BreakthroughAnnual Report 2008 Year ended March 31, 2008

Profile of Nomura Real Estate Group

Group Philosophy
The Group Philosophy is a commitment to both ourselves and to our customers and society. By showing this commitment andcontinuously delivering a level of customer satisfaction at least commensurate with it, we are determined to be a Group thatpeople can count on even more than in the past.

Group Message

The Group Message crystallizes the philosophy of the Nomura Real Estate Group.

Group Mission
We hold each and every meeting in high esteem and are grateful for the fruit it has born. Our enthusiasm due to the
dynamism of group effort and highly creative individuals enables us to produce the best quality service and product.
Giving back to the customers and society is also a high priority for us.
The Group Mission is positioned at the core of the philosophy of the Nomura Real Estate Group. It expresses the shared
mission, sense of identity and goals for which the Nomura Real Estate Group everlastingly works.

Group Symbol, United N
United N is symbolic of our fervent desire to create a better tomorrow by valuing every interaction andforming relationships with many people. This symbol also expresses the important relationships we havewith many groups such as customers, shareholders and trading partners, as well as our commitment tobeing a pacesetter in the creation of a new real estate business paradigm—regardless of convention. At
the same time, the symbol represents the new value we will create by combining the passion and skills of
every person and company in the Nomura Real Estate Group and their diverse values.

Contents
P 1 Business Activities and Group Companies

P16

Business Portfolio

P 2 Consolidated Financial Highlights

P18

Review of Operations

P 3 Segment Information

  

P18

Residential Development Business

P 4 To Our Shareholders

  

P20

Building Business

P 6 Breakthrough: Interview with the President

  

P22

Investment Management & Development Business

P12 Breakthrough: The Brand Power of the Nomura Real Estate Group

  

P24

Property Brokerage & Consignment Sales Business

  

P25

Other BusinessBusiness Activities and Group Companies

Residential Development
Business
Development and sales of condominiums, detached housing
and residential lots, etc., andhousing management andmaintenance under contract
with management associations
after sale of condominiums

Investment Management &Development Business

Property Brokerage &Consignment Sales Business

Other Business

Development and sales of profitgenerating property for the realestate investment market, investment management throughconsignments from investment
corporations, management ofprivate funds, consulting services
for securities investment, etc.

Brokerage of real estate, salesof condominiums and detachedhousing for individual households consigned from outside
the Group, etc.

Operation of fitness clubs, designand supervision of architecturaland civil engineering work, planning and management of commercial facilities, etc.

Building Business

Development, construction andleasing, and operation, management and maintenance undercontract with management
associations, of office buildings,
commercial facilities, etc.

Nomura Real Estate Development
Residential Development
Company

Corporate Real Estate Service Company

Investment Management& Advisory Company

Nomura Living Support

Nomura Building
Management

Nomura Real Estate
Investment Management

PRIME X

Nomura Amenity
Service

Nomura Real Estate
Asset Management

YBP Heating andCooling Supply*

Nomura Real Estate
Capital Management

Nomura Real Estate
Urban Net

Megalos

Geo-Akamatsu* YBP = Yokohama Business Park

P26 Group Company Profile

P64

Group Companies

P28 Corporate Governance

P66

Investor Information

P31 Corporate Social Responsibility (CSR)

P67

Corporate Data

P32 Board of Directors and Statutory Auditors
P33 Financial Section
P63 History of Nomura Real Estate Group

Nomura Real Estate Holdings, Inc. Annual Report 20081

Consolidated Financial Highlights
Nomura Real Estate Holdings, Inc. and its subsidiaries
Years ended March 31(Millions of yen)(Thousands of
U.S. dollars)(Note 1)

2006

2007

2008

2008

Operating Results:
Revenues from operations¥ 350,319¥367,237¥411,493$4,107,131

Gross profit

97,550108,668

130,391

1,301,437

Operating income

44,26754,374

69,822696,894

Net income

12,717

26,29735,255351,877

Cash flows from operating activities(99,830)(89,850)

7,639

76,249Cash flows from investing activities(17,995)(26,787)(13,348)(133,226)

Cash flows from financing activities

113,818

100,863

8,791

87,740¥56,109.84¥ 200.47¥ 236.09

2,000.00

20.00

30.00

0.30

¥ 689,287

Per Share Data (yen / dollars) (Note 2):
Net income
Cash dividends

$

2.36

Balance Sheet Data (as of March 31):
¥836,303¥891,700$8,900,091

Total net assets

60,732 (Note 3)

214,466

235,551

2,351,045

Interest-bearing debt

413,039

394,885

408,016

4,072,422

Total assets

Ratios:Return on assets (Note 4)

6.5%

6.6%

7.9%

Return on equity

23.7%

19.2%

15.8%

Operating margin

12.6%

14.8%

17.0%

Dividend payout ratio

3.6%

10.0%

12.7%

Shareholders’ equity ratio

8.8% (Note 3)

25.5%

26.1%

Notes:
1. The translation of Japanese yen amounts into U.S. dollar amounts is included solely for the convenience of the reader, using the rate of exchange
prevailing on the Tokyo Foreign Exchange Market on March 31, 2008, which was ¥100.19 = U.S.$1.00.
2. The Company carried out a 500-for-1 stock split on April 1, 2006.
3. For the year ended March 31, 2006, the figure for shareholders’ equity is shown for total net assets, and the figure for ratio of shareholders’ equity tototal assets is shown for shareholders’ equity ratio.
4. Return on assets = (Operating income + Non-operating income) / Total assets at end of fiscal year.

Revenues from Operations andOperating Margin

Operating Income and ROA

Net Income and ROE(Millions of yen / %)(Millions of yen / %)(Millions of yen / %)80,000500,000

400,000

14.8

40,000
7.9

17.0

23.7

6.5

19.2

6.6

60,00030,00015.8

12.6
300,000
40,00020,00020,00010,000200,000

100,000

0

2006

2007

0

2008

■ Revenues from Operations
Operating Margin■

2 Nomura Real Estate Holdings, Inc. Annual Report 2008

2006

■ Operating Income
ROA

■

2007

0

2008

2006

■ Net Income
ROE

■

2007

2008

Segment Information
Nomura Real Estate Holdings, Inc. and its subsidiaries
Years ended March 31(Millions of yen)(Thousands of
U.S. dollars)(Note 1)

2006

2007

2008

2008

¥222,518¥205,950¥ 238,802$2,378,375

48,28837,272
22,87427,057(7,690)51,342
69,36932,984
15,161(7,572)

56,88980,55530,183
16,837(11,773)

517,880
780,975
271,113
158,788(117,510)

Operating Income¥ 21,952
Residential Development Business
7,158
Building Business
14,223
Investment Management & Development Business (Note 2)
5,591
Property Brokerage & Consignment Sales Business (Note 2)
323
Other Business(4,981)Eliminations or corporate¥ 23,627
8,372
20,0406,961
1,212(5,838)¥ 26,067
9,414
34,7786,392
1,514(8,343)$ 260,175
93,962
347,123
63,793
15,113(83,272)

11.1%
4.2%
6.5%
14.9%
1.4%

9.2%
4.6%
6.7%
13.9%
5.0%

10.0%
4.6%
10.8%
8.8%
5.6%

Residential Development Business¥163,917¥229,863¥ 222,761$2,223,385

Building Business
Investment Management & Development Business (Note 2)
Property Brokerage & Consignment Sales Business (Note 2)
Other BusinessEliminations or corporate

9,077
137,388
23,704
6,604(137)

10,164
155,034
26,5056,335(129)

11,342
171,819
42,5076,317(127)

113,204
1,714,931
424,263
63,050(1,267)

