, after most of the large-scale buildings

with Sumitomo Fudosan Shibuya Garden Tower, fully occupied

that were expected to be completed during the fiscal year

on a contract basis prior to the completion of construction.

came on to the market. Demand from tenants seeking to moveto buildings with superior business continuity planning (BCP)

Outlookfunctionality remained robust, and the asking rent levels forIn the March 2014 fiscal year, contributions to our performancesome prime properties began to increase. With new demand

will be made by the full-year results of such buildings as

for additional floor space gradually increasing, there was an

Sumitomo Fudosan Shibuya Garden Tower and Sumitomo

increasing sense of a market recovery.

Fudosan Tamachi First Building. In addition, new buildings, such

Against this backdrop, revenue from operations rose 2.4%

as Sumitomo Fudosan Motoakasaka Building, Sumitomo

from the previous year, to ¥278.3 billion, and operating income

Fudosan Chiyoda First Wing and Sumitomo Fudosan Onarimon-grew 5.1%, to ¥94.2 billion. In addition to the bottoming out of

eki Mae Building, are scheduled to be opened during the year.

earnings from existing buildings, this revenue and profit growth(For further information about major future projects, please seereflected full-year contributions from buildings completed dur-

page 7.)

ing the previous year, including Sumitomo Fudosan Shinjuku

Accordingly, we expect revenue from operations to increase

Grand Tower and Sumitomo Fudosan Chiyoda Fujimi Building.

0.6%, to ¥280.0 billion, and operating income to rise 3.0%, to¥97.0 billion.

Sumitomo Realty & Development Co., Ltd.

15

Review of Operations: LEASING

Feature of Portfolio / Total Gross Floor Area: 4.15 million m2 (as of March 31, 2013)

1

Close
Locationsin the Tokyo CBD

BunkyoShinjuku
ChiyodaShibuya

Ueno
StationChuo
MinatoShinjuku
StationShinagawa

Iidabashi StationTokyo
StationTokyo CBD*87%

23 Wards

94%

To be a prime property, a building must be in
the central business district and near a major
train station. In the Tokyo CBD, where manyof Japan’s leading companies have their offices, this is an even more important factor.
Large, recently constructed buildings in good
locations are in short supply, which has beena key element in our land acquisition efforts.

Shibuya Station

Hamamatsu-cho Station
Tamachi Station

Shinagawa Station* Tokyo CBD (Central Business District): 7 wards,
comprising Chiyoda, Minato, Chuo, Shinjuku,
Shibuya, Shinagawa and Bunkyo

Major flagship buildings(See the table below)
Other buildings

Sumitomo Realty’s Portfolio
In the Tokyo CBD (Central Business District), where buildings that meet the three conditions for prime properties—
close, new and large—are in strong demand, our competitive portfolio will provide a strong foundation for us to utilize our strengths—development of high-value-added office buildings, tenant leasing and property management.
We will utilize that foundation to maximize the earnings potential of our office building operations and build astrong base for the achievement of sustainable growth in the years ahead.

Major Flagship Buildings
Name
1. Izumi Garden Tower
2. Shinjuku Sumitomo Building
3. Sumitomo Fudosan Shinjuku Grand Tower
4. Shinjuku Central Park City
5. Shinjuku Oak City
6. Shiodome Sumitomo Building
7. Sumitomo Fudosan Mita Twin Building West
8. Tokyo Shiodome Building
9. Shinjuku NS Building
10. Sumitomo Fudosan Iidabashi First Tower
11. Shibakoen First Building
12. Chiyoda First Building West
13. Sumitomo Fudosan Shibuya Garden Tower
14. Sumitomo Fudosan Aobadai Tower
15. Sumitomo Fudosan Iidabashi Building No.3
16. Sumitomo Fudosan Shibuya First Tower
17. Sumitomo Fudosan Iidabashi First Building
18. Sumitomo Fudosan Shiodome Hamarikyu Building
19. Chiyoda First Building East
20. Sumitomo Fudosan Nishi Shinjuku Building
Note: Figures for gross floor area indicate the area managed by Sumitomo Realty.

16

Annual Report 2013

No. of floors

Location (Tokyo CBD)

(Above ground/
Below ground)

Completion

Minato Ward
Shinjuku Ward
Shinjuku Ward
Shinjuku Ward
Shinjuku Ward
Minato Ward
Minato Ward
Minato Ward
Shinjuku Ward
Bunkyo Ward
Minato Ward
Chiyoda Ward
Shibuya Ward
Meguro Ward
Shinjuku Ward
Shibuya Ward
Bunkyo Ward
Chuo Ward
Chiyoda Ward
Shinjuku Ward

43/4
52/4
40/3
44/2
38/2
25/3
43/2
37/4
30/3
34/3
35/2
32/2
24/3
33/3
24/2
25/3
14/2
21/2
17/2
33/2

Oct. 02Mar. 74
Dec. 11
Feb. 10Jan. 03
July 04
Sept. 06
Jan. 05
Sept. 82
Apr. 10
June 00
Jan. 04
June 12
Aug. 09
Oct. 02
Aug. 10
Mar. 00
Aug. 09
Oct. 98
Apr. 09

Gross floorarea (m2)
204,269
177,467
168,295
130,197
117,446
99,91398,33895,12875,046
68,382
63,822
61,20959,41755,77353,047
52,942
52,74747,95137,54237,317

2

3

New
Brand-new and Recently
Constructed Buildings

Completed since 2000

56%

New
quake-resistance*99%

The strong demand for recently constructedbuildings is a result of tenant needs for thefollowing features:‌ dvanced earthquake countermeasures,
1. A
such as vibration damping and earthquake-resistant construction
2. Uninterruptible‌power supplies to support
business continuity
3. ‌Reinforced floors, high-capacity electricalsystems to accommodate large
computer servers
climate control systems for
4. Separate‌each suite and high ceilings
5. Advanced security systems

Large
Large-scale Buildings

Buildings that can accommodate multiple
units on a single floor enable tenant companies to increase the efficiency of their operations, and in recent years there has been atrend for companies to consolidate their offices. As a result, demand for large-scalebuildings continues to increase.

Over 10,000m2(gross floor area)

85%* New standards that took effect in 1981

​Strengths of Sumitomo Realty’s Portfolio

buildings offer leading-edge earthquake-resistant structures,

Our portfolio includes many competitive prime properties

uninterruptible power sources, separate climate control sys-

located in central Tokyo. As of the end of March 2013, our leas-

tems for each suite, reinforced floors for heavy loads, high-ing portfolio had a gross floor area of 4.15 million squarecapacity electrical systems, high ceilings and other attractive

meters and an average age of 14 years, the lowest among

features. Since the Great East Japan Earthquake, they haveJapan’s major real estate companies. About 56% of the build-been the focus of strong demand from many tenants.

ings in our portfolio have been completed since 2000. Also,
94% of the buildings in our portfolio were located in the 23​Competitive Growth Foundation

wards of Tokyo, with 87% in the Tokyo CBD. Furthermore, 85%

Including the buildings that we expect to open during the Sixthof the portfolio was made up of large-scale buildings with moreManagement Plan (2014–2016)*, prime properties will accountthan 10,000 square meters of gross floor area, and about 99%

for an even higher percentage of our portfolio. To respond toof the buildings meet or exceed earthquake-resistance stan-

the change in market demand toward prime properties anddards that took effect in 1981, which are a key yardstick foraway from less-attractive buildings, such as those with low

earthquake safety. Moreover, about 60% of our buildings haveearthquake resistance, we have been investing aggressively inbeen completed since 1997, when we took the lead in the

new building construction, thereby further increasing the con-application of new building design concepts. These high-quality

centration of prime properties in our portfolio.
* Fiscal years ending March 31

State-of-the-art Facilities
Before 1981
Earthquake protection

1982–1996

1997 and after

Previous quake-resistant structure

New quake-resistant structure

2.5 m

2.7 m

2.9–3.3 m

300 kg/m2

300–500 kg/m2

500–1,000 kg/m2

Air conditioning

Central air conditioning system

Climate control zones

Separate climate control systems

Power capacity

45 VA/m2

60–70 VA/m2

85 VA/m2 and overCeiling height*
Floor load

Anti-sway structure* Includes raised floors

Sumitomo Realty & Development Co., Ltd.

17

Review of Operations

SALES
Sumitomo Realty is a pioneer in the Japanese market for development of condominiums
for sales. The Company established its condominium sales business earlier than almost allof its competitors. The Company is building attractive condominiums in good locations
and working to raise its brand value.

Sumitomo Realty’s Strengths
Sumitomo Realty’s condominium operations are centered on the Tokyo metropolitan area, which accounts
for 70% of our units, and are conducted in other large
urban areas such as Osaka/Kobe, Sapporo, Sendai,
Nagoya and Fukuoka. The Company develops and sells
about 5,000 units a year.
Over the past decade, we have been one of theleading suppliers of condominium units nationwide.
This strong position is the result of our central urban
strategy, which we implemented ahead of competitors, and our aggressive approach to large-scale andhigh-rise condominiums. Our landmark exterior designs,

City Terrace Shimomeguro

the rich array of common facilities that is made possible by the scale of the buildings and elegant entrances
make our condominiums sought after by a wide rangeof consumers with diverse lifestyles. As a result, ourhigh operating margin is at the top of the industry.
The risk of market fluctuations is a critical factor in
the condominium business. Consequently, theCompany’s policy is to offer a stable supply of condominiums and to enhance the Sumitomo Realty brandthrough the ongoing sale of high-quality units. In theyears ahead, the Company will continue striving tomaintain its strong position.

City Terrace Yokohama Nakamachidai Ichibankan

18

Annual Report 2013

Revenue from Operations

Operating Income andOperating Margin

Billions of Yen

Billions of Yen%

Units

300

45

45

6,000

200

30

30

4,000

15

2,000

0

0

12

13

Operating Income

14(Forecast)

09

10

11

12

13

5,100

11

4,688

10

41.0

09

4,119

0

4,841

14

(Forecast)

38.9

13

37.9

232.1

12

33.4

198.2

11

19.6

239.7

10

16.8 17.4

30.7

219.7

09

235.0

191.2
0

13.9
8.9

15

4,222

16.1
100

4,008

19.1

Units Delivered

14(Forecast)

Operating Margin (right scale)

Overview of the Fiscal Yearcondominium units, detached houses and land lots, an increase

In the condominium market, which represents more than 90%

of 412 units year on year.

of our portfolio, the favorable sales environment continued

Of the 5,000 condominium units and detached houses

against a backdrop of low mortgage interest rates. The fourththat we expect to deliver in the March 2014 fiscal year, contracts

quarter of the fiscal year under review saw a large improve-

had already been concluded for approximately 40% as of April

ment in economic sentiment from a rise in stock prices, which

1, 2013, which was 10 percentage points higher year on year.

led to a large year-on-year increase in the number of visitors to

We are therefore forecasting revenue from operations of

our showrooms as consumers showed increased purchasing¥235.0 billion, up 1.2%, and operating income of ¥41.0 billion,

appetite.

up 5.3%.

In this environment, the number of condominium units,
detached houses and land lots delivered, including City Tower
Saitama Shintoshin, City Terrace Yokohama Nakamachidai
Ichibankan and City Tower Tennoji Sanadayama, increased 569
from the previous year, to 4,688 units.
The number of condominium units sold increased 1,117, to
5,151 units, surpassing our initial plan for a 14.5% increase, to
4,500 units.
As a result, revenue from operations grew 17.2%, to¥232.1 billion, with a 2.7% increase in operating income, to¥38.9 billion. Although the operating income margin of 16.8%
was slightly lower than in the previous year, revenue and profit
growth were maintained with an increase in the number ofunits delivered.

Principal Condominium Development Projects (2013–2014)
Location

No. of units
for sale

Scheduleddelivery*City Terrace Itabashi Hasune

Itabashi Ward, Tokyo

350

2013

City Terrace Shimomeguro

Meguro Ward, Tokyo

175

2013

City Terrace Nishiogikubo

Suginami Ward, Tokyo

143

2013

City Terrace Oi-sendaizaka
Hill Top Garden

Shinagawa Ward,
Tokyo

130

2013

Saitama405

2013

Yokohama

245

2013

City Tower Nagoya
Hisaya-odori Koen

Nagoya226

2013

City Tower Tennoji
Sanadayama

Osaka

216

2013
2014

Name

City Tower Saitama Shintoshin
City Terrace Yokohama
Nakamachidai Ichibankan

City Terrace Kaga

Itabashi Ward, Tokyo

385

City Terrace Yoyogi-koen

Shibuya Ward, Tokyo

114

2014

City Tower Ageo-eki Mae

Ageo

291

2014

City Tower Kobe Sannomiya

Kobe

594

2014

City Terrace Imafuku Tsurumi

Osaka

294

2014

Sapporo101

2014

City Towers Maruyama

Outlook* Fiscal years ending March 31

In the March 2014 fiscal year, we are aiming for revenue andprofit growth, and are planning to deliver a total of 5,100

Sumitomo Realty & Development Co., Ltd.

19

Review of Operations

CONSTRUCTION
In the construction business, Sumitomo Realty’s business consists of the construction ofcustom homes and house remodeling. Our construction operations are order-based anddo not require substantial amounts of capital.

Sumitomo Realty’s Strengths

BeforeRemodeling—Shinchiku Sokkurisan
In 1996, Sumitomo Realty launched the Shinchiku Sokkurisan Full Remodeling Package.
This product addresses the concern that remodeling can sometimes be more expensive

Afterthan rebuilding in Japan due to the risk of cost overruns. With Shinchiku Sokkurisan, ahouse can be fully remodeled at 50% to 70% of the cost and in half the time required
to rebuild it. And because Shinchiku Sokkurisan uses fewer materials, it is also environmentally friendly. We were the first major real estate company to offer this type of
product, and Shinchiku Sokkurisan has been well received in the marketplace.
Cumulative sales have surpassed 80,000 units, and we anticipate continued growthin Shinchiku Sokkurisan sales in the years ahead.
Please refer to page 22.

Custom Homes
In 1995, Sumitomo Realty launched the American Comfort line of high-quality, lowcost Western-style homes in Japan using the know-how that the Company acquiredin building and selling homes constructed with the two-by-four method in California.
In April 2003, we launched the J·URBAN home design, which combines theexcellent security features of condominiums with the superior ventilation and lightingof detached houses. J·URBAN has been highly evaluated in the marketplace and has

J·URBANreceived a Good Design Award from the Japan Industrial Design Promotion Organization.
In June 2012, we commenced sales of a new product called J·RESIDENCE.
Please refer to page 22.

J·SKY

20

Annual Report 2013

Revenue from Operations

Operating Income andOperating Margin

Shinchiku Sokkurisan andCustom Home Units Contracted

Billions of Yen

Billions of Yen%

UnitsUnits

210

18

12

9,000

3,000

8

6,000

2,000

4

3,000

1,000

0

0

13

Operating Income

14(Forecast)

Operating Margin (right scale)

09

10

11

12

13

Shinchiku Sokkurisan

8,000
2,500

12

7,651
2,389

11

7,228
1,968

10

18.0

09

(Forecast)

7,463
1,840

0

9.7

7,521
1,779

14

15.8

13

16.5

12

16.7

11

9.2

17.1

10

9.9

8.1

13.0

09

185.0

171.1

0

166.0

6

162.9

70

158.2

12

160.1

140

7,051
1,687

10.8 10.2

140(Forecast)

Custom Home (right scale)

Overview of the Fiscal Year

OutlookContracts at the Shinchiku Sokkurisan remodeling business forIn the March 2014 fiscal year, we will strive to continuously

the fiscal year under review rose 5.9% from the previous year,

enhance our product lineups and strengthen our marketing

to 7,651 units, for a turnaround to the first increase in threestructures for both Shinchiku Sokkurisan remodeling opera-

years. The number of units delivered and revenue from opera-

tions and custom home operations. In this way, we will aim totions both surpassed the initial plan and grew to record levels.

increase orders and return to profit growth. In the March 2013

In custom homes operations, accompanying the launch of

fiscal year, the total number of contracts for these two opera-

the new J·RESIDENCE product in the year under review, wetions surpassed 10,000 units for the first time, and we will aim

opened 10 new model houses in locations throughout Japan,

for further growth in the March 2014 fiscal year, with 8,000

and we rebuilt existing model houses in 7 locations. In thiscontracts in Shinchiku Sokkurisan remodeling operations andway, we took steps to strengthen our marketing system.

2,500 in custom home operations.

Accordingly, custom home operations recorded a solid 21.4%

For the March 2014 fiscal year, we are projecting revenue

increase, to 2,389 units, in the number of units contracted.

from operations of ¥185.0 billion, up 8.1%, and operating

However the number of units delivered and revenue fromincome of ¥18.0 billion, up 14.2%.

operations were roughly flat with the previous fiscal year.
In the construction segment overall, including Sumitomo
Fudosan Reform Co., Ltd., revenue from operations rose 3.1%,
to ¥171.1 billion, but operating income declined 4.4%, to ¥15.8
billion, as the segment was unable to absorb an increase incosts associated with the strengthening of the marketing
structure for the custom home business.

Custom Homes

Sumitomo Realty & Development Co., Ltd.

21

Review of Operations: Construction

Shinchiku Sokkurisan

After

Key Features• ‌Sales engineer system: Most of our sales personnel have engineering qualifications.
• ‌Carpenters: We use carpenters who work exclusively for Sumitomo Realty.
• ‌Fixed price: We provide the customer with a fixed price per unit of floor area, so
there are no concerns about additional construction charges.
• ‌No need for temporary moves: We remodel homes while the customers continue tolive in them, which is a major advantage.
• ‌Earthquake resistance: We incorporate earthquake-resistance strengthening measures based on a computerized analysis of the home as well as measures to prevent
damage from termites and moisture.

Cost Comparison

Before100%

Rebuilding
Shinchiku
Sokkurisan

50~70%

0

50

100

Custom Homes
Key Features• ‌Advanced performance: We have developed
proprietary earthquake-resistant technologies,
namely the New Power Column, New Power
Cube and Super Power Wall construction
methods, and are actively incorporating thesetechnologies in all our products.
• ‌T‌op-class equipment and specifications:
Leveraging our strengths in the form of our
track record in condominiums and economies
of scale as a comprehensive developer, we
employ high-grade condominium interior materials as a standard specification.
• ‌Complete after-sales support: Our homes arebacked by a 30-year guarantee, and we have a
dedicated contact line for customers.