Revenues from Operations
Residential Development Business
Building Business
Investment Management & Development Business (Note 2)
Property Brokerage & Consignment Sales Business (Note 2)
Other BusinessEliminations or corporate

Return on Assets of Each Segment (Note 3)
Residential Development Business
Building Business
Investment Management & Development Business (Note 2)
Property Brokerage & Consignment Sales Business (Note 2)
Other Business
Inventories

Notes:
1. The translation of Japanese yen amounts into U.S. dollar amounts is included solely for the convenience of the reader, using the rate of exchange
prevailing on the Tokyo Foreign Exchange Market on March 31, 2008, of ¥100.19 = US$1.00.
2. From the fiscal year ended March 31, 2008, some departments that had been classified in the “Property Brokerage & Consignment Sales Business”
segment have been transferred to the “Investment Management & Development Business” segment. Amounts up to the fiscal year ended March 31,
2007 have been reclassified to reflect the current segmentation, but 2006 amounts have not been reclassified.
3. ROA of each segment = Segment operating income / Segment assets at end of fiscal year

Revenues from Operations*Operating Income*Inventories*(Millions of yen)

(Millions of yen)

(Millions of yen)

500,000

80,000500,000

400,000

400,000

60,000300,000

300,000
40,000200,000

200,000
20,000100,000

0

2006

2007

2008

■ Residential Development Business■ Building Business■ Investment Management & Development Business■ Property Brokerage & Consignment Sales Business■ Other Business

0

100,000

2006

2007

2008

0

2006

2007

2008

* “Eliminations or corporate” amounts are not reflected in graphs.

Nomura Real Estate Holdings, Inc. Annual Report 20083

To Our Shareholders

Breaking Away From the Status Quo to Achieve Growth

good. Consolidated revenues from operations totaled

The fiscal year ended March 31, 2008 (fiscal 2007) was a year

¥411,493 million, an increase of 12.1% compared to thein which the Nomura Real Estate Group (the Group)’s true

previous year, consolidated operating income rose 28.4% tovalue as a developer was tested. The condominium market¥69,821 million, and consolidated net income grew 34.1%

experienced an overall decline in sales resulting from theto ¥35,254 million. This marked the third consecutive year ofincrease in sales prices caused by steep rises in land prices andrecord high operating results.

construction costs, as well as the revised Building Standards
Law enacted in June 2007, which had the effect of lengthen-Progress With Medium-term Business Plan

ing the application period for building approvals and thus

The Group is currently executing a three-year medium-term

reducing the supply of units on the market. In the real estatebusiness plan starting from fiscal 2007. Under this business

investment market, there was a sharp decline in businessplan, we aim to achieve consolidated operating income ofvolume for investment-targeted real estate, resulting from the¥72 billion, ROA of 7% and a shareholders’ equity ratio oftightening of funding associated with the contraction of credit

30% by the close of fiscal 2009. We have established target

following the turmoil in financial markets triggered by thebusiness volumes for both of the Group’s core businesses: thesubprime loan crisis in the U.S.

Residential Development Business and the Investment Man-

While the environment surrounding the real estate indus-

agement & Development Business. In the Residential Develop-

try is currently very tough, we will strive to break away fromment Business, we aim to build our platform to the point

the status quo and achieve Group growth based on a two-

where we can post 5,000 units of housing and 1,000 units ofpronged strategy focused on the stable Residential Develop-

rental housing for investment purposes. Meanwhile, in thement Business and the growing Investment Management &Investment Management & Development Business, we are

Development Business.

aiming for assets under management of ¥1.5 trillion. In fiscal
2007, we posted 3,810 units of housing and 747 units ofOverview of Fiscal 2007 Results

rental housing for investment purposes, while assets underDuring fiscal 2007 the Nomura Real Estate Group treated the

management exceeded ¥1 trillion at the end of fiscal 2007.

tough operating environment as a significant businessWe view this as a solid first step for the first year of theopportunity and worked to increase profitability throughmedium-term business plan.

such measures as strengthening operating companies’ capa-

The Group understands that the only way to increase thebilities to adapt to changes in the market. In the Residential

market’s trust and give the Group a strong presence is to set

Development Business, we leveraged our strength — inte-targets and continually achieve them. At the Nomura Real Estate

grated development, sales and management operations —Group, we will fully leverage our capabilities as a developer toto enhance our land selection, product planning andcreate even more development profits, which provide added

marketing abilities. Operating results were also supported byvalue. Our business strategy involves generating and building up

new properties that began operations, sales of properties tocontinuous type fee businesses through the business cycle towhich we had finished adding value, and an increase in asset

achieve sustainable growth for the Group as a whole.

management fees based on growth of assets under manage-

Going forward, in the Residential Development Business wement. As a result, the fiscal 2007 performance was extremely

will fully leverage our strength of possessing integrated system

4 Nomura Real Estate Holdings, Inc. Annual Report 2008

development, sales and management operations to boost the

To Our Shareholders

PROUD brand value and thereby achieve our end targets. Large

The Nomura Real Estate Group will continue to build a strong

redevelopment projects and rebuilding projects require high-levelbusiness base and a corporate framework even more resistant toexpertise and a strong track record, and as a result there is lesschanges in real estate prices, interest rates and other volatility incompetition than with general land acquisition deals, which is a

the market, with achieving the targets of the current medium-

major strength of ours in securing business volume. Therefore,

term business plan as the highest priority. We must always seek

we plan to expand our business in these areas as well.

to discover the next source of growth in these rapidly changing

With respect to the Investment Management & Develop-

times in the real estate market. The Group will work as one toment Business, in profit-generating property development

fully use its collective strength and proactively expand into new

operations we will firmly establish the business cycle, whichbusiness areas to build a foundation for future growth, while

comprises sourcing, acquiring, developing, adding value, andmaintaining a balanced business portfolio.

selling properties to investors and other parties, and we will
strive to establish a business model that focuses on businessIn these endeavors, we look forward to your continued
support and encouragement.

efficiency. In the investment management area, we will continue to grow assets under management in order to secure andincrease stable earnings from dividends and management fees.
Additionally, we will continue to develop relationships with

July 2008
Hirohisa Suzuki
President

long-term investors, particularly domestic pension funds.
The Nomura Real Estate Group will continue to push forward with these strategies and achieve stable and sustainablegrowth for the entire Group.

Nomura Real Estate Holdings, Inc. Annual Report 20085

Breakthrough : Interview with the President

Growing Amid a Market Correction
Nomura Real Estate Group’s Strength—Growing Amid a Market Correction

Q1

How is Nomura Real Estate Holdings

Building Business, the Property Brokerage & Consignment Sales

different from other companies in theBusiness, and Other Business.

real estate industry?

In particular, we do not simply increase rental income byincreasing the buildings that we own in order to grow stableA1

Our business portfolio differs greatly from other com-earnings streams. Rather, a major characteristic of the Nomura

panies in the real estate industry. If we look at sources

Real Estate Group is that we start by increasing assets underof operating income, other major companies in the industry earnmanagement in the Investment Management & Development

the majority of their operating income from owning and leasing

Business in order to grow dividend income and managementbuildings. In contrast, the Nomura Real Estate Group has a well-fees, based on rental income. In other words, we acquire fixedbalanced business portfolio consisting of businesses with differ-assets to grow our earnings streams related to the rental market,

ing risk-return characteristics. This business portfolio includes ourwhile preserving and controlling our financial soundness.

two core businesses, the Residential Development Business andIn line with our current medium-term business plan, we are

the Investment Management & Development Business, and the

pursuing a business strategy of making full use of our functions

6 Nomura Real Estate Holdings, Inc. Annual Report 2008

as a real estate developer in order to enhance our strengths. In■ Targets for main business fields

order to achieve our goals of pursuing highly efficient investments

1) Build system to achieve 5,000 housing units and 1,000

and improving our financial soundness, in our profit-generating
property development business we are focusing on businessspeed and investment rotation, and in our investment management business, the Property Brokerage & Consignment Sales
Business and elsewhere we are expanding our fee businesses.
Overview of Medium-term Business Plan
■ Basic policies

rental housing units for investment
2) Expand assets under management to ¥1.5 trillion

Q2

What is Nomura Real Estate Holdings’
strength in the investment manage-

ment business?

mental policies.

A21) Establish a solid earnings base and maintain profit growthfrom changes in Japan’s real estate ownership structure. We have

The current medium-term business plan prescribes two funda-

We will establish a solid earnings base by strengthening ourexisting businesses and building a balanced business portfolio, and maintain sustained profit growth by increasing business and investment opportunities.
2) Pursue high investment efficiency and enhance the soundnessof our financial position
We will work to continuously increase the efficiency of ourassets by maintaining and improving our business speed andSince the late 1990s, the Nomura Real Estate Grouphas been grasping new business opportunities arising

been an industry pioneer in terms of aggressively developing business in the field of real estate securitization. In this field, it isextremely important to be a good judge of both real estate andfinance. The trust that investors place in us is based on our expertise accumulated to date and our track record of business operations, and this trust is one of our biggest strengths. However, viewsby effectively distributing management resources. We will

have been expressed that the enactment of the Financial Instru-

also enhance shareholders’ equity by accumulating returns.

ments and Exchange Law and other strengthening of financial
legislation may restrict our freedom to do business. My opinion is■ Quantitative targets
1) By fiscal 2009, we aim to achieve operating income of ¥72

that if we increase the transparency of funds, this will attract new

billion, about 30% higher than fiscal 2006 (ordinary income

investments, and if strengthened regulations prompt industryof ¥62 billion)

realignments, this will generate business opportunities. With our2) We aim to quickly raise ROA* to at least 7%, compared to
6.6% for fiscal 20063) We aim to raise shareholders’ equity ratio to 30%, compared
to 25.5% for fiscal 2006
* ROA = (Operating income + Non-operating income) / Total assets at endof fiscal year

“Investor Oriented” management philosophy and our commitment to rigorous financial reporting and other information disclosures, together with thorough compliance, this dawn of a new
business environment heralds favorable conditions for us.
Although there has been a credit contraction recently in the realestate investment market due to turmoil in the financial markets,■ Business strategies
1) Make full use of functions as real estate developer2) Strengthen property sourcing capabilities and strategically
expand business opportunities
3) Expand investment management operations

the REITs and private funds managed by the Nomura Real EstateGroup are held in the same basic regard by equity investors andfinancial institutions offering loans, with our operational track record
to date and conservative financial approach being highly acclaimed.

Nomura Real Estate Holdings, Inc. Annual Report 2008

7

Going forward, we will continue to solidify our position as a

In the asset management business operations, we will invest

leading company in this field and continue sustained growthin four asset classes: office, residential, commercial and logistics,

based on our business model which separates us from the otherusing our system that can respond to a wide variety of investors

major players in the industry.

with our own asset management platform, which is focused onvaried investment targets and operation types. We will fully leverage the Group’s property pipeline of our own development prop-

Q3

In line with your current medium-term

erties and brokerage information to focus on acquiring properties,business plan, you aim to expand

with a view to achieving our goal of 1.5 trillion yen in assets
under management by the end of March 2010.

investment assets to 1.5 trillion yen. What are thechances of you actually achieving this?

A3

Q4

With respect to the conditions for acquiring office buildings,

ropolitan area. What is your take on the volume ofalthough competition for good properties is fierce, high-quality

condominiums that will be supplied going forward?

As of March 31, 2008, we had cleared the interim
goal of 1 trillion yen in assets under management.

There has been a decline in the number ofhousing units supplied in the Tokyo met-

properties have gradually begun to appear on the market. In therental housing area, aided by the fact that residential REITs havepoor acquisition capacity, we should be able to acquire many

A4

For many years supply had been about 80,000 units
per year in the Tokyo metropolitan area. But in fiscal

good properties assuming we can raise equity and debt funding.

2007 this dropped to approximately 60,000 units. However,In the private funds area, our funds specializing in commercial

much of this decline was due to circumstances on the supply

real estate and logistics facilities both have ample room to grow.

side, including the impact of the revised Building Standards Law

Our Asset Management Platform
Name of firm

Nomura Real Estate
Asset Management

Nomura Real Estate
Investment Management

Nomura Real Estate
Capital Management

Fund type

REITs

Private funds (real estate)

Private funds (real estate securitization products)

Real estate opportunity fund

Fund
under
management

Nomura Real Estate
Office Fund

Nomura Real Estate
Residential Fund

Property designated fund

CMBS fundCommercial facility specialized fund
Logistics facility specialized fundInvestors

8 Nomura Real Estate Holdings, Inc. Annual Report 2008

Fund-of-funds

and the jump in construction costs, while the demand for condominiums itself did not fall as much. There continues to be an
inflow of people to the Tokyo metropolitan area, and the number

Q5

How have the amendments to the Building Standards Law impacted Nomura Real

Estate Holdings’ operating results?

of households is increasing at a higher rate than that of thenumber of people, so we can expect a decent amount of demand
going forward.

A5

The approval process before construction effectively
stopped for about three months after the law wasConsequently, it is extremely important to create productsthat match the diversified customer needs that are emerging as

amended in June 2007, but the pace of screening gradually pickedup from November onward and is now back at regular speed.

a result of the diversification of household composition and life-

We had expected a certain amount of delay in the schedule

styles. We will conduct meticulous marketing activities coveringwith respect to real estate acquired after the decision to amend

all aspects from land selection to residence planning, specifica-

the law was made. Also, given the large number of projects wetions and price setting, and service provision, and continue towere working on, we were able to flexibly adjust our plans fordevelop products that are popular with customers. As a result,supplying properties to the market, and therefore we do not

we should be able to achieve our target number of units to be

expect any major impact on operating results. Nevertheless, in

supplied even if there is a further drop in the overall number offiscal 2008 we expect there to be a larger-than-normal concen-

units supplied.

tration of condominium completions in the fourth quarter.

Number of Condominium Units Supplied(Tokyo metropolitan area)
100,000

5,000

80,0004,000

60,0003,000

40,0002,000

20,000

1,000

0

2001

2002

2003

2004

2005

2006

0
2007 (Fiscal year)■ Overall (left scale)◆ Nomura Real Estate (right scale)

Nomura Real Estate Holdings, Inc. Annual Report 2008

9

Q6

Q7

have on Nomura Real Estate Holdings’ business?

investment. Will you be able to find buyers for

What kind of impact did the U.S. subprime loan crisis in the summer of 2007

There has been a dramatic decline in thetransaction volume of real estate for

profit-generating properties that the Nomura RealA6

We have certainly been affected indirectly, in the

Estate Group has developed?

market. The global contraction of credit that arosefrom the sub-prime loan crisis has resulted in a significant change
in attitude towards non-recourse loan financing. The supply ofA7

In the market for investment in real estate, the credit
contraction stemming from the sub-prime loan crisis

funding for some properties has thinned, transaction volume

has resulted in certain private funds finding it difficult to raise

involving real estate for investment purposes has decreased dra-money, and transaction volume has declined sharply. Also,

matically, and the drop in the stock market has made potential

some REITs have seen a drop in their share prices, and without

customers less interested in purchasing condominiums targeted

capital increases it has become difficult for them to grow exter-

at affluent buyers.

nally. However, there are some investors who look to buy prop-

On the other hand, the Commercial Mortgage-Backed Secu-

erties precisely at a time like this. Quality REITs continue to be

rities (CMBS) fund managed by Nomura Real Estate Capital Man-

able to buy properties, and we will look to respond to suchagement Co., Ltd. invests in CMBS backed by Japaneseneeds by developing properties that meet their requirements.

commercial real estate, not in U.S. real estate or securities backed

As regards customers for purchasing property in the Group's

by mortgages. Throughout the rest of the Group there has been

profit-generating property development operations, hitherto

no direct impact, because no investments have been made in thethe percentage of sales to private funds and real estate compa-

securities that were at the center of the sub-prime loan crisis.

nies for resale was small, while there has been a higher percentage of sales of large properties to major REITs and smaller

Japan-REIT Market Capitalization

properties to end users and affluent buyers.