22

Annual Report 2013

J·RESIDENCE
Features• ‌‌Accommodates people of all ages andcan blend in with any location• ‌A residential style that incorporates theequipment and specifications found in
high-grade condominiums• ‌The proprietary earthquake-resistanttechnology New Power Cube is incorporated as a standard specification

New Power Cube
We have developed proprietary earthquake-resistant technologies, such as New
Power Cube. With this construction method, building deformation is alleviatedduring an earthquake by attaching earthquake-resistant systems to the upper
part of L- shaped walls. The interior, which is usually used for storage, can becustomized for refuge in an emergency. This is a standard specification for
J·RESIDENCE products.

New Model

BROKERAGE
The Company’s real estate brokerage business is handled by Sumitomo Real Estate Sales Co., Ltd., which wasestablished in 1975 to conduct sales of condominiums developed by Sumitomo Realty. After entering the real estate
brokerage sector in 1979, Sumitomo Real Estate Sales achieved significant success in that field, and it was listed on
the Tokyo Stock Exchange in 1998.

Sumitomo Real Estate Sales Co., Ltd., experienced a 5.5%

Sumitomo Realty’s Strengths

increase in the number of transactions in our mainstay broker-

Under the STEP brand name, Sumitomo Real Estate Sales

age operations, primarily for retail transactions for existing

operates a network of brokerage offices with close ties tohomes, to 33,180 units, for a fourth consecutive record result.

local communities. The network has been steadily expanded

On the other hand, transaction value declined 3.8% in theand upgraded, and the number of offices reached 249 byabsence of the previous year’s large corporate transactions.

the end of March 2013. Because all of the brokerage offices are directly operated, the network boasts high profit

Although revenue from operations rose 3.2%, to ¥51.0 bil-

margins. Sumitomo Real Estate Sales holds the number

lion, the decrease in corporate transactions resulted in operat-

one position in the industry in terms of brokerage revenue

ing income coming in roughly flat with the previous fiscal year,

from direct operations and in terms of profitability.

down 0.3%, to ¥14.5 billion.

In the future, the company will continue working to expand its marketing base and increase its market share.

OutlookIn brokerage operations, we will continue to open new offices andOverview of the Fiscal Yearupgrade existing offices, while at the same time striving to raise

In the existing home market in Japan, the number of contracts

marketing efficiency, with the aim of achieving revenue and profit

tended to increase during the fiscal year under review, and thegrowth on a record number of brokerage transactions.

decline in average transaction prices showed signs of bottom-

Accordingly, for the March 2014 fiscal year we are fore-ing out during the fourth quarter.

casting revenue from operations of ¥55.0 billion, up 7.9%, andIn this environment, the segment, which is handled byoperating income of ¥16.0 billion, up 10.4%.

1,050

40

12

40

700

20

6

20

350

0

0

32,0001314(Forecast)

Operating Margin (right scale)

09

10

11

12

13

Transaction Value

931.5

12

858.9

11

892.8

10

16,000834.6

09Operating Income

34,922
31,44329,97433,18031,29327,822769.9

048,000821.2

14(Forecast)

16.0

13

14.5

12

14.5

11

Transactions

29.4 28.4 29.1

12.2

10

24.1 26.3
10.8

09

20.3

Number of Transactions andTransaction Value

8.8

0

55.0

Billions of Yen

60

51.0

%

18

49.4

Billions of Yen

60

46.4

Billions of Yen

44.6

Operating Income andOperating Margin

43.1

Revenue from Operations

14

0(Forecast)

Number of Transactions (right scale)

Sumitomo Realty & Development Co., Ltd.

23

CSR

Basic Approach to CSR
Sumitomo’s Business Philosophy
The Sumitomo Group’s business philosophy is encapsulated by the following precepts­—“Place prime importance on integrity
and sound management in the conduct of its business” and “Under no circumstances, shall it pursue easy gains or act
imprudently.”
These have been inherited as teachings since the time of the Sumitomo Group’s founder. They are still regarded as thetouchstone for the Sumitomo Realty Group’s business activities.

The Sumitomo Realty Group’s Fundamental Mission
Guided by Sumitomo’s business philosophy, we have set forth our fundamental
mission as being “to create even better social assets for the next generation”
through our business. Based on this fundamental stance, we engage in businesswith the aim of creating cities and urban spaces that are resilient to disasters andfriendly to people and the environment.

Create even bettersocial assets
for the next generation22

1
PeopleFriendly3

People Friendly

Enhancing regional convenience andpromoting barrier-free accessOur redevelopment business makes people-friendly cities. A case in point is the
Roppongi 3-Chome Project (East District),where an underground walkway is being
built so that pedestrians of all abilities canmove more easily from city areas to train
stations.

AEDs
In order to be better prepared for a
medical emergency at an officebuilding, hotel or other key facility
we run and manage, we have installed automated external defibrillators (AEDs). What’s more, all personnel undertake first-aid training.

24

Annual Report 2013

DisasterResistant3

Environment
Friendly1

Disaster ResistantProtecting office workers andbusinesses
Sumitomo Realty’s latest office buildings
actively employ earthquake-resistant features to protect office workers. Furthermore,
we install emergency generators in buildings to supply power for a certain period oftime during a blackout, enabling tenants tocontinue operations.

Contributing to regional disasterprevention
Sumitomo Realty has contributed to regional development through various redevelopment projects in cities. By redeveloping areas with densely packed wooden
houses, we recreate cities so they are
more resistant to disasters. The open spaces that are a feature of our redevelopment
projects also serve as places for temporary refuge in a disaster.

Environment Friendly

Improving the environmental performance of buildings
When we build condominiums, we give consideration to the environment, including by planting trees, adding
greenery to rooftops
and creating open green
areas. Furthermore, the soil excavated during
construction is processed into soil blocks.
We have developed technology for reusing
soil from condominium construction sites tocreate blocks with few CO2 emissions. The
blocks are environmentally friendly because
they are made of natural materials, which
will eventually return to the ground at theend of their life. The blocks are used in planted zones in condominium sites.

Promoting energy conservation
In buildings we operate, we work to reduce
CO2 emissions, such as by actively introducing highly energy-efficient HF fluorescentlamps and LED lighting.

CSR through Business
Urban Redevelopment That Improves Cities—Sumitomo Fudosan Shinjuku Grand Tower
In December 2011, we completed redeveloping an approximate 2 hectare area in the western part of Shinjuku Ward,
Tokyo, under the basic concept of creating a multipurpose urban area combining offices, residences, an event hall andshops with a gross floor area of 168,295 m2.
​‌Redevelopment of an Area of Densely Packed Old
Wooden Houses​Creating Green and Open Spaces
The redevelopment features an approxi-

Prior to redevelopment, the area was disaster-prone, with oldmate 4,000 m2 open area along the road.

wooden houses densely packed around narrow streets. The rede-Our aim was to create an urban spacevelopment has turned it into a safe and pleasant area with the in-with a pleasant environment that is easy

frastructure expected of a modern city, such as fire-resistant build-

to work in. We also endeavored to easeings, public spaces and roads.

the “heat island” effect and improve theenvironment by adding greenery to the​Disaster Preparedness

roofs of buildings. Furthermore, by equip-

We have created open spaces that can serve as refuge areas forping the area with community roads pri-locals in a disaster, and provided spaces for temporary toilets as

marily for non-automobile use and walk-well as emergency water wells. Furthermore, we will open theways, we have enhanced conveniencelarge, multipurpose Belle Salle hall to provide shelter for people

and safety for pedestrians.

who cannot return home in a disaster.
we installed an electric power supply system that uses the bat-‌‌‌Introduction of Solar Power Generation andEnergy-saving Facilities

tery that drives the Nissan LEAF electric car. This will be used as

To supply electricity to some common areas, we installed solar

an auxiliary power source in the event of a disaster, and the bat-panels on the roof for generating power. And we are working totery for one Nissan LEAF vehicle will be able to supply power toreduce energy use as well by employing a highly efficient electri-

the multipurpose hall for approximately 42 hours, or emergency-

cal air-conditioning system and LED lighting, as well as motion-

use well pumps and water purification equipment for roughly

sensing lights.

To further enhance our disaster preparedness, in March 2012

eight hours.

Shinchiku Sokkurisan Remodeling Operations
Our Shinchiku Sokkurisan remodeling operations facilitate remodeling of existing buildings. We reduce remodeling costs,
improve earthquake resistance and make other improvements in response to customer demand.
​‌Earthquake Reinforcement, Extended Life andEnergy Conservation for Housing

Shinchiku Sokkurisan can also breathe​Harmony with Building’s History

Shinchiku Sokkurisan is contributing to efforts to promote earth-

new life into old houses. We add value

quake-proofing of existing homes through low-cost remodeling.

suited to modern living, while taking

It is also extends the life of existing housing through earthquake

care to preserve the history and char-reinforcement work requiring no dismantlement, while leaving theacter of a house that may have been

main structural elements intact. The process also does not waste

home to many generations of a family.

resources and generates little industrial waste; for instance, old

Sumitomo Realty is giving its all to re-tatami mats are reused as material for cement.

invigorate old houses more than 100
years old, helping to ensure that tradition stays alive.

Sumitomo Realty & Development Co., Ltd.

25

Corporate Governance​Fundamental Approach to Corporate Governance

The Internal Audit Division, which has seven staff members,

To achieve sound management, Sumitomo Realty believes that it ismonitors the operational execution of divisions throughout the Group

important to share information on a Companywide basis, ensure thatand the operation of internal control systems. The division also works

everyone is aware of problems, enhance internal management super-

to prevent misconduct and mistakes, and proposes operational im-

vision and achieve highly transparent management through appropri-provements. Moreover, the division reports the results of its audits to

ate information disclosure. We have implemented a number of corpo-

the statutory auditors and the independent auditors and exchanges

rate governance initiatives to realize these practices efficiently.

opinions with them in an appropriate manner. These activities help toimprove the quality and efficiency of the audit work of the Internal​Corporate Governance Bodies

Audit Division, the statutory auditors and the independent auditors.

The Board of Directors is made up of ten directors. The Board

At the same time, the Internal Audit Division, the statutory auditors

makes decisions on important Company matters, and oversees theand the independent auditors provide timely advice and guidance todirectors’ execution of duties. Furthermore, internal information,internal departments that are associated with internal control.

awareness of issues and other matters are shared through the Boardof Directors, internal meetings and other forums, promoting quick​Independent Auditors

and rational decision-making.

In accordance with the Corporate Law and the Financial Instruments

The Board of Statutory Auditors has five members, including

and Exchange Law, the Company has concluded an auditing contract

three outside statutory auditors. To strengthen management over-with KPMG AZSA & Co. for the auditing of the Company’s accounts.

sight, we continue working to enhance outside auditing. The statutory auditors attend meetings of the Board of Directors and other im-

There are no conflicts of interest between Sumitomo Realty andthe independent auditing company or its employees.

portant meetings, and track internal issues that are important for​Reason for Adopting the Current Structurerobust auditing.
Each of the three outside statutory auditors has abundant man-

The current Board of Directors is comprised of directors who are fa-

agement experience at other companies, and they were nominatedmiliar with the nature of the Company’s business. The Company

because their character and knowledge were considered to be appro-

therefore believes that the current Board of Directors is most suitable

priate for the Company’s statutory auditors. The outside statutory au-for promoting management. While Sumitomo Realty has not ap-

ditors fulfill their roles by expressing objective opinions on gover-pointed any outside directors, the Company ensures corporate gover-nance from an independent standpoint from the Company without

nance is maintained by enhancing management oversight throughbeing influenced by executives responsible for operational execution.

the Board of Statutory Auditors and through proper information dis-

They also work together to improve auditing by, for example, ex-closure. The Company has judged that corporate governance is func-changing opinions as needed with other statutory auditors, thetioning effectively with a system of five statutory auditors at present,Internal Audit Division and the independent auditors. At the same

three of whom are outside statutory auditors.

time, they provide timely advice and guidance to internal depart-​Internal Control and Risk Management Systems

ments associated with internal control.
Sumitomo Realty does not have standards or a policy regarding

To efficiently institute sound management practices, the Company

independence from the Company for selecting outside statutory audi-

has established a range of internal control systems and is working totors. However, the Company does refer to the Tokyo Stock Exchange’s

enhance those systems.

evaluation standards regarding the independence of directors andcorporate auditors when appointing such individuals.

General Meeting of Shareholders
Board of Directors

Board of Statutory Auditors
Statutory Auditors

Executive Officers Committee
Chairman, Vice chairman, President, Vice Presidents

Independent Auditors
President
Departments, Divisions, etc.

26

Annual Report 2013

Internal Audit Division

To further enhance our compliance with laws and regulations

promotes the common interests of shareholders to take certain mea-

and to ensure ethical business practices, we established the Risk

sures to avoid disturbance by abnormal speculations to our business

Management Committee. In addition, through the Complianceapproach, which has brought significant achievements. The Company

Department, we have established internal auditing and internal re-therefore introduced a policy for responding to large-scale purchases

porting systems. In these ways, we are working to prevent inappro-of its shares, and at the ordinary general meeting of shareholders

priate and illegal actions.

held on June 28, 2007 the policy was approved by more than 70% of

In regard to information management, to ensure proper storage

shareholders, which is the level of support required for the approvaland control of documents, we have established internal standards forof special resolutions. With the approval of shareholders at the 77th

document control. Furthermore, in terms of risk management sys-

general meeting of shareholders held in 2010, and again at the 80thtems, each department tracks and manages the risks associated withgeneral meeting of shareholders held in 2013, the policy has been

its operations on a daily basis, while important issues are discussed

extended to the conclusion of the 83rd general meeting of share-and decided upon by the Board of Directors and the Executive

holders, scheduled to be held in June 2016.

Officers Committee. In the future, we will consider further enhancement of regulations and systems as needed.

​‌
Overviewof Takeover Defense Measures andBoard of Directors’ Judgment​Compensation of Directors and Statutory Auditors

The Company believes that if a large-scale purchase of the Company

At the ordinary general meeting of shareholders held in June 2004,

shares is initiated, the shareholders, in principle, should decide to ac-

we introduced a new performance-based compensation system for

cept or reject the large-scale purchase. To enable the shareholders to

directors. Under this system, the annual compensation for directors

correctly understand the large-scale purchase’s effect on the corpo-

is based on the Company’s performance. The new system combinesrate value and the common interests of shareholders, however, it is

the three elements that made up the previous system—monthly

necessary that both the party making the large-scale purchase andcompensation, annual bonuses and retirement allowances.

the Board of Directors of the Company provide to the shareholders

Under the new system, total annual (July to June) compensationnecessary and sufficient information, opinions, alternative proposals,

for directors is set at 1% of consolidated ordinary profit. In the year

etc. and that the shareholders are given sufficient time to consider

under review, compensation for directors was ¥1,075 million, com-the provided information, opinions, alternative proposals, etc.

pensation for statutory auditors (excluding outside statutory auditors)

The large-scale purchase rules stipulate that the large-scale pur-was ¥30 million and compensation for outside statutory auditors waschase shall begin after necessary and sufficient information is pro-

¥39 million.

vided to the Board of Directors by the large-scale purchaser and acertain period for evaluation by the Board of Directors has elapsed.

​Takeover Defense Measures

To ensure the objectivity, fairness and rationality of decisions of

The Group endeavors to increase corporate value through integrated

the Board of Directors, a special committee will be established thatGroup management. This entails striving for well-balanced growthconsists of members selected from among external academic ex-

whereby mainstay businesses of a different nature—leasing, sales,

perts, lawyers, certified public accountants, etc.

construction and brokerage—complement each other.

If the large-scale purchase will significantly damage the corpo-

Of our business segments, the real property leasing businessrate value and common interests of shareholders, after consideringand the real property sales business are “development businesses

the opinions of external experts, including lawyers and financial advi-

based on market anticipation” requiring anticipatory investments. In

sors, and taking into the fullest account the recommendations of theother words, we need to acquire land and construct a building within

special committee, the Board of Directors may take countermeasuresa planned period before we are allowed to record revenue. The

to deter the purchase, such as the issuance of stock options.

Company’s main business is to always make appropriate anticipatory

Based on the above basic conceptions, we set out rules oninvestments for the future. The characteristic of the two businesses

large-scale purchases and request the large-scale purchaser to comply

mentioned above is that investments lead to revenues and enhance-with the large-scale purchase rules. The Board of Directors shall takement of our corporate value after an interval.

certain measures if the large-scale purchaser does not comply with

However, considering the existence of a large number of market

the large-scale purchase rules, or even though the large-scale pur-participants who are capable of making huge investments, we arechaser complies with the large-scale purchase rules, if it is clear thatcautious about the risk of abnormal investment activity in the stock of

the large-scale purchase will cause unrecoverable damage to thethe Company amid an enormous variety of decisions and specula-Company or if the large-scale purchase significantly damages the cor-

tions. Hence as a company aiming to improve shareholder value

porate value and common interests of shareholders.

steadily over the medium and long term, we have determined that it

Sumitomo Realty & Development Co., Ltd.

27

Board of Directors and Statutory Auditors
As of June 27, 2013

ChairmanVice Chairman

President

Junji Takashima*

Kenichi Onodera*

Kojun Nishima*

Vice President

Vice President

Director

Director

Nobuaki Takemura*

Masato Kobayashi*

Yoshinobu Sakamoto

Yoshiyuki Odai

* Representative Director

Director

Director

Director

Hiroshi Kato

Koji Ito

Toshikazu Tanaka

Statutory Auditors
Shoichi Abbe
Naoto Enda
Hiroshi Tomoyasu
Tadashi Kitamura
Yoshifumi Nakamura

28

Annual Report 2013

Financial Section30	‌Eleven-year Financial Summary32	‌Management’s Discussion
and Analysis
36 Consolidated Balance Sheets38	‌Consolidated Statements of Income
and Consolidated Statementsof Comprehensive Income
39	‌Consolidated Statements of
Changes in Net Assets
40	‌Consolidated Statements ofCash Flows41	‌Notes to Consolidated
Financial Statements
62	‌Independent Auditor’s Report

Sumitomo Realty & Development Co., Ltd.

29

Eleven-year Financial Summary
Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
Years ended March 31

Millions of yen

2013

2012

2011

2010

2009

¥  736,652
278,317232,149
171,082
50,957¥  688,662
271,812
198,154
165,995
49,397¥  744,756
292,875
239,709
162,924
46,430¥  719,636
293,533
219,662
158,21444,621¥  695,240
298,359
191,224
160,134
43,105

Cost of revenue from operations

529,913490,437

551,364

534,270

496,547

SG&A expenses% of revenue from operations

55,394
7.5%

50,760
7.4%

54,9297.4%

51,3877.1%

52,327
7.5%

Operating income% of revenue from operations

151,345
20.5%

147,465
21.4%

138,46318.6%

133,979
18.6%

146,366
21.1%

Ordinary profit*2% of revenue from operations

114,916
15.6%

107,91215.7%

106,29614.3%

100,464
14.0%

113,582
16.3%

Net income

59,82553,23650,90852,662

46,205

Depreciation and amortization

37,761

36,04923,70518,065

17,886

At Year-end
Current assets
Inventories
Total assets
Shareholders’ equity*3
Net interest-bearing debt¥  965,786
679,496
4,105,500
627,0122,424,932¥  801,142
586,1703,859,698
553,8442,407,639¥  805,958
558,091
3,234,203
526,227
1,901,850¥  802,693
521,871
3,168,098
488,896
1,785,854¥  759,816
518,885
3,006,412
436,667
1,722,733

Per Share Amounts (Yen)
Net income
Shareholders’ equity
Cash dividend applicable to the year¥   126.18
1,322.52
20.00¥   112.28
1,168.11
20.00¥   107.35
1,109.78
20.00¥   111.04
1,030.93
20.00¥    97.39
920.74
20.00

15.3
3.9
10.1
3.9
93
80
4.9

14.3
4.3
9.9
4.3
93
80
4.2

16.3
3.6
10.0
4.4
89
79
4.7

15.4
3.7
11.4
4.4
83
81
4.6

14.5
3.9
10.7
5.1
76
77
4.9

For the Year
Revenue from operations
Leasing
Sales
Construction
Brokerage

Key Ratios
Equity ratio (%)
ND/E ratio*4 (Times)
ROE (%)ROA (%)
Long-term debt ratio (%)
Fixed-interest rate debt ratio (%)
Interest coverage ratio*5 (Times)*1. U.S. dollar amounts in this report are translated, for convenience only, at the rate of ¥94.01 = U.S.$1, the prevailing exchange rate at March 31, 2013.
*2. Ordinary profit, which equals operating income after adjustment for non-operating gains/losses, is a management index that is widely used in Japan.
Due to differences in accounting standards, ordinary profit is not broken out in the Company’s English-language financial statements, but it is included here because it plays an importantrole in the calculation of incentive payments for directors.
*3. Shareholders’ equity = Net assets – Minority interests*4. ND/E ratio = Net interest-bearing debt (Interest-bearing debt – Cash, time and notice deposits) / Shareholders’ equity*5. Interest coverage ratio = (Operating income + Interest and dividend income) / Interest expense

30

Annual Report 2013

Thousands of U.S. dollars*1

2008

2007

2006

2005

2004

2003

2013

¥  691,928
279,568
193,575
156,606
58,542¥  676,834
262,620
211,035
142,564
56,532¥  646,525
234,280
224,735
135,158
49,217¥  616,115
221,234
224,191
127,388
43,445¥  573,862
202,776
213,303
125,086
39,809¥  533,915
192,979
183,745
124,464
37,577$ 7,835,890
2,690,504
2,469,408
1,819,828
542,038

488,202490,491

487,805

470,636

435,078

403,777

5,636,773

49,118
7.1%

49,167
7.3%

46,6977.2%

45,1887.3%

42,807
7.5%

41,626
7.8%

589,235—

154,608
22.3%

137,176
20.3%

112,02317.3%

100,291
16.3%

95,97716.7%

88,512
16.6%

1,609,882—

125,17618.1%

112,406
16.6%

87,03813.5%

74,39312.1%

65,976
11.5%

56,76010.6%

1,222,381—

63,13350,30032,506

15,548

6,320

4,974

636,368

17,15015,677

16,33014,01912,211

11,973

401,670¥  784,195
511,868
2,894,004
427,423
1,548,509¥  756,488
489,093
2,747,900
409,197
1,343,824¥  619,219
330,700
2,460,080
375,656
1,150,880¥  481,341
211,180
2,136,329
320,098
935,155¥  503,911
189,547
2,090,970
303,875
916,156¥  423,446
161,156
2,015,667
211,821
1,036,419$10,273,226
7,227,912
43,670,886
6,669,631
25,794,415¥   133.00
900.5718.00¥   105.92
861.9314.00¥    68.33
790.7410.00¥    32.64
673.409.00¥    15.34
639.01
9.00¥    12.22
520.846.00$      1.34
14.07
0.21

14.8
3.6
15.1
5.6
83
85
6.2

14.9
3.3
12.8
5.4
79
83
6.8

15.3
3.1
9.3
5.0
80
77
6.5

15.0
2.9
5.0
4.8
83
87
5.2

14.5
3.0
2.5
4.7
80
82
4.1

10.5
4.9
2.3
4.5
74
78
3.4

—
—
—
—
—
—
—

Sumitomo Realty & Development Co., Ltd.

31

Management’s Discussion and Analysis

Review of the Fifth Management Planand Start of the Sixth Management Plan

Results of Operations

In the March 2013 fiscal year, we achieved increases from the previous

Both revenue and profit grew during the fiscal year under review, driven

year in revenue from operations, operating income, ordinary profit andby an increasing sense of the office building market having bottomed

net income, with operating income and ordinary profit growing for theout in leasing operations, and growth in condominium units delivered inthird consecutive year.

sales operations. As a result, revenue from operations grew 7.0%, toRevenue from Operations and Operating Income

The year also marked the conclusion of the period covered by the¥736.7 billion, and operating income rose 2.6%, to ¥151.3 billion.

Fifth Management Plan, which was launched from the March 2011 fiscal

Please refer to “Review of Operations” on pages 14 to 23 for detailed

year. Prior to the March 2011 fiscal year, as a result of the global reces-segment information.

sion following the Lehman Shock, we were unable to avoid twoconsecutive years of profit decline, and the Fifth Management Plan was

Other Income and Expenses

therefore launched based on two goals: “Getting back on track toward

Net other expenses increased ¥5.0 billion, to ¥55.3 billion.

increased revenue and profit” and “Targeting record-setting businessAlthough interest expenses, net declined 11.0%, to ¥31.8 billion,

results in the March 2013 fiscal year.” Faced with an adverse operating

the major factor behind the increase was the recording of ¥17.0 billion

environment that included the Great East Japan Earthquake, the yen’sof loss on impairment of fixed assets transferring to real estate for sale.

strong appreciation and the European debt crisis, we were unable toachieve our initial target for revenue from operations set in 2010, but we

Net Income

surpassed our initial targets for operating income and ordinary profit.

Income before income taxes and minority interests declined 1.1%, toAlthough we fell short of our target of record-setting business results¥96.1 billion. However, due to a decrease of ¥7.9 billion in income taxes,

and have carried this over as a goal under the new plan, with threemainly because of a reduction in the applicable corporate income tax

consecutive years of operating income and ordinary profit growth, werate, net income rose ¥6.6 billion, to ¥59.8 billion, and the net profit

have succeeded in returning to a profit growth track.

margin increased to 8.1% from 7.7%.

From April 2013, we began operating under the new Sixth Management
Plan. Along with the early achievement of surpassing our record business

Cash Flows

results recorded in the March 2008 fiscal year, we will aim for a further
increase in the level of cumulative ordinary profit under the new plan,compared with what we achieved under the previous management plans,

Cash and cash equivalents at the end of year totaled ¥224.7 billion, an

to ¥400 billion. Please refer to “A Message from the Management” forincrease of ¥84.5 billion from the end of the previous fiscal year. Cashmore information regarding the Sixth Management Plan.

flows were as follows.

Cash Flows from Operating Activities
Net cash provided by operating activities was ¥33.6 billion, which was¥67.8 billion less than in the previous year. Despite the recording of¥96.1 billion in income before income taxes and minority interests, thisreflected increased investment in condominium units and the payment
of income tax and other taxes.

Revenue from Operations

Operating Income andOperating Margin

Billions of Yen

Ordinary Profit * andNet Income

Billions of Yen%

Billions of Yen

900

180

30

150

600

120

20

100

300

60

10

50

0

0

21.4

Operating Income

14(Forecast)

Operating Margin (right scale)

09

10

11

12

13

Ordinary Profit*

Net Income* Please see the note on page 3.

32

Annual Report 2013

125.0
68.0

13

114.9
59.8

12

107.9
53.2

11

106.3
50.9

10

160.0

09

100.5
52.7

0

113.6
46.2

14

(Forecast)

151.3

13

147.5

12

138.5

736.7

11

18.6 18.6

134.0

688.7

10

21.1
20.5

146.4

744.8

09

760.0

719.6

0

695.2

21.1

14

(Forecast)Cash Flows from Investing Activities

took out on February 22, 2008, was repaid via a lump-sum payment

Net cash used in investing activities was ¥52.5 billion. In addition to

on February 22, 2013, and on the same day a new ¥60.0 billion sub-¥57.6 billion of payments for purchases of property and equipment toordinated loan with a repayment option was raised.

strengthen leasing operations, payments for purchases of investments
Millions of yen

in securities, which included the establishment of a joint-venturecompany in Dalian, China, totaled ¥52.3 billion. On the other hand, net

2013

2012

137,500 ¥149,700

receipts of deposits from partnership investors were ¥42.2 billion.

Short-term debt:

Cash Flows from Financing Activities

Principally from banks ¥Net cash provided by financing activities was ¥102.8 billion. To enhanceCommercial paper

59,977long-term fund-raising stability, proceeds from the issuance of bonds

Subtotal

197,477

and from long-term loans payable totaled ¥521.4 billion, while outlays forLong-term debt:
Bonds

340,000

Non-recourse bonds

redemption of bonds and repayment of long-term loans payable totaled¥424.8 billion. In addition, the difference between redemption of nonrecourse bonds and repayment of long-term non-recourse loans by
SPEs was a net ¥27.8 billion.

Capital Resources and Liquidity¥ –12,200– 8.1%

19,99439,983200.0%

169,694

27,78316.4%

340,0000

0.0%

50,520138,348–87,828– 63.5%

1,549,295

1,392,668

156,627

11.2%

Non-recourse loans

453,415

393,405

60,01015.3%

subordinated loan

60,000120,000–60,000– 50.0%2,453,230

2,384,421

68,8092.9%¥ 2,650,707 ¥ 2,554,115¥ 96,592

3.8%

Interest-bearing debt

Total assets as of March 31, 2013, were ¥4,105.5 billion, an increase of%changeLoans principallyfrom banks

Subtotal

AssetsAmountchange¥245.8 billion from the previous fiscal year-end. Current assets grew
¥164.6 billion, to ¥965.8 billion, mainly from increases in cash, time andShareholders’ Equity*

notice deposits and real estate for sale. Property and equipment

Shareholders’ equity as of March 31, 2013, was ¥627.0 billion, a ¥73.2

increased ¥11.7 billion, to ¥2,684.2 billion.

billion increase from the previous fiscal year-end. This included net
income of ¥59.8 billion, as well as a ¥20.0 billion net unrealized holding

Liabilities

gains on securities (a ¥21.9 billion increase from the previous fiscal year-

Total liabilities as of March 31, 2013, were ¥3,456.6 billion, an increaseend). As a result, the equity ratio improved to 15.3%, from the previousof ¥179.6 billion from the previous fiscal year-end. Consolidated interest-

year’s 14.3%. ROE also improved to 10.1%, from 9.9%. ROA was 3.9%,

bearing debt increased ¥96.6 billion, to ¥2,650.7 billion. A perpetualcompared with 4.3% for the March 2012 fiscal year.

subordinated loan in the amount of ¥120.0 billion that the Company* Shareholders’ equity = Net assets – Minority interests

Total Assets

Shareholders’ Equity and 
Equity Ratio

ROE and ROA

Billions of Yen

Billions of Yen

%

%

4,500

750

30

12

10.7
3,000

500

20

14.5
15.4

13

* ‌SPEs have been included in the scope of consolidation
since the March 2012 fiscal year.

0

627.0

12

553.8

4,105.5

11526.2

3,859.7

10488.9

3,234.2

09

9.9

10.1

4.4

4.4

4.3

3.9

10

11

12

13

8

5.1

436.7

3,168.1

0

10.0

15.3

250

3,006.4

1,500

16.3

14.3

11.4

09

10

11

12

13

10

4

0

0

Shareholders’ Equity (Net Assets – Minority Interests)
Equity Ratio (right scale)09

ROE (Net Income / Shareholders’ Equity)
 OA (Operating Income + Interest andR
Dividend Income / Total Assets)

Sumitomo Realty & Development Co., Ltd.

33

Financial Strategy

redevelopment for future site acquisition. As a result, we brought grossfloor area of 140,000 tsubo for leasing to market during the Fifth

Characteristics of Operations and Diversification of Fund-raising

Management Plan, which ended with the March 2013 fiscal year. We

In leasing and sales, which are our mainstay business segments, several

plan to bring an additional 140,000 tsubo to market during the Sixth

years are required from the acquisition of a site to the completion of aManagement Plan, and we are making preparations for the Seventhbuilding and the generation of revenue. In addition, significant advanceManagement Plan and beyond, focusing on large-scale urban redevelop-

investment is required. In consideration of these factors, under the threement projects. Due to the need to coordinate rights among landowners,

mid-term management plans from April 1997 to reinforce our financial

redevelopment requires time and effort, but on the other hand compara-

position and achieve operational growth, we worked to diversify ourtively high levels of profit can be expected.
In addition to moving ahead with these types of investments, we arefund-raising methods so as to control interest-bearing debt while making

steadily strengthening our financial position. To maintain a stable finan-

investments needed for growth.

cial position even in a worsening financial environment, we raised

Specifically, we have aggressively introduced development securitization methods using SPEs. With SPEs where off-balance sheet funds are¥120.0 billion in February 2008 through a perpetual subordinated loan.

raised through non-recourse loans, we have worked to conduct develop-

This subordinated loan, which received a high level of equity credit—

ment on a large scale with a small amount of equity money without

75%—from a rating agency, was intended to increase effective

placing a burden on our balance sheet. In addition, to diversify our fund-shareholders’ equity while avoiding equity dilution. After raising thisraising methods in order to control interest-bearing debt, we havesubordinated loan, an international financial crisis symbolized by theformed SURF (Sumitomo Realty & Development Fund) investment part-Lehman Shock triggered a global recession. The subordinated loan cannerships backed by leased buildings, making effective use of our assets

therefore be seen as having played an important role in maintaining thein our fund-raising activities. At the end of March 2013, the balance ofstability of our financial position.
We repaid this subordinated loan with a lump-sum payment in Febru-

investment received in SURF investment partnerships was ¥130 billion,ary 2013, and at the same time, we raised a new subordinated loan withwhich was recorded on the balance sheet as deposits received.

a repayment option in the amount of ¥60.0 billion (the “new subordi-

By actively utilizing these types of fund-raising methods that do not
rely on interest-bearing debt, in the first half of the 2000s, we raised

nated loan”). The new subordinated loan received an equity credit

large amounts of funds without having to sell assets at low prices, anddesignation of 25% from a rating agency, which is less than that of thehave aggressively acquired sites when site acquisition costs are low andprevious subordinated loan. However, in light of the fact that we had

there are investment opportunities. Consequently, our site acquisition

been able to increase shareholders’ equity by ¥217.8 billion from March

has proceeded according to plan, and we were able to achieve substan-31, 2007, to March 31, 2013, and that the government’s monetary

tial growth in revenue and profit over a decade.

easing is reducing fund-raising risk, we decided to refinance with the
new subordinated loan. The new subordinated loan has a term of 60

Investing in Line with Changes in the Market Environment andStrengthening Financial Position

years, but early repayment is possible after three years. In addition, the
new stock subscription rights that had been allotted to ensure a collec-

Since the second half of the 2000s, it has become increasingly difficulttion method for the financial institutions that had extended the previous

to acquire large prime sites that meet our investment criteria. In thissubordinated loan were canceled.

setting, Sumitomo Realty has implemented a policy centered on urban

ND including Debt ofNon-consolidated SPEs and
ND/E Ratio
Billions of Yen

Long-term Debt Ratio and
Fixed-interest Rate Debt Ratio

Interest Coverage Ratio

Times

%

Billions of Yen

3,000

12

100

180

12

2,000

8

120

8

80

34

79

80

80

60

4.9
3.9

4.2

4.9

0

09

10

11

12

13

0

4

155.4
31.9

0

93

2,424.913

93

2,407.612892,444.211

20

83

2,363.7
10

4.7

60

76

2,390.4

4

09

4.6

40

151.2
35.8

4.3

142.0
30.0

4.6

136.5
29.8

4.8

1,000

0

81

150.1
30.4

5.5

77

Times

09

10

11

12

13

ND (Net Interest-bearing Debt)

Short-term Loans and Commercial Paper

Operating Income + Interest and Dividend Income

ND/E Ratio (right scale)Long-term Loans and Bonds

Interest Expense

Fixed-interest Rate Debt Ratio

Interest Coverage Ratio (right scale)

Annual Report 2013

0

Dividend Policy

The Fifth Management Plan set a target of an improvement in the net
debt-equity (ND/E) ratio, including the debt of SPEs, to approximately 4times by the conclusion of the plan on March 31, 2013, compared wit

Our fundamental policy for the distribution of profit is to maintain ah a ratio of 4.8 times as of March 31, 2010. Through the steady accumu-

stable base level of dividends and, while retaining a sufficient level oflation of shareholders’ equity, we surpassed this target with a ND/E ratio

earnings for stable, long-term operational growth, to increase dividendsof 3.9 times as of March 31, 2013.

in line with growth in profit.