(Trillions of yen)8

One of the Group’s strengths is our ability to uncover

7purchasing needs by using our direct pipeline that we have6

built over the years. These needs include those stemming

5

from capital investment activity on the part of companies

4and the asset management needs of affluent individuals. We

3are committed to using this strength to keep these custom-2

ers in the future.

1
0
01/10

02/10

03/10

04/10

10 Nomura Real Estate Holdings, Inc. Annual Report 2008

05/10

06/10

07/10

Q8

How have rising interest rates impacted
Nomura Real Estate Holdings’ earnings?

Q10

What is your policy regarding
returning profits to shareholders?

Concretely, what countermeasures have you taken
against rising interest rates?

A10

First, I think it is necessary to make every effort
to ensure that the Nomura Real Estate Group is

A8

The most obvious impact of rising interest rates

developing in line with the desires of all our stakeholders forhas been the increased interest payments we havemaximizing our corporate value.

to make on our interest-bearing debt. On the business front,

Our basic policy regarding the returning of profits to share-

in residential condominium operations the fact that theholders is that dividends should be determined by considering aburden of loans for our customers has been increasing meansbalance with the retained earnings needed for future earnings

that purchasing power is declining. In profit-generating prop-

growth and trends at other companies, after comprehensively

erty development operations, the fact that cap rates are risingtaking into account such factors as business performance duringmeans that sales prices may fall. As regards countermeasures

the applicable fiscal year, the management environment goingfor rising interest rates, we have been increasing the percent-forward, and business and capital investment plans. In both fiscal

age of borrowings that have long-term fixed rates in order to2006 and fiscal 2007 we announced consecutively increased

avoid sudden increases in interest payments and depressed

dividends, and we intend to raise the dividend payout ratio toearnings. Furthermore, in October 2007 we issued straightaround 20% if we achieve the medium-term business plan’scorporate bonds as the first step in procuring long-term fixed

target for the shareholders’ equity ratio.

funds. Looking ahead, we will watch trends in financial markets and procure funds appropriately.

Looking ahead, we will continue to examine our policy
regarding returning profits to shareholders, including by engaging in interactive communication with all our shareholders.

Q9

Nomura Real Estate Holdings’ share priceset a record high of 4,570 yen in 2007, but

has since declined to 50-60% of that level. How doyou view the market’s valuation of your stock?

A9

Our stock price is the market’s valuation of our company, so we must take it seriously. Our share pricehas fallen in line with the overall drop in stock prices in the realestate sector, despite the fact that our earnings have been
good. We are committed above all to increasing the trust placedin us by our investors by achieving the business targets of our
medium-term business plan. At the same time, we will continue
to focus energy on investor relations activities so that investors
gain a better understanding of our business model.

Nomura Real Estate Holdings, Inc. Annual Report 200811

Breakthrough : The Brand Power of the Nomura Real Estate Group

PROUD — The Best Living Spaces to
Residential Development Business
PROUD Provides Unrivaled Contentment
As the brand name of Nomura Real Estate Development’s residential products and services, PROUD represents places
where residents can pass the time with unrivaled contentment that inspires pride in residents, developers and, furthermore, neighbors. Guided by our integrated development, sales and management operations and our system of quality
management, we seek to create durable, universally beautiful residences with an uncompromising commitment to quality

12 Nomura Real Estate Holdings, Inc. Annual Report 2008

Spend Time
construction. Leveraging the advanced expertise that we have cultivated up through the present, we will also continue tobe actively involved in urban redevelopment and renovation projects.

Nomura Real Estate Holdings, Inc. Annual Report 200813

Breakthrough : The Brand Power of the Nomura Real Estate Group

Uniting Our Real Estate and Finance  Property development
Extensive Pipeline of Direct Partners and Ample Development Expertise
We maximize real estate profitability and added value by leveraging information, planning ability and architectural
knowledge cultivated over many years to provide optimal solutions in line with the needs of investors and corporate
customers. A pipeline of over 3,000 companies that serve as direct partners is one of our major strengths, as it allows
us to find buyers for profit-generating properties and acquire additional properties for development.

Development Profit Generated by Creating Added Value at Each Stage—Land Acquisition, Product Planning and Sales
Land used effectively thanks toplanning and development that
anticipates tenant needs

Land purchased at prices based on
existing strategies utilizing an extensive
information network

Sell at prices that reflect
maximum property value based on
optimal existing strategy
Rents raised thanks to tenant leasing
capabilities

Added value

Added value

Added value

Added value

Added value

Acquisition costs

Acquisition costs

Acquisition costs

Land acquisition

Product planning

Sales

Maximize

Development profit

Urban Dining Complexes

Custom-Made Office Buildings

Large-Scale Commercial Facilities

Project planning conducted after checking locational
advantages and convenience of commercial areas andanalyzing area needs and market.

Custom-designed, meticulously developed office buildings
cater to tenant needs.

A variety of commercial facilities have been developed, including large-scale shopping centers and urban cinema complexes, suiting characteristics and market needs of the area.

AEON Yachiyo-Midorigaoka Shopping Center

Cheers Ginza

14 Nomura Real Estate Holdings, Inc. Annual Report 2008

Kansai Paint
Head Office Building   Skills
Investment management
Highly Reliable Management Based on the Investor-Oriented Management Philosophy
The Nomura Real Estate Group manages J-REITs, private real estate funds, funds of real estate-related securities and otherassets. We also provide investment services for pension funds and other institutional investors. Our investment professionals have wide-ranging knowledge and expertise in both real estate and finance fields. They regularly meet investor
expectations by providing a broad array of investment opportunities that precisely reflect diverse asset management
needs while offering highly reliable management services.

Our Asset Management Platform for Diverse
Property Types

Steadily Raise Assets Under Management to ¥1.5 Trillion
by the End of Fiscal 2009

Our services broadly cover the four categories of investment properties:
office, residential, retail and logistics. The investment strategies we develop
are based on the characteristics of each type of property

Increasing assets under management will raise related fee and dividend
income and create a more stable, secure earnings structure.

J-REITsPrivate funds

Offices

Retail facilities(Billions of yen)

1,500

■ Listed J-REITs■ Private funds, etc.
■ Joint investment, etc.

1,000

500

Rental housing

Logistics facilities

0

1999

2000

2001

2002

2003

2004

2005

2006

2007

2009
(Target)Nomura Real Estate Holdings, Inc. Annual Report 200815

Business Portfolio

Residential Development Business

Main business

Composition of revenues*■ Sales of housing■ Management of condominiums
56.4%

Building Business■ Leasing (owned)■ Leasing (subleasing)■ Property management and facility
management

13.4%

Investment Management & Development Business■ Property development■ Investment management
19.0%

Property Brokerage & Consignment Sales Business■ Property brokerage■ Consignment sales■ Real property sales
7.1%

Other Business■ Fitness club operation■ Architectural planning andmanagement■ Planning of commercial facilities

16 Nomura Real Estate Holdings, Inc. Annual Report 2008

4.0%

*Revenues in each segment havebeen calculated including intersegment sales and transfers.

Composition ofoperating income

Major subsidiaries

Fiscal 2007 topics■ Nomura Real Estate Development Co., Ltd.

The Residential Development Business provides a diverse lineup of products under the
PROUD brand, including large-scale condominium complexes, ultra-high-rise condominiums, large-scale detached housing and urban housing. Two properties that wedeveloped, PROUD Minami Aoyama and THE STAGIO, won Good Design Awards infiscal 2007, which were sponsored by the Japan Industrial Design Promotion Organization. In addition, our business involving the development of rental condominiums andtheir sale to real estate funds and other investors has grown into a new earnings basefor the Group. In fiscal 2007, we sold PROUD FLAT Kagurazaka and other properties
to Nomura Real Estate Residential Fund, Inc.

■ Nomura Living Support Co., Ltd.
■ PRIME X Co., Ltd.
33.4%

■ Nomura Real Estate Development Co., Ltd.
■ Nomura Building Management Co., Ltd.
■ Nomura Amenity Service Co., Ltd.
12.0%

■ YBP Heating and Cooling Supply Co., Ltd.

■ Nomura Real Estate Development Co., Ltd.
■ Nomura Real Estate Investment
Management Co., Ltd.
44.5%

■ Nomura Real Estate AssetManagement Co., Ltd.
■ Nomura Real Estate CapitalManagement Co., Ltd.

■ Nomura Real Estate Development Co., Ltd.
■ Nomura Real Estate Urban Net Co., Ltd.
8.2%

■ Nomura Real Estate Development Co., Ltd.
■ Megalos Co., Ltd.
■ Geo-Akamatsu Co., Ltd.
1.9%

In the Building Business, Fukagawa Gatharia Tower-N, which was completed in January 2007, was in operation for the full term and helped to increase earnings. With aview to further raising earnings, we acquired the Daini Edobashi Building in March
2008. We are also making progress on the provisionally named Nihonbashi Nomura
Building, a redevelopment project slated for completion in fiscal 2010 that includes
renovating the Shinmuromachi Building. The vacancy rate in buildings owned by theGroup was 2.2% as of the end of fiscal 2007.

In the Investment Management & Development Business, profit-generating property
development operations resulted in the sale of the AEON Yachiyo-Midorigaoka Shopping Center to Japan Retail Fund Investment Corporation. We also sold the Lasertec
Headquarters Building to Lasertec Corporation. The building was developed specifically for the company according to custom specifications. In the area of asset management operations, Morisia Tsudanuma, a commercial complex operated by a private
fund for which large-scale renovation had been carried out by Nomura Real Estate
Investment Management, opened in March 2008. Property management was contracted out to Geo-Akamatsu Co., Ltd.

The property brokerage operations of the Property Brokerage & Consignment Sales
Business endured a decline in transactions with real estate funds and developers due
to turmoil in the financial markets. Given these conditions, for individual households,
we developed efficient marketing activities through aggressive utilization of the Internet, and for corporations, we reinforced proposal-based marketing. In the area ofconsignment sales, we worked to win consignments for highly competitive products
from high-quality developers and further strengthen our sales ability.

In the fitness club business, we conducted renovations at some clubs and focused on
maintaining the profitability of our existing facilities as well as opening new clubs, inan effort to boost competitiveness and raise member retention rates. The total numberof Megalos members was over 120,000 as of the end of fiscal 2007. Megalos waslisted on the Jasdaq Securities Exchange in November 2007. Geo-Akamatsu entered
the Group in July 2007 via an M&A project. The company plans and designs commercial facilities and provides property management services. It has been classified into
this segment.

Nomura Real Estate Holdings, Inc. Annual Report 200817

Review of Operations

Residential Development Business
The Residential Development Business supplies approximately 4,000 housing units a year, primarily in theTokyo metropolitan area. The Group offers a diverse product lineup under the PROUD brand that includes:
PROUD CITY (large-scale condominiums), PROUD TOWER (skyscraper condominiums), PROUD TOWN
(large-scale detached housing), and PROUD SEASON (urban detached housing). The PROUD brandembodies our desire to supply the best properties in the area and greatly satisfy our customers. Ourconcept of PROUD brand being synonymous with Nomura Real Estate Development’s high-quality condominiums has steadily entrenched us in the market.

Overview of Fiscal 2007

In housing sales operations, we promoted a strategy designed to

In fiscal 2007, the housing market saw an overall decline in contract rates

increase recognition of the PROUD brand and raise brand value. We also

on rising sales prices caused by higher land and construction costs.

worked to further strengthen site selection, product planning and sales

Suburban-type properties, in particular, had considerable difficulty incapabilities. In the area of housing management operations, we rein-

attracting buyers. At the same time, properties in good locations soldforced collaboration with housing sales operations and strove to build

quite well, revealing a clear trend toward market polarization. Applica-

integrated development, sales and management operations. Efforts weretions for construction inspections were prolonged and supply declined

also made to raise management quality and boost the value of thedue to the impact of revisions to the Building Standards Law that went

PROUD brand from a management perspective. Moreover, we also

into effect in June 2007. Despite this increasingly challenging operating

aggressively undertook management consignment orders from compa-

environment, revenues from operations in the Residential Developmentnies outside the Group, and attempted to increase the number of man-Business segment increased ¥32,852 million, or 16.0% year-on-year toaged units and expand orders for repair work.

¥238,802 million. Operating income rose ¥2,440 million, or 10.3% yearon-year to ¥26,066 million.

The business of developing rental housing, bundling properties and selling them to REITs and funds inside and outside the Group is also proceeding

Revenues from Operations

Operating Income*Number of Housing Sales(Billions of yen)

(Millions of yen)

(Units)300

30,0006,000

200

20,000

4,000

100

10,000

2,000

0

2006

2007

2008

■ Sales of Housing■ Management of Housing■ Other

18 Nomura Real Estate Holdings, Inc. Annual Report 2008

0

2006

2007

2008

* Operating income figures are total amounts ofResidential Development Business.

0

2006

■ Housing for Household■ Rental Housing

2007

2008

PROUD Shin-urayasu(Urayasu-city, Chiba)

THE CENTER TOKYO(Shinjuku-ku, Tokyo)

PROUD Esaka(Suita-city, Osaka)

PROUD SEASON Yokohama Nakayama(Yokohama-city, Kanagawa)vigorously. In fiscal 2007 we sold PROUD FLAT Kagurazaka, PROUD FLAT

proactively become involved in areas that capitalize on the Group’s particu-

Sumida Riverside and other properties to Nomura Real Estate Residential

lar strengths, including redevelopment, renovation and land readjustment

Fund, Inc. A total of 747 units were sold, an increase of 499 units from the

projects, in order to ensure land continues to be acquired in a stable manner

previous fiscal year, and this business is developing into a new earnings base.

going forward. We will also continue to focus on raising quality, the foundation of our brand, while leveraging the strengths of our integrated devel-

Basic Policy in Medium-term Business Plan and Future Expansion

opment, sales and management operations in order to further enhance the

Our medium-term business plan lays out a basic policy that is aimed atvalue of the PROUD brand.

making the Group the leading company in the housing industry. We plan to

In the area of rental housing for investors, we are steadily increasingly

achieve annual housing sales of 5,000 units and rental housing sales ofour stock of land, and we plan to recognize 1,700 units in fiscal 2008. In

1,000 units in the final fiscal year of our medium-term business plan by

the housing management business, which is a stock-based fee business,

establishing an organization to ensure the stable supply of properties on

we are raising the number of properties managed on commission tothis scale. Our inventory of land for housing, including land being acquired

100,000 units and will seek to harness new business opportunities closely

in fiscal 2008, stands at the equivalent of 11,500 housing units. We willconnected to customer lifestyles in an effort to generate further growth.