In addition, the cash flow generated by our core leasing business is

We have implemented four plans since April 1997. We steadily

more than ¥100.0 billion, reaching ¥129.7 billion in the year under review.

strengthened our profit foundation under two management plans—This represents increased operational stability. As a result, net debt (ND)

the First Plan and the Second Plan. In addition, we worked to respondis at roughly the same level as four years ago, but with an increase

to various changes in accounting standards and to reduce unrealized

in leasing cash flow, the ND / leasing cash flow ratio is improving.

losses. Over this period, due to comparatively large special losses, net

Also, properties for leasing, including SPEs, have about ¥1 trillion inincome fluctuated, but we maintained annual dividends at ¥6.00 per

unrealized gains (the difference between the carrying amount and theshare. At the conclusion of the Second Plan, we raised dividends to thefair value). Ratings agencies have evaluated these two strengths highly,

bubble period level: ¥9.00 per share.

and we have maintained our rating even in difficult financial environ-

Under the Third Plan, which began in April 2004, we completed thements, such as after the Lehman Shock. Presently, we maintain A and

implementation of measures to deal with unrealized losses, and laid theA– ratings with JCR and R&I, respectively. Due to the early adoption offoundation for full-scale growth in EPS. Thereafter, we continued to

new accounting standards, SPEs were included within the scope ofincrease the dividend in line with profit growth to the extent that we

consolidation from the March 2012 fiscal year. However, there was noraised the dividend for the March 2009 fiscal year, the year after wechange in evaluations from ratings agencies and financial institutions,recorded record high profit, to ¥20.00 per share.

and there was no effect on fund-raising.

However, profit subsequently declined due to the Lehman Shock.

To protect ourselves from the risk of future rate increases on interest

Nevertheless, we focused on the continuation of stable dividends andpayments, we endeavor to raise funds at fixed rates and to increase themaintained the dividend per share at ¥20.00. Although revenue andportion of loans with longer terms. During 2013, we have issued bonds

profit grew, based on this dividend policy we will pay a full-year dividendwith maturities of seven years in March and June, and with a maturity ofof ¥20.00 per share for the March 2013 fiscal year. In addition, we

10 years in July.

expect to pay a ¥20.00 per-share dividend for the March 2014 fiscal

As of March 31, 2013, long-term debt accounted for 93% of consoli-

year. Moving forward, in accordance with our judgment that we need

dated interest-bearing debt, and fixed-rate debt accounted for 80%.

to further bolster equity, we will continue to follow a policy of imple-

Site acquisition is essential to the achievement of ongoing growth. In

menting dividend increases in accordance with growth in profit.

the Sixth Management Plan, we will continue to strengthen our financial
position through the generation of profit and work to achieve increased
fund-raising stability as we continue to invest in growth, centered on thecore leasing business.

Leasing Cash Flows

Leasing Assets andReturn on Leasing Assets

Billions of Yen

12

150

45

20

2,000

8

100

30

4

50

0

0

12

13

20.0
15

09

10

11

12

13

Income before Income Taxes

Leasing Cash Flows

Leasing Assets

Ordinary Profit

ND* / Leasing Cash Flows Ratio (right scale)

Return on Leasing Assets (right scale)

Cash Dividends per Share (right scale)

125.0
115.0

11

20.0

14

0

(Forecast)

125.0
115.0

10

20.0

114.9
96.1

09

20.0

114.9

0

20.0

107.9
97.2

0

20.0

107.9

129.7
13

4.8

106.3
87.8

123.6
12

5.3

106.3

110.3
11

5.6

100.5
91.2

114.3
10

6.1

100.5

121.5
09

10

1,000

6.8

113.6
79.3

18.7

Yen

113.6

19.5

2,884.2

22.2

2,840.5

20.7

2,170.9

19.7

50

0

%

3,000

2,088.0100

Billions of Yen

30

Times

150

1,993.6

Billions of Yen

Cash Dividends per Share,
Ordinary Profit andIncome Before Income Taxes* Including debt of non-consolidated SPEs

Sumitomo Realty & Development Co., Ltd.

35

Consolidated Balance Sheets
Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
As of March 31, 2013 and 2012

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

2013

2012

¥  225,774
17,886(112)
679,496
10,796
31,946
965,786¥  146,476
17,058(511)
586,170
10,58841,361
801,142$ 2,401,596
190,256(1,191)
7,227,912
114,839
339,814
10,273,226

39,373
222,970(15,506)
246,837

1,044
178,394(15,068)
164,370

418,817
2,371,769(164,940)
2,625,646

2,042,669
918,316
25,331
3,005
43,581
3,032,902

2,005,364
899,281
24,8542,656
59,8182,991,973

21,728,210
9,768,280
269,450
31,965463,578
32,261,483

Accumulated depreciation
		 Net property and equipment(348,702)
2,684,200(319,451)
2,672,522(3,709,201)
28,552,282

Other assets:
Guarantee and lease deposits paid to lessors (Note 6)
Leasehold rights and other intangible assets
Deferred income taxes (Note 14)
Other
		 Total other assets
			Total assets

125,855
51,538
14,97816,306208,677¥4,105,500

134,067
51,587
18,565
17,445
221,664¥3,859,698

1,338,741
548,218
159,323
173,450
2,219,732$43,670,886

AssetsCurrent assets:Cash, time and notice deposits (Notes 3, 5 and 6)
Notes and accounts receivable—trade (Note 6)
Allowance for doubtful accounts (Note 6)
Inventories (Note 4)
Deferred income taxes (Note 14)
Other current assets
		 Total current assets

Investments:
Investments in unconsolidated subsidiaries and affiliates (Notes 6)
Investments in securities and other (Notes 6 and 7)
Allowance for doubtful accounts
		Total investments

Property and equipment:
Land (Notes 4, 5 and 21)
Buildings and structures (Notes 4, 5 and 21)
Machinery and equipment (Notes 5 and 21)
Leased assets
Construction in progress (Notes 4, 5 and 21)

See accompanying notes.

36

Annual Report 2013

2013

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

Liabilities and Net Assets
Current liabilities:
Short-term debt (Notes 6 and 8)
Long-term debt due within one year (Notes 5, 6 and 8)
Long-term non-recourse debt due within one year (Notes 5, 6 and 8)
Notes and accounts payable—trade (Note 6)
Accrued income taxes
Accrued bonuses
Deposits received (Notes 6 and 15)
Other current liabilities (Note 15)
		 Total current liabilities

2013

2012

2013

¥  197,477
278,392
84,53838,811
22,156
3,351
206,865
98,795930,385¥  169,694
307,623
137,438
34,66324,066
3,137
121,81482,373880,808$ 2,100,596
2,961,302
899,245
412,839
235,677
35,6452,200,457
1,050,899
9,896,660

Long-term liabilities:
Long-term debt due after one year (Notes 6 and 8)
Long-term non-recourse debt due after one year (Notes 5 ,6 and 8)
Guarantee and deposits received (Notes 6 and 15)
Allowance for employees’ severance and retirement benefits (Note 9)
Other long-term liabilities (Notes 14 and 15)
		 Total long-term liabilities

1,670,903
419,397
404,411
5,518
26,021
2,526,250

1,545,045
394,315426,785
5,102
24,9762,396,223

17,773,673
4,461,196
4,301,787
58,696
276,789
26,872,141

122,805
132,749
363,384(3,779)615,159

122,805
132,748
313,041(3,704)564,890

1,306,297
1,412,073
3,865,376(40,198)
6,543,548

19,981(1,393)(6,736)
11,852
21,854
648,865¥4,105,500(1,933)(972)(8,141)(11,046)
28,823582,667¥3,859,698

212,541(14,818)(71,651)
126,072
232,465
6,902,085$43,670,886

Contingent liabilities (Note 22)
Net assets (Note 16):
Shareholders’ equity
		Common stock:			Authorized —1,900,000 thousand shares
			Issued—476,086 thousand shares
		Capital surplus
		Retained earnings
		Treasury stock			Total shareholders’ equity
Accumulated other comprehensive income (loss)
		 Net unrealized holding gains (losses) on securities
		 Net deferred losses on hedges
		 Foreign currency translation adjustments
			 Total accumulated other comprehensive income (loss)
Minority interests
		 Total net assets
			 Total liabilities and net assets

Sumitomo Realty & Development Co., Ltd.

37

Consolidated Statements of Income
Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
For the years ended March 31, 2013, 2012 and 2011

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

2013

2012

2011

2013

Revenue from operations
Costs and expenses:
Cost of revenue from operations
Selling, general and administrative expenses¥736,652¥688,662¥744,756$7,835,890

529,91355,394585,307490,437
50,760541,197551,364
54,929606,293

5,636,773
589,235
6,226,008

Operating income
Other income (expenses):
Interest expense, net
Dividend income
Gain on sale of property and equipment
Loss on sale of property and equipment
Loss on impairment of fixed assets (Note 10)
Loss on disposal of property and equipment
Gain on sale of investments in securities
Loss on sale of investments in securities
Loss on devaluation of investments in securities
Dividend to partnership investors
Gain on prior periods adjustment (Note 12)
Compensation income
Loss on devaluation of common stocks of affiliates
Provision for allowance for loss on disaster (Note 11)
Other, net

151,345

147,465

138,463

1,609,882(31,820)
4,021
21
(10)
(16,967)(1,405)
1,769(187)(2,087)(2,566)————(6,052)(55,283)(35,748)
3,684
429
(399)
(5,618)(555)——(3,740)(2,853)——(854)—(4,644)(50,298)(29,789)
3,344
120
(19)
(7,602)(2,188)4(33)(6,710)(3,043)413
78—(1,930)(3,350)(50,705)(338,475)
42,772223(106)(180,481)(14,945)
18,817(1,989)(22,200)(27,295)————(64,376)(588,055)

Income before income taxes and minority interests
Income taxes (Note 14):
Current
Deferred		Total96,062

97,16787,7581,021,827

37,432(3,508)33,924

37,616
4,224
41,84035,138(128)35,010398,170(37,315)360,855

Income before minority interests

62,13855,32752,748660,972

Minority interests

2,313

2,091

1,840

24,604¥ 59,825¥ 53,236¥ 50,908$  636,368

Net income

Yen

2013
Amounts per share of common stock:
Net income:		—Basic
		—Diluted
Cash dividend applicable to the year

2012
¥112.28
99.83
20.00

¥126.18—
20.00

U.S. dollars (Note 1)

2011

2013

¥107.35
94.73
20.00

$1.34
—
0.21

Consolidated Statements of Comprehensive Income
Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
For the years ended March 31, 2013, 2012 and 2011
Thousands of U.S. dollars(Note 1)Millions of yen

2013
Income before minority interests
Other comprehensive income (loss) (Note 20)
Net unrealized holding gains (losses) on securities
Net deferred gains (losses) on hedges
Foreign currency translation adjustments
		 Total other comprehensive income (loss)
Comprehensive income
Comprehensive income attributable to:
Owners of the parent
Minority interests
See accompanying notes.

38

Annual Report 2013

2012

2011

2013

¥62,138¥55,327¥52,748$660,972

21,919(387)
1,741
23,273¥85,411

4,780
1,212
(1,067)
4,925¥60,252(3,308)534(1,610)(4,384)¥48,364

233,157(4,117)
18,519247,559$908,531¥82,724
2,687¥58,352
1,900¥46,9171,447$879,949
28,582

Consolidated Statements of Changes in Net Assets
Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
For the years ended March 31, 2013, 2012 and 2011

Thousands

Millions of yen

Number ofshares ofcommonstock

Commonstock

Capitalsurplus

Shareholders’ equity

Accumulated Other Comprehensive Income (Loss)

Retainedearnings

Treasurystock

Net unrealized
Foreign
Total accumuholding gains Net deferredcurrency
lated other(losses) on gains (losses) translation comprehensive
securities
on hedges adjustments income (loss)

Total
shareholders’equityMinority
interests

Total net
assets476,086¥122,805¥132,748¥248,836¥(3,543)¥500,846¥ (3,393)¥(2,591)¥(5,966)¥(11,950)¥18,504¥507,400

Net income

—

—

—

50,908—50,908

—

—

—

—

—

50,908Foreign currency translation
adjustments

—

—

—

—

—

—

—

—

(1,349)(1,349)—(1,349)Net unrealized holding losses
on securities

—

—

—

—

—

—

(3,308)——(3,308)—(3,308)Acquisition of treasury stock

—

—

—

—

(102)

(102)

—

—

—

—

—

(102)

		 Final for prior year(¥10 per share)

—

—

—

(4,742)—(4,742)

—

—

—

—

—

(4,742)

		 Interim for current year(¥10 per share)

Balance at April 1, 2010

Cash dividends paid:

—

—

—

(4,742)—(4,742)

—

—

—

—

—

(4,742)

Minority interests

—

—

—

—

—

—

—

—

—

—

598

598

Net deferred gains on hedges

—

—

—

—

—

—

—

666

—

666

—

666

476,086¥122,805¥132,748¥290,260¥(3,645)¥542,168¥ (6,701)¥(1,925)¥(7,315)¥(15,941)¥19,102¥545,329

Net income

—

—

—

53,236—53,236

—

—

—

—

—

53,236Foreign currency translation
adjustments

—

—

—

—

—

—

—

—

(826)

(826)

—

(826)

Net unrealized holding gains
on securities

—

—

—

—

—

—

4,768

—

—

4,768

—

4,768

Acquisition of treasury stock

—

—

—

—

(61)

(61)

—

—

—

—

—

(61)

Disposal of treasury stock

—

—

—

—

2

2

—

—

—

—

—

2

Change of scope of
consolidation

—

—

—

(20,971)—(20,971)

—

—

—

—

—

(20,971)		 Final for prior year(¥10 per share)

—

—

—

(4,742)—(4,742)

—

—

—

—

—

(4,742)

		 Interim for current year(¥10 per share)

Balance at April 1, 2011

Cash dividends paid:

—

—

—

(4,742)—(4,742)

—

—

—

—

—

(4,742)

Minority interests

—

—

—

—

—

—

—

—

—

—

9,721

9,721

Net deferred gains on hedges

—

—

—

—

—

—

—

953

—

953

—

953

476,086¥122,805¥132,748¥313,041¥(3,704)¥564,890¥ (1,933)¥  (972)¥(8,141)¥(11,046)¥28,823¥582,667

Net income

—

—

—

59,825—59,825

—

—

—

—

—

59,825Foreign currency translation
adjustments

—

—

—

—

—

—

—

—

1,405

1,405

—

1,405

Net unrealized holding gains
on securities

—

—

—

—

—

—

21,914——

21,914—

21,914

Acquisition of treasury stock

—

—

—

—

(77)

(77)

—

—

—

—

—

(77)

Disposal of treasury stock

—

—

1

—

2

3

—

—

—

—

—

3

		 Final for prior year(¥10 per share)

—

—

—

(4,741)—(4,741)

—

—

—

—

—

(4,741)

		 Interim for current year(¥10 per share)

Balance at April 1, 2012

Cash dividends paid:

—

—

—

(4,741)—(4,741)

—

—

—

—

—

(4,741)

Minority interests

—

—

—

—

—

—

—

—

—

—

(6,969)(6,969)Net deferred losses on hedges

—

—

—

—

—

—

—

(421)

—

(421)

—

(421)

476,086¥122,805¥132,749¥363,384¥(3,779)¥615,159¥19,981¥(1,393)¥(6,736)¥ 11,852¥21,854¥648,865

Minority
interests

Total net
assetsBalance at March 31, 2013

Thousands of U.S. dollars (Note 1)

Commonstock

Capitalsurplus

Shareholders’ equity

Accumulated Other Comprehensive Income (Loss)

Retainedearnings

Net unrealized
Foreign
Total accumuholding gains Net deferredcurrency
lated other(losses) on
losses ontranslation comprehensive
securities
hedgesadjustments income (loss)

Treasury
stock

Total
shareholders’equity$1,306,297$1,412,063$3,329,870$(20,562)$(10,340)$(86,596)$(117,498)$306,595$6,197,927

Net income——

636,368—

636,368

—

—

—

—

—

636,368

Foreign currency translation
adjustments

—

—

—

—

—

—

—

14,945

14,945—

14,945Net unrealized holding gains
on securities

—

—

—

—

—

233,103——

233,103—

233,103

Acquisition of treasury stock

—

—

—

(819)

(819)

—

—

—

—

—

(819)

Disposal of treasury stock

—

10

—

21

31

—

—

—

—

—

31

		 Final for prior year($0.11 per share)——(50,431)—(50,431)

—

—

—

—

—

(50,431)		 Interim for current year($0.11 per share)

Balance at April 1, 2012$(39,400) $6,008,830

Cash dividends paid:——(50,431)—(50,431)

—

—

—

—

—

(50,431)

Minority interests

—

—

—

—

—

—

—

—

—

(74,130)(74,130)

Net deferred losses on hedges

—

—

—

—

—

—

(4,478)—(4,478)—(4,478)$1,306,297$1,412,073$3,865,376$(40,198) $6,543,548$212,541$(14,818) $(71,651)$ 126,072$232,465$6,902,085

Balance at March 31, 2013
See accompanying notes.

Sumitomo Realty & Development Co., Ltd.