Business Results(Millions of yen)
2006

2007

2008

Revenues from Operations¥222,518¥205,950¥238,802

Operating Income
Assets21,952
197,316

23,627257,184

26,067259,781Years ended March 31

ROA* (%)

11.1%

9.2%

10.0%

Inventories¥163,917¥229,863¥222,761* ROA by segment = Segment operating income / Segment assets at end of fiscal year

Nomura Real Estate Holdings, Inc. Annual Report 200819

Building Business
The Group owns trophy office buildings such as Shinjuku Nomura Building, Yokohama Business Park,and Otemachi Nomura Building in major areas of the office market. Besides leasing the buildings weown, we are also operating subleasing and property management businesses, which enables us to gaina better understanding of the needs of tenants that are specific to the area as well as market trends in atimely manner. At the same time, we respond in a comprehensive manner to customers’ needs such as
trading and liquidity, and leasing and property brokerage, and we have developed an organization thatis able to increase customer satisfaction.

Overview of Fiscal 2007

thoroughly improved services, which resulted in an increase in the number

In the Building Business, we strove to expand marketing activities closelyof consigned properties.

tailored to tenant needs as well as to maintain and enhance utilization
rates. We also continued to work to raise commission income from prop-

Basic Policy in Medium-term Business Plan and Future Expansion

erty management and facility management operations and increase

With regard to ownership of assets for lease, our policy remains

orders from tenants for interior renovations. In terms of income, Fuka-

unchanged: we will strategically expand our holdings in line withgawa Gatharia Tower-N, which was completed in January 2007, was ingrowth in shareholders’ equity by comprehensively considering various

operation for the full term, which helped boost revenues. As a result,factors, including 1) whether the asset was developed by us, 2) whether

revenues from operations in the Building Business segment rose ¥5,547

it constitutes a so-called trophy building in a prime area, and 3) whether

million, or 10.8% year-on-year, to ¥56,889 million. Operating income

it plays a role in giving us access to information about tenants in thegrew ¥1,041 million, or 12.4% year-on-year, to ¥9,414 million.

area. In March 2008, we focused on the future redevelopment in theProfits derived from leasing operations improved thanks to an

Nihonbashi area and acquired the Daini Edobashi Building. In terms ofincrease in the number of rent revisions for existing tenants that resulted

major projects going forward, progress is currently being made on thein rent increases. In property and facility management operations, we

provisionally named Nihonbashi Nomura Building. The project entails

Revenues from Operations

Operating Income*Vacancy Rate at Year-end(Billions of yen)

(Millions of yen)

(%)

60

15,000

640

10,000

4

20

5,000

2

0

2006

2007

2008

■ Building Leasing (Company-owned)■ Building Leasing (Subleased)■ Property Management and Facility Management■ Other

20 Nomura Real Estate Holdings, Inc. Annual Report 2008

0

2006

2007

2008

* Operating income figures are total amounts of
Building Business.

0

2006

2007

2008

Shinjuku Nomura Building(Shinjuku-ku, Tokyo)

Fukagawa Gatharia Tower-N(Koto-ku, Tokyo)

Daini Edobashi Building(Chuo-ku, Tokyo)

the integrated renovation of surrounding buildings, including theutilizing its management and technological capabilities in regular nego-

Shinmuromachi Building, which was owned by Nomura Real Estatetiations with owners and tenants. In addition, these utilization rates have

Development. We are taking advantage of redevelopment opportuni-

been the result of our strength in directly marketing and leasing proper-

ties in designated urban areas, the transfer bonus of floor space andties without relying on intermediaries.

various other techniques to substantially increase the building capac-

Beyond further expanding the Building Business, we intend to rein-

ity rate. When the building is completed, it will become the Group’s

force our organizational network for ascertaining the specific, local needs

key office building in the Nihonbashi area. We will continue to strate-of tenants and market trends in a timely manner.

gically increase owned floor space while at the same time expanding
fee-based businesses; specifically, property management and facility
management.
Our leased buildings continue to have high utilization rates thanks to
our comprehensive service organization for property management andbuilding management, two of the Group’s strengths. The Group has successfully met customer needs and enhanced customer satisfaction by

Business Results(Millions of yen)
2006

2007

2008

Revenues from Operations¥ 48,288¥ 51,342¥ 56,889

Operating Income
AssetsROA* (%)
Inventories

7,158
170,010
4.2%¥ 9,077

8,372
180,587
4.6%¥ 10,164

9,414
203,563
4.6%¥ 11,342

Years ended March 31* ROA by segment = Segment operating income / Segment assets at end of fiscal year

Nomura Real Estate Holdings, Inc. Annual Report 200821

Investment Management & Development Business
The Investment Management & Development Business is the Group’s core business and is steadily achieving growth. This segment comprises two types of activities. In the case of the profit-generating property
development, we carry out investment and development by using our own funds, and then generate
income by selling these developed properties. In the case of the asset management operations, wemanage investors’ funds. Our great strengths in this business have been established by the provision of
investment opportunities and the accumulation of operational expertise that are able to fulfill a variety
of investors’ needs, as well as customer confidence built up by our impressive past achievements.

Overview of Fiscal 2007

AEON Yachiyo-Midorigaoka Shopping Center, which was developed as a

In the Investment Management & Development Business, profit-

profit-generating property, to Japan Retail Fund Investment Corporation in

generating property development operations made progress in develop-

September 2007. We also recorded the sale of the Lasertec Headquarters

ing properties and selling off those for which value had been adequately

Building in March 2008, a customized office building development projectraised. We also continued to focus on acquiring new projects and pro-in which the Group planned and arranged the product in line with the

moting existing ones. In investment management operations, we

specific office-related needs of the tenant company. As a result, operating

increased the balance of assets under management by Group funds. The

revenues from these operations amounted to ¥67,428 million.

Group’s pipeline was utilized to push the balance of assets under man-In the area of investment management operations, we commenced

agement up over ¥1 trillion as of the end of fiscal 2007. This resulted inoperations at Landport Atsugi, a large logistics facility developed by aa concomitant increase in asset management fees and revenues. As a

private fund managed by Nomura Real Estate Investment Management

result, revenues from operations in the Investment Management & Devel-that was completed in April 2007, and Morisia Tsudanuma, a commer-

opment Business segment climbed ¥11,186 million, or 16.1% year-on-

cial complex in front of a station at which a large-scale renovation had

year, to ¥80,555 million. Operating income increased ¥14,738 million, orbeen completed, opened in March 2008. Property management for

73.5% year-on-year, to ¥34,778 billion.

Morisia Tsudanuma was contracted out to Geo-Akamatsu Co., Ltd., andIn the area of profit-generating property development, we sold thefacility management to Nomura Building Management Co., Ltd. The

Revenues from Operations

Operating Income*

Assets Under Management(Billions of yen)

(Millions of yen)(Billions of yen)90

40,0001,200

30,000900

20,000600

10,000

300

60

30

0

2006

2007

2008

■ Profit-generating Property Development■ Asset Management

0

2006

2007

2008

* Operating income figures are total amounts ofInvestment Management & Development Business.

0

2006

■ Listed REITs■ Private Funds, etc.

* Amounts from April 1, 2007 have been reclassified as per the current segmentation. Amounts prior to then have not been retrospectively reclassified.

22 Nomura Real Estate Holdings, Inc. Annual Report 2008

2007

2008

AEON Yachiyo-Midorigaoka Shopping
Center (Yachiyo-city, Chiba)

Lasertec Headquarters(Yokohama-city, Kanagawa)Morisia Tsudanuma(Narashino-city, Chiba)

project was a collaborative effort of the companies within the Groupadvanced functionality, security and brand power that match the needs

and involved pooling of the Group’s expertise in commercial facilityof niche markets, with the aim of setting rents at relatively high levels

operations. As a result, revenues from investment management opera-

compared to nearby buildings of the same scale. The PMO business planstions amounted to ¥13,126 million. Assets under management roseto own and operate the buildings over the medium-term and then bundle

33.8% to ¥1,031.5 billion.

multiple properties together and sell them as profit-generating properties. Going forward, we intend to further establish this business model by

Basic Policy in Medium-term Business Plan and Future Expansion

increasing property numbers.

Profit-generating property development operations are currently engaged

Investment management operations aim to increase assets under man-in more than 100 development and value-adding projects. However,agement to ¥1.5 trillion by the end of fiscal 2009. Although the current

going forward, we will successively sell them off to realize development

operating environment has temporarily cooled, the real estate securitization

profits and use the funds to invest in new projects. In this way we aim tomarket in Japan will expand in the medium- and long-term. The Group will

establish a business model for profit-generating property development

respond to the expectations and trust of investors and arrange projects that

operations that focuses on fund cycles and investment returns. We haveensure stable operation fees and dividends by leveraging our fund procure-also started a new initiative, the premium mid-size office (PMO) business.

ment and operational execution capabilities.

This business involves the development of smaller office buildings with

Business Results(Millions of yen)
2006

2007

2008

Revenues from Operations¥ 37,272¥ 69,370¥ 80,555

Operating Income
AssetsROA* (%)
Inventories

14,223
217,543
6.5%¥137,388

20,040297,632
6.7%¥155,034

34,778322,937
10.8%¥171,819

Years ended March 31* ROA by segment = Segment operating income / Segment assets at end of fiscal year

Nomura Real Estate Holdings, Inc. Annual Report 2008

23

Property Brokerage & Consignment Sales Business
The Group’s Property Brokerage & Consignment Sales Business in its individual brokerage operations performs highly efficient management by promoting office networks
primarily in the Tokyo metropolitan area and Internet strategies with a comprehensive
property information website, “nomu.com.” The main feature of our corporate realestate brokerage operations is the fact that we make effective use of direct networking channels to more than 3,000 companies that we have cultivated over a long periodof time. This leads to exploring the seeds of projects and the conclusion of contracts.
Nomura Real Estate Urban Net Ebisu
Center (Shibuya-ku, Tokyo)

Overview of Fiscal 2007

through our network of stores and direct communications. Starting in

Property brokerage operations faced a business environment in whichfiscal 2007, some of the development projects previously classified in thisproperty fund-related transactions declined in conjunction with financial

segment have been reclassified into the Investment Management &market turmoil precipitated by the sub-prime loan crisis. In response, forDevelopment Business segment. As a result, revenues from operations inindividual households, we developed efficient marketing activities

the Property Brokerage & Consignment Sales Business segment decreased

through aggressive utilization of the Internet. For corporations, we rein-¥2,802 million, or 8.5%, to ¥30,182 million, and operating income

forced customer-driven marketing.

declined ¥570 million, or 8.2%, to ¥6,391 million.

In the area of consignment sales, we worked to win consignments
for highly competitive products from high-quality developers, given the

Basic Policy in Medium-term Business Plan and Future Expansion

ongoing polarization of the market. In addition, with more and moreIn the Group, the basic policy for the Property Brokerage & Consignment

properties taking longer to sell, we carried out a variety of locally targeted

Sales Business in the medium-term business plan is to establish the number

marketing activities.

one brand in customer trust. Specifically, we will step up promotion of the

In the area of product real estate sales, we worked to increase sales

Internet strategy by enhancing the contents of nomu.com, a website man-and capture more brokerage opportunities by developing and enhancing

aged by Nomura Real Estate Urban Net. In addition, we will promote thethe value of smaller-scale products on the basis of information gathereddevelopment of human resources and larger branch offices.

Revenues from Operations

Operating Income*Property Brokerage(Billions of yen)

(Millions of yen)(Billions of yen/number of transactions)

40

8,000

20

30

6,000

15

20

4,000

10

3,000

10

2,000

5

1,500

0

2006

2007

2008

■ Property Brokerage■ Consignment Sales■ Real Property Sales■ Other

0

2006

2007

2008

* Operating income figures are total amounts ofProperty Brokerage & Consignment Sales Business.

0

6,000

3,923

2006

3,949

2007

■ Total Commission Fee (left)
Number of Transactions (right)■* Amounts from April 1, 2007 have been reclassified as per the current segmentation. Amounts prior to then have not been retrospectively reclassified.

24 Nomura Real Estate Holdings, Inc. Annual Report 2008

4,047

2008

4,500

0

Other Business
The fitness club business entails the management of 20 facilities mainly in the Tokyo
metropolitan area. We expect to realize synergies with the Nomura Real EstateGroup through the acquisition of land information when opening facilities and themaintenance and management of facilities. We regard this as a sector where wewill continue to achieve steady growth through the expansion of the facility network. Geo-Akamatsu, which became a member of the Group in 2007, provides awide range of services related to commercial facilities, including the planning, operTRESSA Yokohama(Yokohama-city, Kanagawa)ation and management.

Overview of Fiscal 2007

Basic Policy in Medium-term Business Plan and Future Expansion

In the fitness club business, we focused on maintaining the profitability

In the fitness industry, increasing numbers of people are utilizing fitnessof our existing facilities while seeking to expand, opening Megalos Urawa

clubs due to growing concern about lifestyle diseases and their preven-

Parco in November 2007. In addition, we worked to acquire new mem-tion. The increase is largely from women and people in middle-age andbers and raise retention rates for existing members by conducting reno-

senior age groups. We intend to accelerate the pace of club openings

vation work at a portion of our facilities to boost their competitiveness.

and promote growth by developing both clubs with new concepts andAs a result, the total number of Megalos members steadily grew toalso clubs in locations where we have not yet developed facilities. We willaround 120,000 as of March 31, 2008. Geo-Akamatsu Co., Ltd., which

work to differentiate ourselves from other companies in terms of both

entered the Group in July 2007, has been classified into this segment.

facilities and programming by developing large-scale clubs and diverse

The company is involved in property management for commercial facili-

programs that cater to the needs of each age group. Utilizing this uniqueties and other activities.

approach with our expertise, we will help promote physical and mental

As a result, revenues from operations in the Other Business segment

health for as many local residents as possible.

increased ¥1,675 million, or 11.0%, to ¥16,837 million. Operating

Moreover, Geo-Akamatsu, a company involved in property manage-

income increased ¥302 million, or 24.9%, to ¥1,514 million.

ment for commercial facilities, has joined the Group. We will further promote collaboration within the Group to advance initiatives for thedevelopment of commercial facilities.

Revenues from Operations

Operating Income*(Billions of yen)

(Millions of yen)

30

2,000

Number of Megalos Members
150,000

1,500
20

100,000

1,000

10

50,000
500

0

2006

■ Fitness Clubs Business■ Other

2007

2008

0

2006

2007

2008

0

2006

2007

2008

* Operating income figures are total amounts of
Other Business

Nomura Real Estate Holdings, Inc. Annual Report 200825

Group Company Profile Vol. 1

Nomura Building Management Co., Ltd.
Turbulent conditions currently surround the building management business, but basedon a philosophy of “Maintaining the Best Value of Buildings,” we have developed thebusiness in line with the times while being driven by a social mission and aspirations
shared by all employees. We not only manage buildings owned and leased by Nomura
July 2008
President
Shiro Takahashi

Real Estate, but also manage educational facilities for universities and public facilities for
local government on a contractual basis. Through such activities we are expanding thescope of our business endeavors.