39

Consolidated Statements of Cash Flows
Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
For the years ended March 31, 2013, 2012 and 2011

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

2013
Cash flows from operating activities:
Income before income taxes and minority interests
Depreciation and amortization
Loss on impairment of fixed assets (Note 10)
Provision for allowance for loss on disaster (Note 11)
Provision for (Reversal of) allowance for doubtful accountsIncrease (Decrease) in allowance for employees’ severance andretirement benefits
Loss on sale of property and equipment, net
Loss on disposal of property and equipment
Loss (Gain) on sale of investments in securities, net
Loss on devaluation of investments in securities
Loss on devaluation of common stocks of affiliates
Interest and dividend income
Interest expense
Decrease (Increase) in notes and accounts receivable—trade
Increase in inventories
Increase (Decrease) in notes and accounts payable—trade
Increase (Decrease) in advances received
Other, net
		Total

2011

2013

¥  96,062
37,761
16,967—39¥  97,167
36,049
5,618
—
(839)

¥   87,758
23,705
7,602
1,930
776

$ 1,021,827
401,670
180,481
—
415

417
(11)
1,405
(1,582)
2,087—(4,090)31,889(1,243)(104,737)
4,160
15,963
6,264
101,351

219
(30)
555
—
3,740
854
(3,761)35,825(2,867)(14,347)
2,908(2,145)
5,798
164,744

(87)
(101)
2,188
29
6,710
—
(3,525)29,9692,935(30,830)(22,407)(2,936)(23,894)
79,822

4,436(117)
14,945(16,828)
22,200—(43,506)
339,209(13,222)(1,114,105)
44,251
169,801
66,6301,078,087

Proceeds from interest and dividend income
Payments for interest
Payments for income tax and other taxes
Net cash provided by operating activities

4,090(32,507)(39,339)
33,595

3,761(36,360)(30,742)
101,403

3,525(30,261)(38,644)
14,44243,506(345,782)(418,455)
357,356

Cash flows from investing activities:
Payments for purchases of property and equipment
Proceeds from sale of property and equipment
Payments for purchases of investments in securities
Proceeds from sale of investments in securities
Payments for guarantee and lease deposits paid to lessors
Proceeds from guarantee and lease deposits paid to lessors
Payments for guarantee and lease deposits received
Proceeds from guarantee and lease deposits received
Receipts of deposits from partnership investors
Restitution of deposits from partnership investors
Other, net
Net cash used in investing activities(57,623)678(52,334)
6,194(1,343)
9,171(16,747)
12,781
86,327(44,085)
4,449(52,532)(112,294)
1,485(8,316)52(2,291)
10,713(18,305)
19,115
91,115(51,971)(1,403)(72,100)(98,059)
1,040(7,301)
7,074(2,241)
21,642(26,385)
20,15688,996(78,133)(2,301)(75,512)(612,945)
7,212(556,685)
65,887(14,286)
97,553(178,141)
135,954918,275(468,939)
47,323(558,792)

Cash flows from financing activities:
Increase (Decrease) in short-term debt, net
Proceeds from issuance of bonds
Redemption of bonds
Proceeds from non-recourse bonds
Redemption of non-recourse bonds
Proceeds from long-term loans payable
Repayment of long-term loans payable
Proceeds from long-term non-recourse loans
Repayment of long-term non-recourse loans
Increase (Decrease) in assignment of receivables
Increase in treasury stocks, net
Cash dividends paid
Other, net
Net cash provided by (used in) financing activities

27,78390,000(90,000)
2,000(89,828)
431,400(334,773)
109,000(48,990)
7,102(73)(10,639)
9,776
102,758(46,045)
30,000(90,000)
4,900(6,140)390,895(284,087)
42,340(50,985)(1,878)(60)(10,334)(8,672)(30,066)(112,486)
60,000(80,000)——
413,300(194,381)——(20,090)(102)(10,334)(24,072)
31,835295,532
957,345(957,345)
21,274(955,515)
4,588,874(3,561,036)
1,159,451(521,115)
75,545(777)(113,169)
103,990
1,093,054

711

(464)

(331)

7,563

Net increase (decrease) in cash and cash equivalents

84,532(1,227)(29,566)

899,181

Cash and cash equivalents at beginning of year
Increase in cash and cash equivalents of newly
consolidated subsidiaries
Cash and cash equivalents at end of year (Note 3)

140,200

119,749

149,315

1,491,331—¥ 224,732

21,678¥ 140,200—¥ 119,749—$ 2,390,512

Effect of exchange rate changes on cash and cash equivalents

See accompanying notes.

40

2012

Annual Report 2013

Notes to Consolidated Financial Statements
Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
As of and for the years ended March 31, 2013, 2012 and 2011

1. Basis of presenting consolidated financial statements

Accordingly, 23 Special Purpose Entities, including Shiodome Hamarikyu
Special Purpose Company, Ltd., and 1 limited partnership (“Tokumei

The accompanying consolidated financial statements of Sumitomo Realty

kumiai”) have been newly included within the scope of consolidation at& Development Co., Ltd. (“the Company”) and its consolidated subsidiar-

April 1, 2011.

ies have been prepared in accordance with the provisions set forth in theThis early adoption of the new accounting standard is according to the

Financial Instruments and Exchange Law and its related accounting regula-rules under paragraph 44-4, item (3) of “Accounting Standard for Consoli-tions, and in conformity with accounting principles generally accepted in

dated Financial Statements”, and assets or liabilities belonging to newly

Japan (“Japanese GAAP”), which are different in certain respects as toconsolidated subsidiaries are evaluated by their fair carrying amount at

application and disclosure requirements from International Financial

April 1, 2011.

Reporting Standards.
The accounts of the Company’s overseas subsidiaries are based on their

As a result, retained earnings decreased by ¥19,386 million at April 1, 2011.

accounting records maintained in conformity with generally accepted account-(2) Foreign currency translation

ing principles prevailing in the respective countries of domicile. The

Receivables and payables denominated in foreign currencies are translated

accompanying consolidated financial statements have been restructured

into Japanese yen at the year-end rate.

and translated into English (with certain expanded disclosure) from the

Financial statements of consolidated overseas subsidiaries are translated

consolidated financial statements of the Company prepared in accordance

into Japanese yen at the year-end rate, except for shareholders’ equity

with Japanese GAAP and filed with the appropriate Local Finance Bureau

accounts, which are translated at historical rates, and income statementof the Ministry of Finance as required by the Financial Instruments anditems resulting from transactions with the Company, which are translated

Exchange Law. Certain supplementary information included in the statu-

at the rates used by the Company.

tory Japanese-language consolidated financial statements, but notrequired for fair presentation, is not presented in the accompanying consolidated financial statements.
The translation of the Japanese yen amounts into U.S. dollars is included

Differences arising from translation are presented as “Foreign currencytranslation adjustments” in net assets.

(3) Cash and cash equivalents

solely for the convenience of readers outside Japan, using the prevailing

In preparing the consolidated statements of cash flows, cash on hand,exchange rate at March 31, 2013, which was ¥94.01 to U.S. $1. The trans-

readily available deposits and short-term, highly liquid investments withlation should not be construed as representations that the Japanese yen

maturities not exceeding three months at the time of purchase are consid-

amounts have been, could have been or could in the future be converted

ered to be cash and cash equivalents.

into U.S. dollars at this or any other rate of exchange.

(4) Recognition of revenue
Revenues from sales operations of condominiums, detached houses and2. Accounting policies(1) Consolidation
The accompanying consolidated financial statements include the accounts

land lots are recognized when units are delivered and accepted by customers. Revenues from leasing operations of office buildings, residences andother properties are recognized as rent accrues over the lease term.

of the Company and significant companies over which the Company has(5) Inventories

power of control through majority voting rights or existence of certain

Inventories are stated at cost, determined by the specific identification

conditions evidencing control by the Company.

method principally. The carrying amount of inventories is written down

In the elimination of investments in subsidiaries, the assets and liabilitiesof the subsidiaries, including the portion attributable to minority sharehold-when the profitability declines.

ers, are recorded based on the fair value at the time the Company acquired(6) Securities

control of the respective subsidiaries.

Held-to-maturity securities are stated at amortized cost. Investments in

All significant intercompany balances, transactions and profits have been
eliminated in consolidation.
Effective from the year ended March 31, 2012, the Company earlysubsidiaries and affiliates that are not consolidated or accounted for using
the equity method are stated at moving-average cost. Available-for-salesecurities with available fair values are stated at fair value. Unrealized gains

adopted the new accounting standard, revised “Accounting Standard forand losses on these securities are reported, net of applicable income

Consolidated Financial Statements” (Statement No. 22 revised by thetaxes, as a separate component of net assets. Realized gains and losses

Accounting Standards Board of Japan on March 25, 2011), “ Guidance onon the sale of such securities are computed using moving-average cost.

Disclosures about Certain Special Purpose Entities” (Guidance No. 15

Senior securities are stated at cost determined by the specific identifica-

revised by the Accounting Standards Board of Japan on March 25, 2011),

tion method, and securities with no available fair value are stated at“Guidance on Determining a Subsidiary and an Affiliate” (Guidance No. 22

moving-average cost.

revised by the Accounting Standards Board of Japan on March 25, 2011)

Investments in limited partnerships, which are regarded as securities

and “Practical Solution on Applications of the Control Criteria and Influence

under the Financial Instruments and Exchange Law, are accounted for in a

Criteria to Investment Associations” (PITF No. 20 revised by the Account-manner similar to the equity method based on recent financial statements.

ing Standards Board of Japan on March 25, 2011).

Sumitomo Realty & Development Co., Ltd.

41

If the market value of held-to-maturity securities, investments in subsid-(11) Income taxes

iaries and affiliates and available-for-sale securities declines significantly,

Income taxes are provided for on the basis of income for financial state-such securities are stated at fair value and the difference between fairment purposes. The tax effects of temporary differences between thevalue and the carrying amount is recognized as a loss in the period of thecarrying amounts of assets and liabilities for financial statements anddecline. If the fair value of investments in unconsolidated subsidiaries andincome tax purposes are recognized as deferred income taxes.

affiliated companies not accounted for using the equity method is not readily available, such securities should be written down to net asset value with(12) Employees’ severance and retirement benefitsa corresponding charge in the income statement in the event net asset

The Company and certain of its consolidated subsidiaries provide twovalue declines significantly. In these cases, such fair value or the net asset

types of post-employment benefit plans, lump-sum payment plans andvalue will be the carrying amount of the securities at the beginning of thedefined benefit corporate pension plans, under which all eligible employ-next fiscal year.

ees are entitled to benefits based on their current rate of pay, length ofservice and the conditions under which termination occurs.

(7) Property and equipment

The liabilities and expenses for severance and retirement benefits are

The Company and its consolidated domestic subsidiaries depreciate build-determined based on the amounts actuarially calculated using certain

ings using the straight-line method, and other property and equipment

assumptions.

using the declining-balance method over their estimated useful lives.

The Company and certain of its consolidated subsidiaries provided an

The consolidated overseas subsidiaries depreciate property and equipment

allowance for employees’ severance and retirement benefits at March 31,

using primarily the straight-line method in accordance with the accounting

2013, 2012 and 2011 based on the estimated retirement benefit obligations

principles in the respective countries.

at those dates.

Leased assets related to finance lease transactions without title transfer

Prior service costs are recognized as expenses in the period in which

are depreciated using the straight-line method over the lease periods as

they are incurred, and actuarial gains and losses are recognized as

their useful lives with no residual value.

expenses in the following period.

Estimated useful lives used in the computation of depreciation are(13) Comprehensive income

generally as follows:
Buildings and structures

6 to 60 years

Effective from the year ended March 31, 2011, the Company and its consoli-

Machinery and equipment

2 to 20 years

dated subsidiaries adopted the new accounting standard, “Accounting

Leased assets		

Lease periods

Standard for Presentation of Comprehensive Income” (Statement No. 25

Effective from the year ended March 31, 2013, in accordance with theissued by the Accounting Standards Board of Japan on June 30, 2010).

revision of the Corporation Tax Act (Law) of Japan, the Company and its
consolidated domestic subsidiaries have computed depreciation by the(14) Asset retirement obligations

method based on the revised Corporation Tax Act (Law) for the property

Effective from the year ended March 31, 2011, the Company and its consoli-and equipment acquired on or after April 1, 2012.

dated subsidiaries adopted the new accounting standard, “Accounting

This accounting change has an immaterial impact on operating income
and income before income taxes and minority interests.

(8) Software costs
Software costs are amortized using the straight-line method over the esti-

the Accounting Standards Board of Japan on March 31, 2008), and “Guidanceon Accounting Standard for Asset Retirement Obligations” (Guidance No.
21 issued by the Accounting Standards Board of Japan on March 31, 2008).
This accounting change has an immaterial impact on operating income

mated useful lives (five years).

and income before income taxes and minority interests.

(9) Allowance for doubtful accounts(15) Construction contracts

The Company and its consolidated subsidiaries provide for doubtful

The construction projects for which the outcome of the portion completed

accounts at an estimated uncollectable amount based on the evaluation ofby the end of the fiscal year under review can be reliably estimated arecertain identified doubtful and bankrupt receivables plus an amount calcu-

accounted for by the percentage-of-completion method (the degree oflated using the percentage of actual collection losses in certain referencecompletion of each construction project is estimated using the cost-periods with respect to remaining receivables.

comparison method), while other construction projects are accounted for(10) Lease transactions

by the completed-contract method.

Leased assets related to finance lease transactions without title transfer(16) Derivative transactions and hedge accounting

are depreciated using the straight-line method over the lease periods as

The Company and its consolidated subsidiaries state derivative financial

their useful lives with no residual value.

instruments at fair value and recognize changes in the fair value as gains

The Company and its consolidated subsidiaries use the accounting
procedures that conform to methods related to normal lease transactions
with respect to finance lease transactions without title transfer with alease transaction start date prior to March 31, 2009.

42

Standard for Asset Retirement Obligations” (Statement No. 18 issued by

Annual Report 2013or losses unless derivative financial instruments are used for hedging
purposes and qualify for hedge accounting.
If derivative financial instruments are used as hedges and meet certain
hedging criteria, the Company and its consolidated subsidiaries defertive financial instruments until the related gains or losses on the hedged(18) N ew accounting pronouncements (Accounting standards issued
not yet effective)

items are recognized.

“Accounting Standard for Retirement Benefits” (Statement No. 26 issued

recognition of gains or losses resulting from changes in fair value of deriva-

However, in cases where foreign exchange forward contracts are usedby the Accounting Standards Board of Japan on May 17, 2012)as hedges and meet certain hedging criteria (regarding foreign exchange“Guidance on Accounting Standard for Retirement Benefits” (Guidancecontracts), the foreign exchange forward contracts and hedged items are

No. 25 issued by the Accounting Standards Board of Japan on May 17, 2012)accounted for in the following manner:

1. Outline

1. 	If a foreign exchange forward contract is executed to hedge an existing	In consideration of improvement of financial reporting and international

foreign currency receivable or payable,

trends, “Accounting Standard for Retirement Benefits” and “Guidance(a) the difference, if any, between the Japanese yen amount of theon Accounting Standard for Retirement Benefits” were revised mainly

hedged foreign currency receivable or payable translated using thewith a focus on the accounting method of unrecognized actuarial differ-

spot rate at the inception date of the contract and the carrying

ences and unrecognized prior service costs, the calculation method ofamount of the receivable or payable is recognized in the income

retirement benefit obligations and service costs, and the expansion

statement in the period which includes the inception date; andof disclosure.

(b) t he discount or premium on the contract (that is, the difference

2. Effective date

between the Japanese yen amount of the contract translated using	The accounting standard and the guidance are scheduled to be effective

the contracted forward rate and that translated using the spot rate

at the end of the year ending March 31, 2014. However, the revisions ofat the inception date of the contract) is recognized over the term of

calculation method of retirement benefit obligations and service costs

the contract.

are scheduled to be effective from the beginning of the year ending

2.	If a foreign exchange forward contract is executed to hedge a future

March 31, 2015.

transaction denominated in a foreign currency, the future transaction will

3. Impact of the adoption of the accounting standard and the guidance

be recorded using the contracted forward rate, and no gains or losses on	The impact of the adoption of the accounting standard and the guidance

the foreign exchange forward contract are recognized.

was under evaluation at the time of the preparation of consolidated

Also, if interest rate swap contracts are used as a hedge and meet certain

financial statements.

hedging criteria (regarding interest rate swap contracts), the net amountto be paid or received under the interest rate swap contracts is added to(19) Reclassifications and restatement

or deducted from the interest on the assets or liabilities relative to which

Certain prior year amounts have been reclassified to conform to the 2013

the swap contract was executed as a hedge.

presentation.

(17) Amounts per share of common stock

dated statements of cash flow for the year ended March 31, 2011 is deemed

The computation of net income per share is based on the weighted-

immaterial and thus reclassified to “Other, net” of operating activities of

average number of shares of common stock outstanding during each year.

the consolidated statements of cash flow.

“Increase in investments in SPEs holding properties for sale” of the consoli-

Diluted net income per share is computed based on the amount of net
income available to the shareholders and the weighted-average number of

These reclassifications had no impact on previously reported results ofoperations or retained earnings.

shares of common stock outstanding during each year after giving effect tothe dilutive potential of shares of common stock to be issued upon the(20) Accounting changes and error corrections

exercise of stock options.

Effective from the year ended March 31, 2012, the Company and its consoli-

Diluted net income per share for the year ended March 31, 2013 is not

dated subsidiaries adopted the new accounting standard, “Accounting

listed since dilutive shares of the Company had been extinguished by repay-

Standard for Accounting Changes and Error Corrections” (Statement No. 24

ment of perpetual subordinated loans.

issued by the Accounting Standards Board of Japan on December 4, 2009)

Cash dividends per share represent actual amounts applicable to therespective year.

and “Guidance on Accounting Standard for Accounting Changes and Error
Corrections” (Guidance No. 24 issued by the Accounting Standards Boardof Japan on December 4, 2009).

3. Cash and cash equivalents
Cash and cash equivalents at March 31, 2013 and 2012 consisted of the following:Thousands of
U.S. dollars

Millions of yen

Cash, time and notice deposits
Time deposits
Cash and cash equivalents

2013

2012

¥225,774¥146,476

2013$2,401,596(1,042)(6,276)(11,084)¥224,732¥140,200$2,390,512

Sumitomo Realty & Development Co., Ltd.

43

4. Inventories
Inventories at March 31, 2013 and 2012 are as follows:

Thousands of
U.S. dollars

Millions of yen

2013

2012

Real estate for sale¥203,452¥172,679$2,164,153

2013

Real estate for sale in process

469,550

407,955

4,994,681

Costs on uncompleted construction contracts

5,142

4,272

54,696

Other

1,352

1,264

14,382

Total¥679,496¥586,170$7,227,912

The Company transferred amounts between inventories and property and equipment. Such transfers at March 31, 2013 and 2012 are as follows:
Thousands of
U.S. dollars

Millions of yen

2013

2012

2013

Transferred to property and equipment¥(34,504)¥    —$(367,025)

Transferred from property and equipment

22,32813,819237,507(12,176)

13,819(129,518)

Inventories:

Net increase (decrease)

5. Pledged assets
Assets pledged as collateral at March 31, 2013 and 2012 are as follows:

Thousands of
U.S. dollars

Millions of yen

2013

2012

Cash, time and notice deposits¥  2,031¥     —$   21,604

Buildings and structures

167,145

168,789

1,777,949

Land446,113353,848

4,745,378

Construction in progress

17

—

181

Machinery and equipment

1,128

1,509

11,999¥616,434¥524,146$6,557,111

Total

2013

Secured liabilities at March 31, 2013 and 2012 are as follows:

Thousands of
U.S. dollars

Millions of yen

Long-term debt due within one year

2013

2012

2013

¥     —

¥ 20,500$      —

Long-term non-recourse debt due within one year:
Bonds

8,848

2,248

94,118Loans

75,69031,510805,127

Long-term non-recourse debt due after one year:
Bonds

41,672

48,520443,272Loans

377,725

345,795

4,017,923¥503,935¥448,573$5,360,440

Total
Specified assets for non-recourse debts at March 31, 2013 and 2012 are as follows:

Thousands of
U.S. dollars

Millions of yen

2013

2012

Cash, time and notice deposits¥ 17,450¥ 30,480$  185,619

Buildings and structures

167,145

176,627

1,777,949

Land446,113446,113

4,745,378

Construction in progress

17

17

181

Machinery and equipment

1,128

1,506

11,998¥631,853¥654,743$6,721,125

Total

2013

(Note) “Specified assets for non-recourse debts” includes a portion of the amount of “Assets pledged as collateral” for the years ended March 31, 2013 and 2012.

44

Annual Report 2013

6. Financial instruments
1. Policy for financial instruments

Interest rate swap contracts are used to hedge risks arising from fluctua-

The Company and its consolidated subsidiaries (“the Group”) have thetions in interest rates on certain loans, corporate bonds, commercial paper

policy to limit its fund management to short-term deposits with funds

and deposits.

through loans from banks and the issuance of corporate bonds andIn regard to derivative transactions, the Group utilizes interest rate swaps
for bank loans and deposits, and utilizes foreign exchange forward contracts

commercial paper.
The Group utilizes derivative financial instruments only for the purpose

and cross currency swap contracts for foreign currency-denominated trans-of hedging the foreign exchange risk associated with foreign currency-

actions. Interest rate swap contracts are exposed to the risks of interest

denominated transactions or hedging the interest rate risk associated with

rate changes, and foreign exchange forward contracts and cross currency

the Group’s loans payable, and does not utilize derivative financial instru-

swap contracts are exposed to the risks of foreign exchange rate changes.

ments for any speculative purposes.

The derivative financial instruments are executed with creditworthy finan-

2. D
 etails of financial instruments, risks, and policies and systemsof risk management

cial institutions, and the Group’s management believes there is insignificant
risk of default by counterparties. Derivative transactions are executed by theGroup’s Finance Department in accordance with the decisions of a commit-

Operating receivables such as notes and accounts receivable—trade are

tee whose chairman is the director of the Finance Department. The Financeexposed to customers’ credit risk, but this risk is generally avoided throughDepartment prepares reports on derivative transactions that are provided to

the receipt of deposits.

the director of the Finance Department periodically.

Investments in securities are business-related equities and are exposed
to market price fluctuation risk. The Group regularly checks the market

3. Supplemental information on fair values of financial instruments

value of the securities and the financial condition of the issuers, and contin-

The fair values of financial instruments are based on their market prices,

uously reviews whether it keeps to hold securities with consideration forand if the market price is not available, other rational valuation techniques

its relationships with the issuers.

are used instead. The rational valuation techniques incorporate variable

Guarantee and lease deposits are mostly deposits related to leasing
properties, and are exposed to the counterparty credit risk.

factors, and as a result the values may change due to using different
assumptions.

In addition, the Group accommodates counterparties with loans and conse-

The amounts of derivative transactions shown in Note 18 “Derivative

quently is exposed to the borrowers’ credit risk. However, the Group constantly

transactions,” are not representing the market risks related to derivative

checks the financial condition of principal borrowers and their performancetransactions.

using the funds lent to those borrowers even after accommodation.

The carrying amounts of financial instruments on the consolidated

The majority of due dates of operating debt, such as notes and accounts
payable, are within one year.

balance sheets, their fair values and the differences between them as ofMarch 31, 2013 and 2012 are as follows. (Financial instruments whose fairvalue is extremely difficult to estimate are not included; please see (Note 2).)

For 2013
Millions of yen
Carrying amount

Assets:(1) Cash, time and notice deposits(2) Notes and accounts receivable—trade
Allowance for doubtful accounts*1
Balance(3) Investments in securities
Available-for-sale securities(4) Guarantee and lease deposits
Held-to-maturity securities
Available-for-sale securities
Total assets
Liabilities:(1) Notes and accounts payable—trade(2) Short-term debt
(3) Long-term debt (including due within one year)(4) Long-term non-recourse debt (including due within
one year)(5) Deposits received*2(6) Guarantee and deposits received*2
Total liabilities
Derivative transactions*3:
Non-hedge accounting
Hedge accounting
Total derivative transactions

Fair value

Thousands of U.S. dollars
Difference

Carrying amount

Fair value

Difference$ 2,401,596$        
—190,246—¥  225,774
17,886(1)
17,885¥  225,774¥      —

17,885—$ 2,401,596
190,256(10)
190,246

176,131

176,131—

1,873,535

1,873,535

—

1,294
820
¥  421,904

1,297
820
¥  421,907

3—¥     3

13,7648,722$ 4,487,863

13,796
8,722$ 4,487,895

32—$     32¥   38,811
197,477
1,949,295¥   38,811
197,477
1,963,978¥      —
—14,683$   412,839
2,100,596
20,734,976$   412,839
2,100,596
20,891,161$        
——156,185

503,935
39,00066,000¥2,794,518

511,766
39,00066,000¥2,817,032

7,831
—
—
¥22,5145,360,440
414,849
702,053$29,725,753

5,443,740
414,849
702,053$29,965,238

83,300——$239,485¥         —(2,127)¥   (2,127)¥        
—(2,127)¥      (2,127)¥      ——
¥      —

$          —(22,625)$         (22,625)$           —(22,625)$         (22,625)$        —
—$        
—Sumitomo Realty & Development Co., Ltd.

45

For 2012
Millions of yen
Carrying amount

Fair value

Difference¥  146,476¥  146,476¥       —17,05817,058—135,458

135,458—

Held-to-maturity securities

1,269

1,278

9

Available-for-sale securities

676

676

—

¥  300,937¥  300,946¥     9¥   34,663¥   34,663¥       —169,694

169,694—

1,852,668

1,865,955

13,287

Assets:(1) Cash, time and notice deposits(2) Notes and accounts receivable—trade(3) Investments in securities
Available-for-sale securities(4) Guarantee and lease deposits

Total assets
Liabilities:(1) Notes and accounts payable—trade(2) Short-term debt
(3) Long-term debt (including due within one year)(4) Long-term non-recourse debt (including due within one year)

531,753

539,082

7,329(5) Deposits received*2

9,000

9,000

—

(6) Guarantee and deposits received*2

66,00066,000—¥2,663,778¥2,684,394¥20,616¥         
—¥         
—¥       —

(1,569)(1,569)—¥   (1,569)¥   (1,569)¥       —Total liabilities
Derivative transactions*3:
Non-hedge accounting
Hedge accounting
Total derivative transactions*1 The carrying amount of notes and accounts receivable—trade is stated at net of allowance for doubtful accounts.
*2 The amounts only included in financial liabilities are disclosed.
*3 Derivative transactions are stated at net of assets and liabilities. Figures in parentheses indicate net liabilities.

(Note 1) The calculation methods of fair value for financial instruments

Assets:(1) Cash, time and notice deposits
The fair value of cash, time and notice deposits approximates their carrying
amounts because of their short-term maturities.
(2) Notes and accounts receivable—trade
The fair value of notes and accounts receivable—trade approximates theircarrying amounts unless the credit standing of debtors has changed significantly since the loan origination.
The allowance for doubtful receivables is estimated based on expected
recoverable amounts, considering the possibility of individual collections.
Therefore the fair value of doubtful receivables approximates the carrying
amount deducted by the estimated allowance for doubtful accounts on the
consolidated balance sheets as of the end of the fiscal year.
(3) Investments in securities
The fair value of listed shares is based on the exchange prices at market.
For floating rate notes, the carrying amount is presented as the fair value,as the fair value approximates the carrying amount because the market
interest rate is reflected in such notes within a short time period. The fairvalue of the fixed-coupon debt is determined based on the present value
discounted at the interest rate which reflects the period remaining to maturity and the credit risk.
For notes on securities classified by purpose of holding, please see
Note 7 “Securities.”(4) Guarantee and lease deposits
The fair value of guarantee and lease deposits are based on the value
offered by correspondent financial institutions.
For notes and securities classified by purpose of holding, please see
Note 7 “Securities.”

46

Annual Report 2013

Liabilities:(1) Notes and accounts payable—trade and (2) Short-term debt
The fair value of these items approximates their carrying amounts becauseof their short-term maturities.
(3) Long-term debt (including due within one year)
For floating rate notes, the carrying amount is used as the fair value
because the market interest rate is reflected in such notes within a shorttime period and because the credit standing of the Company is the sameafter borrowing. The fixed-coupon debt is calculated by discounting the
combined total of principal and interest at an interest rate assumed forsimilar new borrowings.
The specific matching criteria of interest rate swaps and cross currencyinterest rate swaps are applicable to some long-term debts with floatinginterest rates (please see Note 18 “Derivative transactions”). The fair valueof these items is calculated by discounting the combined total of interest
and principal, with which the interest rate swap and cross currency interest
rate swap have been accounted for, at an interest rate rationally estimatedfor similar borrowings.
The fair value of corporate bonds issued by the Company (includedin (3) Long-term debt (including due within one year)) is based on themarket price.
(4) Long-term non-recourse debt (including due within one year)
For floating rate notes, the carrying amount is used as the fair value because
the market interest rate is reflected in such notes within a short time period
and the value of its non-exempt properties hasn’t been changed.
The fixed-coupon debt is calculated by discounting the combined totalof principal and interest at an interest rate assumed for similar new borrowings or bonds.

The specific matching criteria of interest rate swaps are applicable to(5) Deposits received and (6) Guarantee and deposits received

some long-term non-recourse debts with floating interest rates (please

The fair value of these items approximates their carrying amounts because

see Note 18 “Derivative transactions”). The fair value of these items isthe market interest rate is reflected in deposits with floating interest rates

calculated by discounting the combined total of interest and principal, withwithin a short time period and the credit standing of the Company is thewhich the interest rate swap has been accounted for, at an interest rate

same after borrowing.

rationally estimated for similar borrowings or bonds.

Derivative transactions:
Please see Note 18 “Derivative transactions.”(Note 2) Financial instruments whose fair value is extremely difficult to estimate
Carrying amountThousands of
U.S. dollars

Millions of yen

2013

2012

¥ 17,735¥  5,659$  188,650

Unlisted equity securities*1

18,981

18,953201,904

Senior securities, etc.*1

22,288550

237,081

496

96

5,276

Guarantee and lease deposits (excluding held-to-maturity securities and available-for-sale securities)*2

123,743

132,122

1,316,275

Guarantee and deposits received*3

160,470

165,002

1,706,946

Investments in subsidiaries and affiliates*1

Investments in limited partnerships, etc.*1

2013*1 The fair value of these items are not disclosed since their market price is unavailable and the assessment of their fair value is deemed extremely difficult.
*2	Guarantee and lease deposits (excluding held-to-maturity securities and available-for-sale securities) are not included in “Assets (4) Guarantee and lease deposits” because theassessment of their fair value is deemed extremely difficult and their remaining terms cannot be determined.
*3 The fair value of guarantee and deposits received (mainly consisting of lease deposits) are not disclosed because the assessment of their fair value is deemed extremely difficult and theirremaining terms cannot be determined.

(Note 3) Redemption schedule of pecuniary claims and held-to-maturity securities

For 2013
Millions of yen
1 year or lessCash, time and notice deposits

1 to 5 years

5 to 10 years

Over 10 years¥225,774¥     —

¥     —¥—

17,718

168

—

—

—

—

700

—

Held-to-maturity securities (National government bonds)

324

976

—

—

Available-for-sale securities with maturities (National government bonds)

—

—

770

—

¥243,816¥1,144¥1,470¥—Notes and accounts receivable—trade
Investments in securities
Available-for-sale securities with maturities (Corporate bonds)
Guarantee and lease deposits

Total

For 2012
Millions of yen
1 year or lessCash, time and notice deposits

1 to 5 years

5 to 10 years

Over 10 years¥146,476¥     —

¥     —¥—

16,620

438

—

—

—

—

700

—

Held-to-maturity securities (National government bonds)

505

775

—

—

Available-for-sale securities with maturities (National government bonds)

—

—

651

—

¥163,601¥1,213¥1,351¥—

Notes and accounts receivable—trade
Investments in securities
Available-for-sale securities with maturities (Corporate bonds)
Guarantee and lease deposits

Total

Sumitomo Realty & Development Co., Ltd.

47

For 2013
Thousands of U.S. dollars
1 year or lessCash, time and notice deposits
Notes and accounts receivable—trade

1 to 5 years

5 to 10 years

Over 10 years$2,401,596$      —

$      —$—

188,469

1,787

—

—

—

—

7,446

—

3,446

10,382

—

—

—

—

8,191

—

$2,593,511$12,169$15,637$—

Investments in securities
Available-for-sale securities with maturities (Corporate bonds)
Guarantee and lease deposits
Held-to-maturity securities (National government bonds)
Available-for-sale securities with maturities (National government bonds)
Total(Note 4) Repayment schedule of corporate bonds, long-term debt, long-term non-recourse debt and other interest-bearing debt

For 2013
Millions of yen
Year ending March 31

2014

2015

2016

2017

2018

2019 and thereafter

Short-term debt

¥197,477¥        
—¥        
—¥        
—¥        
—¥        
—Long-term debt (including due within one year)

278,392

285,085

380,863316,612289,372

398,971

Long-term non-recourse debt (including due within one year)

84,53876,04367,049118,850

17,620139,835

Deposits received

39,000

—

—

—

—

—

—

—

—

66,000——¥599,407¥361,128¥447,912¥501,462¥306,992¥538,806

Guarantee and deposits received
Total

For 2012
Millions of yen
Year ending March 31

2013

2014

2015

2016

2017

2018 and thereafter

Short-term debt

¥169,694¥       —

¥       —

¥       —

¥       —

¥       
—Long-term debt (including due within one year)

307,623

278,092

284,785

372,485

305,962

303,721Long-term non-recourse debt (including due within one year)

137,438

82,25873,76364,769116,570

56,955

9,000

—

—

—

—

—

—

—

—

—

66,000—¥623,755¥360,350¥358,548¥437,254¥488,532¥360,676

Deposits received
Guarantee and deposits received
Total

For 2013
Thousands of U.S. dollars
Year ending March 31

2014

2015

2016

2017

2018

2019 and thereafter

Short-term debt

$2,100,596$        
—$        
—$        
—$        
—$        
—Long-term debt (including due within one year)

2,961,302

3,032,497

4,051,303

3,367,854

3,078,098

4,243,922

Long-term non-recourse debt (including due within one year)

899,245808,882

713,211

1,264,227

187,427

1,487,448

Deposits received

414,849

—

—

—

—

—

—

—

—

702,053——$6,375,992$3,841,379$4,764,514$5,334,134$3,265,525$5,731,370

Guarantee and deposits received
Total

48

Annual Report 2013

7. Securities
For 2013
A. The following tables summarize the acquisition costs, carrying amounts and fair values of securities with available fair values as of March 31, 2013:(a) Held-to-maturity securities:
Millions of yen
Carrying amount

Fair value

Thousands of U.S. dollars
Difference

Carrying amount

Fair value

Difference

Securities whose fair value exceeds carrying amount:
National and local government bonds, etc.

¥  771¥  775¥4$ 8,201$ 8,244$ 43

Securities whose fair value does not exceed carrying
amount:National and local government bonds, etc.

523

522

(1)

5,563

5,552

(11)

¥1,294¥1,297¥3$13,764$13,796$ 32

Carrying amount

Acquisition cost

Equity securities¥124,162¥ 81,426

Debt securities*

819

770

Other

435

Total
(b) Available-for-sale securities:

Millions of yen

Thousands of U.S. dollars
Difference

Carrying amount

Acquisition cost

Difference¥ 42,736$1,320,732$  866,142$ 454,590

49

8,712

8,191

521

433

2

4,627

4,606

21

125,416

82,62942,787

1,334,071

878,939455,132

Equity securities

49,716

61,271(11,555)

528,837

651,750(122,913)

Debt securities

700

700

—

7,446

7,446

—

1,118

1,294

(176)

11,893

13,764(1,871)

Securities whose carrying amount exceeds acquisition cost:

SubtotalSecurities whose carrying amount does not exceed
acquisition cost:

Other
Subtotal
Total

51,53463,265(11,731)

548,176

672,960(124,784)¥176,950¥145,894¥ 31,056$1,882,247$1,551,899$ 330,348* Debt securities in securities whose carrying amount exceeds acquisition cost are included in “Guarantee and lease deposits paid to lessors” on the consolidated balance sheets.
(Note) T he Company recognized ¥2,087 million ($22,200 thousand) of impairment loss on investments in securities (¥1,861 million ($19,796 thousand) on equity securities in available-forsale securities).

B.	Total sales of available-for-sale securities sold in the year ended March 31, 2013 amounted to ¥6,121 million ($65,110 thousand) and the related gains andlosses amounted to ¥1,769 million ($18,817 thousand) and ¥187 million ($1,989 thousand), respectively.
C.	The Company lent the equity securities temporarily to financial institutions under securities lending agreements. Lent securities, included in investments
in securities and other, were ¥129,719 million ($1,379,843 thousand) as of March 31, 2013.

Sumitomo Realty & Development Co., Ltd.

49

For 2012
A. The following tables summarize the acquisition costs, carrying amounts and fair values of securities with available fair values as of March 31, 2012:(a) Held-to-maturity securities:
Millions of yen
Carrying amount

Fair value

Difference

Securities whose fair value exceeds carrying amount:
National and local government bonds, etc.

¥1,269¥1,277¥ 8

Securities whose fair value does not exceed carrying amount:
National and local government bonds, etc.

—

—

—

¥1,269¥1,277¥ 8

Carrying amount

Acquisition cost

Equity securities¥ 66,867¥ 45,039¥ 21,828

Debt securities*1

583

556

27

Other

249

247

2

Subtotal

67,69945,842

21,857

Equity securities

66,38091,028(24,648)

Debt securities*2

795

795

—

1,261

1,436

(175)

Total
(b) Available-for-sale securities:

Millions of yen
Difference

Securities whose carrying amount exceeds acquisition cost:

Securities whose carrying amount does not exceed acquisition cost:

Other
Subtotal
Total

68,436

93,259(24,823)¥136,135¥139,101¥ (2,966)*1 Debt securities in securities whose carrying amount exceeds acquisition cost are included in “Guarantee and lease deposits paid to lessors” on the consolidated balance sheets.
*2	¥ 95 million of debt securities in securities whose carrying amount does not exceed acquisition cost is included in “Guarantee and lease deposits paid to lessors” on the consolidatedbalance sheets.
(Note) The Company recognized ¥3,740 million of impairment loss on investments in securities (¥3,740 million on equity securities in available-for-sale securities).

B. Total sales of available-for-sale securities sold in the year ended March 31, 2012 amounted to ¥8 million.
C.	The Company lent the equity securities temporarily to financial institutions under securities lending agreements. Lent securities, included in investments
in securities and other, were ¥89,061 million as of March 31, 2012.

8. Short-term debt and long-term debt
Short-term debt at March 31, 2013 and 2012 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2013
Loans, principally from banks
Commercial paper
Total

Average interest
rate (%)¥137,500

0.52

59,977

0.11¥197,477

2012

Average interest
rate (%)¥149,700

0.64

19,9940.11¥169,6942013$1,462,610
637,986$2,100,596

The interest rates represent weighted average rates in effect at March 31, 2013 and 2012, regardless of borrowing currencies, though the range of theinterest rate varies by borrowing currency.

50

Annual Report 2013

Long-term debt at March 31, 2013 and 2012 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2013

2012

2013

¥      —¥   30,000$         —1.87% domestic straight bonds, due 2012—

20,000

—1.89% domestic straight bonds, due 2013

10,00010,000106,372

1.70% domestic straight bonds, due 2013

20,00020,000212,743

1.80% domestic straight bonds, due 2012—

20,000—1.76% domestic straight bonds, due 2012—

20,000

—1.68% domestic straight bonds, due 2013

20,00020,000212,743

1.63% domestic straight bonds, due 2013

20,00020,000212,743

2.50% domestic straight bonds, due 201910,00010,000106,372

1.81% domestic straight bonds, due 2014

20,00020,000212,743

1.87% domestic straight bonds, due 2014

10,00010,000106,372

1.48% domestic straight bonds, due 2014

10,00010,000106,372

1.28% domestic straight bonds, due 2015

10,00010,000106,372

1.17% domestic straight bonds, due 2015

30,00030,000319,114

0.96% domestic straight bonds, due 2015

30,00030,000319,114

0.94% domestic straight bonds, due 2015

10,00010,000106,372

0.80% domestic straight bonds, due 2015

20,00020,000212,743

0.74% domestic straight bonds, due 2016

10,00010,000106,372

0.68% domestic straight bonds, due 2016

10,00010,000106,372

0.75% domestic straight bonds, due 2017

10,00010,000106,372

0.55% domestic straight bonds, due 2017

10,000—106,372

0.50% domestic straight bonds, due 2017

10,000—106,372

0.50% domestic straight bonds, due 2017

10,000—106,372

0.486% domestic straight bonds, due 2017

10,000—106,372

0.444% domestic straight bonds, due 2017

10,000—106,372

0.388% domestic straight bonds, due 2018

20,000—212,743

0.329% domestic straight bonds, due 2018

10,000—106,372

0.563% domestic straight bonds, due 2020

10,000—106,372

1.28% domestic straight bonds, due 2012

Loans, principally from banks and insurance companies, with interest at weighted average rates of 0.73%
in 2013, and 0.91% in 2012, respectively:
Secured

—20,500—1,609,295

1,492,168

17,118,338

Subtotal

1,949,295

1,852,668

20,734,976

Amount due within one year

(278,392)(307,623)(2,961,302)¥1,670,903¥1,545,045$17,773,674

Unsecured*

Total* Unsecured long-term debt as of March 31, 2013 and 2012 includes a subordinated loan of ¥60,000 million ($638,230 thousand) and a perpetual subordinated loan of ¥120,000 million,
respectively.

Sumitomo Realty & Development Co., Ltd.

51

Non-recourse debt at March 31, 2013 and 2012 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2013

2012

2013

Due within one year¥  8,848¥ 89,828$   94,118

Due after one year

41,672

48,520443,272

Subtotal

50,520138,348537,390

Non-recourse bonds, with interest at weighted average rate of 1.09% in 2013, and 0.87% in 2012, respectively:

Non-recourse loans, with interest at weighted average rate of 0.95% in 2013, and 1.12% in 2012, respectively:
Due within one year

75,69047,610805,127

Due after one year

377,725

345,795

4,017,923

Subtotal
Total
Secured453,415

393,405

4,823,050¥503,935¥531,753$5,360,440¥503,935¥428,073$5,360,440—

103,680—¥503,935¥531,753$5,360,440

UnsecuredTotal
The aggregate annual maturities of long-term debt at March 31, 2013 are as follows:Year ending March 31

Millions of yen

Thousands of
U.S. dollars

2014¥  278,392$ 2,961,302

2015

285,085

3,032,497

2016

380,863

4,051,303

2017

316,6123,367,854

2018

289,372

3,078,098

2019 and thereafter

398,971

4,243,922¥1,949,295$20,734,976

Millions of yen

Thousands of
U.S. dollars

Total
The aggregate annual maturities of non-recourse debt at March 31, 2013 are as follows:Year ending March 31

2014¥ 84,538$  899,245

2015

76,043808,882

2016

67,049713,2112017

118,850

1,264,227

2018

17,620187,4272019 and thereafter

139,835

1,487,448

Total¥503,935$5,360,440

It is customary in Japan that security must be given if requested by lending banks under certain circumstances, and generally banks have the right tooffset cash deposited with them against any debt or obligations payable to the bank that becomes due in the case of default and certain other specified
events. The Company and its consolidated subsidiaries have never received such a request.

9. Employees’ severance and retirement benefits
As explained in Note 2 (12), the liabilities and expenses for severance and retirement benefits are determined based on the amounts obtained by actuarial
calculations.
The allowance for severance and retirement benefits included in the liabilities section of the consolidated balance sheets as of March 31, 2013 and 2012
consisted of the following:Thousands of
U.S. dollars

Millions of yen

2013

2013

¥ 8,861¥ 8,519$ 94,256

Fair value of plan assets(3,471)(3,024)(36,922)

128

(393)

1,362

¥ 5,518¥ 5,102$ 58,696

Unrecognized actuarial differences
Allowance for employees’ severance and retirement benefits

52

2012

Retirement benefit obligations

Annual Report 2013

Included in the consolidated statements of income for the years ended March 31, 2013, 2012 and 2011 are severance and retirement benefit expenses
comprised of the following:Thousands of
U.S. dollars

Millions of yen

2013

2012

2011

2013

Service costs – benefits earned during the year¥  557¥  492¥ 514$ 5,925

Interest cost on retirement benefit obligations

130

152

146

1,383

Expected return on plan assets

(60)

(58)

(57)

(638)

Amortization of actuarial differences

392

228

(163)

4,170

Other
Severance and retirement benefit expenses

318

311

309

3,382

¥1,337¥1,125¥ 749$14,222

Other of ¥318 million ($3,382 thousand) for the year ended March 31,

The discount rate and the rate of expected return on plan assets for

2013, ¥311 million for the year ended March 31, 2012 and ¥309 million forthe years ended March 31, 2013, 2012 and 2011 used by the Company is

the year ended March 31, 2011 is the amount paid for a defined contribu-

primarily 2.0%, and the discount rate used by some of its consolidated

tion plan that one of the Company’s consolidated subsidiaries adopted insubsidiaries is 1.0% for the years ended March 31, 2013 and 2012. The

September 2008.

estimated amount of all retirement benefits to be paid at future retirement
dates is allocated equally to each service year using the estimated numberof total service years.

10. Loss on impairment of fixed assets
The Company and its consolidated domestic subsidiaries recognized impairment losses on the following assets for the years ended March 31, 2013, 2012
and 2011, respectively.

For 2013
Use

Location

Land for development

Tokyo

Number of properties

1

For 2012
Use

Location

Land for development

Setagaya-ku, Tokyo, etc.

Number of properties3

For 2011
Use

Location

Land for development

Katsushika-ku, Tokyo1

Ancillary facility

Minami-Uonuma-shi, Niigata

1

The Company and its consolidated domestic subsidiaries recognized

Number of properties

As a result of transferring inventories from property and equipment, thelosses on the impairment of certain properties, which are generally

carrying values of the land holdings summarized above have been reduced

assessed individually for impairment. The Company’s houses are treatedto their recoverable amounts by ¥16,967 million ($180,481 thousand),as common assets.

¥5,618 million and ¥7,602 million for the years ended March 31, 2013, 2012
and 2011, respectively. These write-downs were recognized as impairment
losses in other expenses.

Details of loss on impairment of fixed assets are as follows:

Thousands of
U.S. dollars

Millions of yen

2013
Land

¥16,967

2012¥5,6182011¥7,602

2013$180,481

The recoverable amounts of these assets were determined as the net disposal value. The net disposal value for land for leased buildings and lands fordevelopment are based on the income approach, and that for the others is based mainly on the sales comparison approach.

Sumitomo Realty & Development Co., Ltd.

53

11. Provision for allowance for loss on disaster

13. Asset retirement obligations

Provision for allowance for loss on disaster of ¥1,930 million for the year

Even though removing asbestos is required for some buildings theended March 31, 2011 is to prepare for expenditure to restore any fixedCompany and its consolidated subsidiaries (“the Group”) operate at theassets or inventories damaged by the Great East Japan Earthquake.

time of demolishing, it is difficult to estimate the fair value of obligations
associated with such assets reasonably since the timing and/or method ofsettlement for the retirement obligations are not clear enough. Therefore,

12. Gain on prior periods adjustment

for the years ended March 31, 2013 and 2012, asset retirement obligations
related to such a case are not recorded (except for the asset retirement

Gain on prior periods adjustment of ¥413 million for the year ended
March 31, 2011 is due to the adjustment of useful life of depreciable assets.

obligations recorded on the financial statements).
In addition, under the partial lease contracts, the Group has obligations
for restoring office spaces when they move out. For the asset retirement
obligations associated with such a case, the duration of use of the assets
is not clear enough and these assets do not have any relocation plans.
Therefore, the Group is unable to estimate the asset retirement obligations
since it is difficult to estimate the timing of fulfillment of the obligations.
Consequently, for the years ended March 31, 2013 and 2012, asset retirement obligations related to such a case are not recorded (except for theasset retirement obligations recorded on the financial statements).

14. Income taxes
The normal effective statutory income tax rate in Japan arising out of the aggregation of corporate, enterprise and inhabitants’ taxes was approximately
38.01% for the year ended March 31, 2013 and 40.69% for the years ended March 31, 2012 and 2011.
Details of deferred tax assets and liabilities at March 31, 2013 and 2012 are as follows:

Thousands of
U.S. dollars

Millions of yen

2013

2012

2013

Deferred tax assets:
Depreciation and amortization of consolidated adjustment¥ 12,129¥ 11,967$ 129,018

Loss on impairment of fixed assets

6,156

5,242

65,482

Net operating loss carryforwards

3,383

4,002

35,986

Loss on devaluation of real estate for sale

2,394

2,934

25,465

Accrued enterprise tax and business office tax

2,197

2,140

23,370Allowance for employees' severance and retirement benefits

1,972

1,823

20,976

Loss on devaluation of investments in SPEs holding properties for sale

1,645

—

17,498

Allowance for doubtful accounts

1,503

1,171

15,988

Accrued bonuses

1,414

1,324

15,041Elimination of unrealized profit

1,054

1,223

11,212

Loss on devaluation of investments in securities

1,031

1,151

10,967

809

591

8,605

3

1,113

32

Other

6,648

5,569

70,716

Subtotal of deferred tax assets

42,33840,250450,356

Valuation allowance(5,526)(6,393)(58,781)¥ 36,812¥ 33,857$ 391,575

Net deferred losses on hedges
Net unrealized holding losses on securities

Total deferred tax assets
Deferred tax liabilities:
Net unrealized holding gains on securities(11,079)—(117,849)

Retained earnings appropriated for tax allowable reserves(4,343)(4,343)(46,197)

(655)

(361)

(6,967)(16,077)(4,704)(171,013)¥ 20,735¥ 29,153$ 220,562

OtherTotal deferred tax liabilities
Net deferred tax assets

54

Annual Report 2013

“Amendment to income tax law, etc. in response to the changing

from April 1, 2012. the Company and its consolidated subsidiaries will beeconomic structure” and “Special measures to secure the financial

subject to the new corporate tax rate based on these laws. As a result, net

resources to implement the restoration from the Great East Japan Earth-deferred tax assets decreased by ¥3,354 million and deferred income taxes

quake” were enacted into law on December 2, 2011 and became effective

increased by ¥3,161 million for the year ended March 31, 2012.

The differences between the statutory tax rate and the effective tax rate for the years ended March 31, 2013 and 2012 are as follows:

2013
Statutory tax rate

2012

38.01%

40.69%

Dividends and other income not taxable permanently(3.35)(1.33)

Inhabitant tax on per capita basis

0.30

0.28

Elimination of dividend income

0.95

0.84

Adjustment of deferred income taxes

—

3.25

(0.60)(0.67)

35.31%

43.06%

Adjustment:

Other
Effective tax rate

The differences between the statutory tax rate and the effective tax rate for the year ended March 31, 2011 were insignificant and not presented.

15. Deposits received and accounts payable with interest rate
Guarantee and deposits received at March 31, 2013 and 2012 are as follows:
Thousands of
U.S. dollars

Millions of yen
Average interest
rate (%)

2013

Average interest
rate (%)

2012

2013

Short-term deposits and long-term deposits due within one year:
Non-interest-bearing¥167,865—¥112,814—

39,000

0.27

9,000

0.36

Interest-bearing

121,814

206,865$1,785,608
414,849
2,200,457

Guarantee and lease deposits from tenants:
Non-interest-bearing

160,470—

165,002—

1,706,946

—

—

—

—

—
1,892,788

Interest-bearing
Long-term deposits:
Non-interest-bearing

177,941—

195,783—

Interest-bearing

66,0000.34

66,000

0.40

Total

702,053

404,411426,785

4,301,787¥611,276¥548,599$6,502,244

Accounts payable with interest rate at March 31, 2013 and 2012 are as follows:
Thousands of
U.S. dollars

Millions of yen

2013

Average interest
rate (%)

2012

Average interest
rate (%)

Due within one year

¥ 3,277

1.53¥ 3,277

1.53

Due after one year

17,251

1.53

20,528

1.53

Total

¥20,528¥23,8052013$ 34,858
183,502$218,360(Note) A ccounts payable due within one year is included in “Other current liabilities” and accounts payable due after one year is included in “Other long-term liabilities” on the consolidated balance sheets.

Sumitomo Realty & Development Co., Ltd.

55

The aggregate annual maturities of deposits received at March 31, 2013 are as follows:Year ending March 31

Millions of yen

Thousands of
U.S. dollars

2014¥ 39,000$  414,849

2015

—

—

2016

—

—

2017

66,000702,053

2018

—

—

2019 and thereafter——¥105,000$1,116,902

Total
The aggregate annual maturities of accounts payable at March 31, 2013 are as follows:Year ending March 31

Millions of yen

Thousands of
U.S. dollars

2014¥ 3,277$ 34,858

2015

3,277

34,858

2016

3,277

34,858

2017

3,277

34,858

2018

3,277

34,8582019 and thereafter

4,143

44,070¥20,528$218,360

Total

16. Net assets
Under the Japanese Corporate Law (“the Law”) and its regulations, theUnder the Law, legal earnings reserve and additional paid-in capitalentire amount paid for new shares is required to be designated as common

could be used to eliminate or reduce a deficit and capitalized by a resolu-

stock. However, a company may, by a resolution of the Board of Directors,

tion of the shareholders’ meeting.

designate an amount not exceeding one-half of the price of the new sharesas additional paid-in capital, which is included in capital surplus.
Under the Law, in cases where a dividend distribution of surplus is made,the smaller of an amount equal to 10% of the dividend or the excess,if any, of 25% of common stock over the total of additional paid-in capital

Additional paid-in capital and legal earnings reserve may not be distributed as dividends. Under the Law, all additional paid-in capital and all legal
earnings reserve may be transferred to other capital surplus and retained
earnings, respectively, which are potentially available for dividends.
The maximum amount that the Company can distribute as dividends isand legal earnings reserve must be set aside as additional paid-in capital

calculated based on the non-consolidated financial statements of theor legal earnings reserve. Legal earnings reserve is included in retained

Company in accordance with the Law and its regulations.

earnings on the accompanying consolidated balance sheets.

17. Information for certain lease transactions
Future lease payments and receipts under such non-cancelable operating leases at March 31, 2013, 2012 and 2011 are as follows:
Thousands of
U.S. dollars

Millions of yen

2013

2012

2011

2013

		 Due within one year¥  2,036¥  2,056¥  2,374

		 Due after one year

14,12915,44813,870150,293¥ 16,165¥ 17,504¥ 16,244$  171,950

		 Due within one year

¥ 59,375¥ 57,989¥ 48,884$  631,582

		 Due after one year

76,303

94,60253,597

811,647¥135,678¥152,591¥102,481$1,443,229

Operating leases
Future lease payments:

Total$   21,657

Future lease receipts:

Total

56

Annual Report 2013

18. Derivative transactions
Hedge accounting was applied for all derivative transactions for the years ended March 31, 2013 and 2012.
The summary of these transactions is as follows:

For 2013(1) Foreign currency-related derivatives
Millions of yen

Hedging accounting

Types of derivative transactions

Foreign exchange forward contracts
Deferred hedge accounting

Receipts in U.S. dollars / Payments in yen
Cross currency swap contracts
Receipts in U.S. dollars / Payments in yen

Hedged items

Foreign currencydenominatedtransactions

Total

Contract amounts

Contract amounts
due after one year¥  286¥—

Fair value

¥  5

9,184

—

134

¥9,470¥—¥139

Thousands of U.S. dollars

Hedging accounting

Types of derivative transactions

Foreign exchange forward contracts
Deferred hedge accounting

Receipts in U.S. dollars / Payments in yen
Cross currency swap contracts
Receipts in U.S. dollars / Payments in yen

Hedged items

Foreign currencydenominatedtransactions

Total

Contract amounts

Contract amounts
due after one year$  3,042$—

Fair value$   53

97,692—

1,426$100,734$—$1,479Contract amounts

Contract amounts
due after one year

¥432,000¥422,000¥(2,266)

847,706

676,822

—(*)

4,000

4,000

—(*)

(Note) Fair value is determined based on the quoted price obtained from relevant financial institutions.

(2) Interest-related derivatives
Millions of yen

Hedging accounting

Deferred hedge accounting

Types of derivative transactions

Interest rate swap contracts
Fixed rate payments / Floating rate receipts

Exceptional accounting forinterest rate swaps

Interest rate swap contracts

Exceptional accounting forinterest rate and currency
swapsInterest rate swap contracts

Fixed rate payments / Floating rate receipts
Fixed rate payments / Floating rate receipts
Receipts in U.S. dollars / Payments in yen

Hedged items

Bank loansBank loans and bondsForeign currencydenominated loans

Fair value

Thousands of U.S. dollars

Hedging accounting

Deferred hedge accounting

Types of derivative transactions

Interest rate swap contracts
Fixed rate payments / Floating rate receipts

Exceptional accounting forinterest rate swaps

Interest rate swap contracts

Exceptional accounting forinterest rate and currency
swapsInterest rate swap contracts

Fixed rate payments / Floating rate receipts
Fixed rate payments / Floating rate receipts
Receipts in U.S. dollars / Payments in yen

Hedged items

Bank loansBank loans and bondsForeign currencydenominated loans

Contract amounts

Contract amounts
due after one year

$4,595,256$4,488,884$(24,104)

9,017,190

7,199,468—(*)

42,54942,549—(*)

Fair value(Note) Fair value is determined based on the quoted price obtained from relevant financial institutions.
(*) I nterest rate swap contracts and cross currency interest rate swap contracts which qualify for hedge accounting and meet specific matching criteria are not remeasured at market
value, but the differential paid or received under the swap agreements is recognized and included in interest expenses of income of the long-term debt or the long-term non-recourse
debt as hedged items. Thus, the fair value of such interest rate swap contracts is included in the fair value of the long-term debt.

Sumitomo Realty & Development Co., Ltd.

57

For 2012(1) Foreign currency-related derivatives
Millions of yen

Hedging accounting

Types of derivative transactions

Hedged items

Foreign exchange forward contracts
Deferred hedge accounting

Contract amounts

Contract amounts
due after one year

¥1,620¥—Foreign currencydenominatedtransactions

Receipts in U.S. dollars / Payments in yen
Cross currency swap contracts
Receipts in U.S. dollars / Payments in yen

Fair value

¥ (5)

7,794

—

(28)

¥9,414¥—¥(33)

Contract amounts

Contract amounts
due after one year

¥375,424¥180,000¥(1,537)

866,040

711,186

—(*)

4,000

4,000

—(*)

Total
(Note) Fair value is determined based on the quoted price obtained from relevant financial institutions.

(2) Interest-related derivatives
Millions of yen

Hedging accounting

Deferred hedge accounting

Types of derivative transactions

Hedged items

Interest rate swap contracts
Fixed rate payments / Floating rate receipts

Exceptional accounting forinterest rate swaps

Interest rate swap contracts

Exceptional accounting forinterest rate and currency
swapsInterest rate swap contracts

Fixed rate payments / Floating rate receipts
Fixed rate payments / Floating rate receipts
Receipts in U.S. dollars / Payments in yen

Bank loans and bonds
Bank loans and bondsForeign currencydenominated loans

Fair value(Note) Fair value is determined based on the quoted price obtained from relevant financial institutions.
(*) Interest rate swap contracts and cross currency interest rate swap contracts which qualify for hedge accounting and meet specific matching criteria are not remeasured at market
value, but the differential paid or received under the swap agreements is recognized and included in interest expenses of income of the long-term debt or the long-term non-recourse
debt as hedged items. Thus, the fair value of such interest rate swap contracts is included in the fair value of the long-term debt.

19. Segment information
The Company and its consolidated subsidiaries mainly operate their busi-

Effective from the year ended March 31, 2011, the Company and its

ness in five segments: (1) Leasing business consists of leasing of officeconsolidated subsidiaries adopted the new accounting standard, “Account-buildings, residences and other properties, and management of theseing Standard for Disclosures about Segments of an Enterprise and Related

properties; (2) Sales business consists of sale of condominiums, detached

Information” (Statement No. 17 issued by the Accounting Standards Board

houses and land lots; (3) Construction business consists of construction ofof Japan on March 27, 2009), and “Guidance on Accounting Standard for

housing, condominiums and buildings; (4) Brokerage business; andDisclosures about Segments of an Enterprise and Related Information”(5) Other business including fitness business and restaurant business.

(Guidance No. 20 issued by the Accounting Standards Board of Japan on
March 21, 2008).

Information by business segment for the years ended March 31, 2013, 2012 and 2011 is summarized as follows:
Millions of yen
Reportable segments
Brokeragebusiness

Adjustments

Otherbusiness

Consolidated
financialstatements
amounts

Sales
business

Construction
business¥  275,379¥231,928¥168,608¥50,397¥10,340¥  736,652¥      
—

2,938

221

2,474

560

¥5,451

11,644(11,644)—278,317232,149

171,082

50,957

15,791

748,296(11,644)736,652

Segment profit¥   94,187¥ 38,924¥ 15,758¥14,494¥ 1,667¥  165,030¥     (13,685)¥  151,345

Segment assets¥2,884,179¥732,713¥ 15,358¥12,490¥24,874¥3,669,614¥435,886¥4,105,500¥   35,558¥    275¥    552¥   195¥   123¥   36,703¥  1,058¥   37,761—

16,967———

16,967—

16,96755,346

3,394

1,367

134

251

60,492

159

60,651For 2013

Leasingbusiness

Total

Revenue from operations:Customers
Intersegment
Total¥  736,652

Other:
Depreciation and amortizationLoss on impairment of fixed assets
Increase in property and equipment, and intangible assets

58

Annual Report 2013

Millions of yen
Reportable segments

For 2012

Leasingbusiness

Salesbusiness

Construction
business

Brokeragebusiness

Adjustments

Otherbusiness

Total

Consolidated
financialstatements
amounts

Revenue from operations:Customers
Intersegment
Total¥  269,225¥198,070¥163,246¥48,882¥ 9,239¥  688,662¥       
—

2,587

84

2,749

515

4,932

10,867(10,867)¥  688,662—

271,812

198,154

165,995

49,397

14,171

699,529(10,867)

688,662

Segment profit¥   89,636¥ 37,892¥ 16,476¥14,540¥ 1,757¥  160,301¥      (12,836)¥  147,465

Segment assets¥2,840,515¥678,886¥ 13,824¥12,809¥39,236¥3,585,270¥274,428¥3,859,698¥   33,990¥    227¥    448¥   215¥   104¥   34,984¥  1,065¥   36,049

—

5,618

—

—

—

5,618

—

5,618

113,185

1,499

641

125

215

115,665299

115,964

Other:
Depreciation and amortizationLoss on impairment of fixed assets
Increase in property and equipment, and intangible assets

Millions of yen
Reportable segments

For 2011

Leasingbusiness

Salesbusiness

Construction
business

Brokeragebusiness

Adjustments

Otherbusiness

Total

Consolidated
financialstatements
amounts

Revenue from operations:Customers
Intersegment
Total¥  290,536¥239,620¥160,771¥45,840¥ 7,989¥  744,756¥     —

2,339

89

2,153

590

4,857

10,028(10,028)¥  744,756—

292,875

239,709

162,924

46,43012,846754,784(10,028)

744,756

Segment profit¥88,241¥ 33,418¥ 16,698¥12,203¥   520¥  151,080¥ (12,617)¥  138,463

Segment assets¥2,170,939¥721,957¥ 13,626¥12,959¥41,859¥2,961,340¥272,863¥3,234,203¥   22,017¥    161¥    355¥   242¥    92¥   22,867¥    838¥   23,705

—

7,602

—

—

—

7,602

—

7,602

121,507

148

215

203

66

122,139315

122,454

Other:
Depreciation and amortizationLoss on impairment of fixed assets
Increase in property and equipment, and intangible assets

Thousands of U.S. dollars
Reportable segments

For 2013

Adjustments

Consolidated
financialstatements
amounts$ 7,835,890$         
—$ 7,835,890

123,859(123,859)—

167,9717,959,749(123,859)

7,835,890

Leasingbusiness

Salesbusiness

Construction
business

Brokeragebusiness

Otherbusiness$ 2,929,252$2,467,057$1,793,512$536,081$109,988

31,252

2,351

26,316

5,957

57,9832,960,504

2,469,408

1,819,828

542,038

Total

Revenue from operations:Customers
Intersegment
Total
Segment profit$ 1,001,883$  414,041$  167,620$154,175$ 17,733$ 1,755,452$      (145,570) $ 1,609,882

Segment assets$30,679,492$7,793,990$  163,366$132,858$264,588$39,034,294$4,636,592$43,670,886$   378,236$    2,925$    5,872$   2,074$  1,309$   390,416$   11,254$   401,670—

180,481———

180,481—

180,481588,725

36,103

14,541

1,425

2,670

643,464

1,691

645,155

Other:
Depreciation and amortizationLoss on impairment of fixed assets
Increase in property and equipment, and intangible assets

Sumitomo Realty & Development Co., Ltd.

59

Intercompany eliminations between the Company and its consolidated

Intercompany eliminations between the Company and its consolidated

subsidiaries and undistributed corporate expenses to each segment are

subsidiaries and undistributed corporate assets to each segment areincluded in adjustments of segment profit, and the Company classified

included in adjustments of segment assets, and the Company classified

expenses of the general administrative division in the Company and certain

cash, time and notice deposits, investments in securities and assets of theof its consolidated subsidiaries to corporate expenses for the years ended

general administrative division in the Company and certain of its consoli-

March 31, 2013, 2012 and 2011.

dated subsidiaries to corporate assets for the years ended March 31, 2013,2012 and 2011.

20. Comprehensive income
Amounts reclassified to net income in the current period that were recognized in other comprehensive income in the current or previous period and tax
effects for each component of other comprehensive income (loss) for the years ended March 31, 2013 and 2012 are as follows:
Thousands of
U.S. dollars

Millions of yen

2013

2012

2013

Unrealized holding gains on securities:
Increase during the fiscal year

¥ 33,694¥ 4,479

Reclassification adjustments

329

3,814

3,500

		 Amounts before tax effect34,0238,293

361,909

		 Tax (expense) or benefit(12,104)(3,513)(128,752)

		 Net unrealized holding gains on securities

21,9194,780

233,157$ 358,409

Deferred gains (losses) on hedges:
Decrease during the fiscal year

(2,501)(293)(26,604)

Reclassification adjustments

1,943

2,379

20,668

		 Amounts before tax effect

(558)

2,086

(5,936)

		 Tax (expense) or benefit

171

(874)

1,819

		 Net deferred gains (losses) on hedges

(387)

1,212

(4,117)

1,741(1,067)

18,519

—

—

—

1,741

(1,067)

18,519¥ 23,273¥ 4,925$ 247,559

Foreign currency transaction adjustments:
Decrease during the fiscal year
		 Tax (expense) or benefit
		 Foreign currency transaction adjustments
Total other comprehensive income

21. Investment and rental properties
The Company and certain of its consolidated subsidiaries own some rental properties such as office buildings and residences in Tokyo and other areas.
Certain domestic office buildings are not recognized as rental properties but as a portion used as investment and rental properties since the Company orcertain of its consolidated subsidiaries use some of the floor space of these properties.
The carrying amounts of these properties on the consolidated balance sheets, their changes during the fiscal year and their fair values at March 31,
2013 and 2012 are as follows:

Thousands of
U.S. dollars

Millions of yen

Balance at beginning of fiscal year
Investment and rental properties

2012

2013

¥1,903,295$25,997,405

Changes during the fiscal year

(60,510)

540,721(643,655)

Balance at end of fiscal year

2,383,506

2,444,016

25,353,750

Fair value at end of fiscal year

3,293,202

3,387,741

35,030,337¥  221,738¥   69,068$ 2,358,664

Changes during the fiscal year

71,243

152,670

757,824

Balance at end of fiscal year

292,981

221,738

3,116,488

Fair value at end of fiscal year

384,834

253,995

4,093,543

Balance at beginning of fiscal year
A portion used as investment and rental properties

2013¥2,444,016(Notes)* Carrying amounts on the consolidated balance sheets are the amounts determined by deducting accumulated depreciation from the acquisition costs.
* Fair values as of March 31, 2013 and 2012 are determined by the Company primarily based on their fair values according to the “Real Estate Appraisal Standards.”

60

Annual Report 2013

Significant changes during the years ended March 31, 2013 and 2012 are as follows:

Thousands of
U.S. dollars

Millions of yen

2013

2012

2013

¥ 56,302¥113,548$ 598,894

32,762—

348,495—

633,985—

Depreciation and amortization¥(33,996)¥ (32,456)$(361,621)

Transferred to real estate for sale in process(22,328)(13,819)(237,507)

Loss on impairment of fixed assets(16,967)(5,618)(180,481)

Increase:
Acquired real estateTransferred from real estate for sale in process
Newly consolidated subsidiaries
Decrease:

Income and expenses for investment and rental properties for the years ended March 31, 2013 and 2012 are as follows:
Thousands of
U.S. dollars

Millions of yen

Investment and rental properties

A portion used as investment and rental properties

2013

2012

Income¥165,264¥166,201$1,757,941

Expenses

85,74286,501

912,052

Balance

79,52279,700845,889

Other income (expenses)(17,753)(6,040)(188,842)

Income¥ 24,227¥ 18,113$  257,707

Expenses

15,41014,704

163,919

Balance

8,817

3,409

93,788

(72)

(88)

(766)

Other income (expenses)

2013(Notes)*A s a portion used as investment and rental properties includes a portion used by the Company or certain of its consolidated subsidiaries for providing services as well as management
and administration, income for these are not recorded above. The expenses primarily consist of rent, depreciation, taxes and dues, and others.
*O ther income (expenses) for investment and rental properties is mostly the loss on impairment of fixed assets and for a portion used as investment and rental properties is mostly theloss on disposal of property and equipment.

22. Contingent liabilities
The Company and its consolidated subsidiaries were contingently liable as guarantors of borrowings by customers and others in an amount aggregatingto ¥351 million ($3,734 thousand) at March 31, 2013 and as guarantors of borrowings by customers in an amount aggregating to ¥39 million at March
31, 2012.

23. Subsequent events
On June 27, 2013, the shareholders of the Company approved payments of a year-end cash dividend of ¥10 ($0.11) per share or a total of ¥4,741 million($50,431 thousand) to shareholders of record at March 31, 2013. Such appropriations are recognized in the period in which they are approved by theshareholders.

Sumitomo Realty & Development Co., Ltd.

61

Independent Auditor’s Report

To the Board of Directors of
Sumitomo Realty & Development Co., Ltd.:We have audited the accompanying consolidated financial statements of Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries,
which comprise the consolidated balance sheets as at March 31, 2013 and 2012, and the consolidated statements of income, statements of comprehensive income, statements of changes in net assets and statements of cash flows for each of the years in the three-year period ended March 31, 2013, anda summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles
generally accepted in Japan, and for such internal control as management determines is necessary to enable the preparation of consolidated financial
statements that are free from material misstatements, whether due to fraud or error.

Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance withauditing standards generally accepted in Japan. Those standards require that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgement, including the assessment of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of
the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, while the objective of the financial
statement audit is not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Sumitomo Realty & Development Co.,
Ltd. and its consolidated subsidiaries as at March 31, 2013 and 2012, and their financial performance and cash flows for each of the years in the three-year
period ended March 31, 2013, in accordance with accounting principles generally accepted in Japan.

Convenience Translation
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31, 2013 are presented solely forconvenience. Our audit also included the translation of yen amounts into U.S. dollar amounts and, in our opinion, such translation has been made on thebasis described in Note 1 to the consolidated financial statements.

August 27, 2013
Tokyo, Japan

62

Annual Report 2013

Corporate Data / Investor Information
As of March 31, 2013

Corporate Data

Investor Information

Head OfficePaid-in Capital

Shinjuku NS Building,¥122,805 million

4-1, Nishi-Shinjuku 2-chome
Shinjuku-ku, Tokyo 163-0820, Japan
Phone: +81-3-3346-2342

Breakdown of Shareholders

Number of Common Stock
Authorized: 1,900,000,000 shares
Issued: 476,085,978 shares

Facsimile: +81-3-3346-1918

Number of Shareholders

Corporate Website
http://www.sumitomo-rd.co.jp/english/

13,728Stock Exchange Listings

Date of Establishment

Tokyo Stock Exchange

December 1, 1949

Osaka Securities Exchange

Number of Employees

Trust Accounts
Financial Institutions
Other Companies
Foreign Companies
Individuals and Others

22.65%
9.83%
27.26%
35.56%
4.70%

10,741 (Consolidated)

Major Shareholders

Major Consolidated Subsidiaries

Number of shares held Percentage of(Thousands)
shares held
Japan Trustee Services Bank, Ltd. (Trust account)
26,255
5.51%
The Master Trust Bank of Japan, Ltd. (Trust account)
23,124
4.86%
Sumitomo Mitsui Banking Corporation
11,9902.52%
SSBT OD05 Omnibus Account – Treaty Clients
11,078
2.33%
Japan Trustee Services Bank, Ltd. (Trust account 4)
9,397
1.97%
Cbldn-Stichting PGGM Depositary-Listed Real Estate PF Fund
8,665
1.82%
Obayashi Corporation
7,527
1.58%
Shimizu Corporation
7,500
1.58%
Kajima Corporation
6,923
1.45%
Mitsui Sumitomo Insurance Co., Ltd.
6,740
1.42%

Sumitomo Real Estate Sales Co., Ltd.
Sumitomo Fudosan Tatemono Service Co., Ltd.
Sumitomo Fudosan Syscon Co., Ltd.
Sumitomo Fudosan Reform Co., Ltd.
Sumitomo Fudosan Esforta Co., Ltd.
Sumitomo Fudosan Villa Fontaine Co., Ltd.
Sumitomo Fudosan Finance Co., Ltd.
Sumitomo Fudosan Bellesalle Co., Ltd.

Name

Stock Price and Trading Volume on Tokyo Stock Exchange
Yen
2,000

5,000

Stock Price (right scale)
TOPIX Average (left scale)
1,600

4,000

1,200

3,000

800

2,000

400

1,000

0

7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6

2008

2009

2010

2011

2012

0

2013

Millions of Shares
250

Trading Volume

200

150

100

50

0

7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6

2008

2009

2010

2011

2012

2013

Sumitomo Realty & Development Co., Ltd.

63

Shinjuku NS Building, 4-1, Nishi-Shinjuku 2-chome
Shinjuku-ku, Tokyo 163-0820, Japan
Phone: +81-3-3346-2342 Facsimile: +81-3-3346-1918
http://www.sumitomo-rd.co.jp/english/

Printed in Japan