Properties Managed

Basic Information
Head office:1-26-2 Nishi Shinjuku, Shinjuku-ku, Tokyo
163-0562, Japan

Representative:

Shiro Takahashi, President

Business activities:

Building management, interior construction,
property management

Capital:¥100 million

Sales:¥31,760 million (Fiscal 2007)

Number of employees: 871 (As of March 31, 2008)
Established:

April 1, 1977

Shinjuku Nomura Building

Nomura Yotsubashi Building

Corporate Philosophy

Maintaining the Best Value of Buildings
We will help bring about social affluence by creating comfortable building
environments with awareness of the present and a view to the future.
Yokohama Business Park

26 Nomura Real Estate Holdings, Inc. Annual Report 2008

Shin-Fujita Building

Fukuoka Tenjin Center Building

Meiji University

Gakushuin University

Momijiyama Culture Center

Tennozu Park Side
Building

April 2007 marked the company’s 30th anniversary. During the span of these thirty
years, our sales totals have grown considerably. We have been able to achieve thisgrowth thanks in large part to pooling and effectively utilizing the wisdom and ingenuity of employees. Nomura Building Management’s growth is underpinned by our
employees, their strong will to succeed and our open, straightforward organization. We
will continue to promote locally rooted marketing activities and continue being a trusted
partner committed to maximizing business value and profit for our customers.

Interior Construction
Building inspections anddiagnostics• Renovations• Interior work
• Construction, facilities andcommunications work•

ISO 9001 (Quality Management)
ISO 14001 (Environmental Preservation)

Property Management(Management Services)

Building Management
Facilities management/
security/janitorial services• Other support services•

Property management
services• Owner representation•

Property Management(Leasing)••

Marketing surveys
Tenant recruitment

ComfortSecurity
Broad Support for Internal/
External Partners

Human Resources

Engineering Technology

Functionality
Expertise

Ample Track Record(Offices, Schools and Other)

Security System (Wide-Area
Management Center)

Strength of Nomura Building Management: High-Quality Management

1

We have substantial expertise not only in management services, but also
in the entire field of building operations, including building management, interior construction and property management.

4

We conduct operations on a nationwide basis via our presence in theurban centers of the Kanto and Kansai regions as well as our three sales
offices in Nagoya, Hiroshima and Fukuoka. Moreover, we have ample experience in every building format, including office buildings, educational institutions, public facilities and commercial facilities.

2

Our Computer Data Center’s facility management services have earned ISO
9001 certification, the first in Japan to do so. We have also acquired ISO
14001 certification for environmental initiatives aimed at helping create a recycling-based society. At the present, eight properties have acquired ISO 9001 certification and one has acquired ISO 14001 certification. As evidenced by this trackrecord, we provide high quality services that earn the trust of customers.

3

We continue to constantly provide customers with an optimal environment on a timely basis through the Nomura COA Center, which conducts 24-hour remote monitoring all year-round, and the Tokyo Office, which
spearheads site management activities. In terms of employee training, we
regularly conduct various forms of training and provide courses to help
employees become certified. We provide high-quality management by constantly working to improve our technical capacities.

Nomura Real Estate Holdings, Inc. Annual Report 200827

Corporate Governance

Basic Viewpoints Regarding Corporate GovernanceRisk Management and Compliance Framework

The Company believes that it must be governed in a way that

Risk Management System

continuously maximizes corporate value over the long term,

The Company has established a Risk Management Committee

while consideration is given to the interest of shareholders andwhose members include officers in charge of administrative

all other stakeholders related to the Nomura Real Estate Group.

operations at the Company and Group companies, for the

Furthermore, we aim to enhance the earning power of the

purpose of promoting risk management activities within theentire Group, and while acting as a holding company in manag-

Group. The Committee deliberates matters relating to risk

ing and supervising the business activities of our subsidiaries,

management, compliance, and information security for the

we will strive to build a highly transparent management

entire Group, and also cooperates and provides guidance withorganization.

regard to countermeasures when risks occur.

Company Organizations and Establishment of Internal

Compliance Systems

Control Systems

The Nomura Real Estate Group regards compliance, including

The Company’s Board of Directors comprises five directors. It

the observance of laws and regulations and corporate ethics,

decides important corporate matters and supervises the execu-

as one of the most important management issues. As a set oftion of business operations by directors. Statutory auditors

relevant guidelines, it has formulated the Nomura Real Estate

attend meetings of the Board of Directors and provide theirGroup Code of Action.

opinions as the need arises.

To promote continuous educational and awareness activi-

The Company has adopted a statutory auditor system. The

ties for executives and employees, we have established a

Board of Statutory Auditors comprises five statutory auditors, threeCompliance Department in the Company. It provides advice,of whom are external auditors. The Board formulates such matters

guidance, and support to Group companies.

as audit policies and operational roles, and receives reports andFurthermore, based on our priority of collecting information

conducts discussions regarding important matters relating to audits

regarding risks, we have set up the Nomura Real Estate Group

carried out on the basis of those policies and roles.

Risk Hotline as a point of contact for internal reporting by Group

Moreover, the Company has established the holding of

employees.

Group Management Meeting whose members include theCompany’s directors and the presidents of major subsidiaries.

Internal Audit System

The purpose of these meetings is to unify intentions to promote

The Nomura Real Estate Group has established an internal audit

Group management and to verify the progress of the budgets

department at each Group company, with the exception ofof each operating company and execution status of other busi-

some small companies. Each department is supervised underness operations.

the direct jurisdiction of the Group company president or an
officer who does not hold an additional office in a business
operations division, which allows the department to maintainorganizational independence. In addition, we have establishedthe Internal Audit Department at Nomura Real Estate Holdingsthat supervises the internal audit functions of the entire Groupand performs monitoring, evaluation and auditing in eachdivision within the Company.

28 Nomura Real Estate Holdings, Inc. Annual Report 2008

Corporate Governance System
General Meeting of Shareholders
Nomura Real Estate Holdings, Inc.
Appointment/
dismissal

Appointment/
dismissal

Board of Directors (5 directors)

Appointment

Audit

Board of Statutory Auditors(5 statutory auditors)

Appointment/dismissal

President

AuditGroup Management Meeting

Certified Public
Accountant(Auditing Firm)

Risk Management Committee
Corporate Planning Department

Compliance Department

Management guidanceInternal Audit Department

Training & guidance

Monitoring

Operating Companies

Corporate Auditor Audit System

Assistants associated with audit operations comprise four

The Company has appointed full-time staff as audit officers incertified public accountants and nine assistant certified public

the Corporate Planning Department to support corporate audi-

accountants and staff.

tor audits. Each corporate auditor attends meetings of the Boardof Directors and other important meetings and audits the execu-

Compensation of Directors and Officers

tion of the duties of directors while cooperating with the Internal

At the second annual general meeting of shareholders on June

Audit Department and the accounting auditors as needed.

26, 2006, it was resolved that the maximum annual compensation limit for directors and statutory auditors would be ¥650

Accounting Audits
The Company has concluded an auditing contract with Ernst &Young ShinNihon. In addition to performing regular audits, Ernst

million and ¥120 million, respectively.
The Company paid the following compensation for fiscal
2007 to directors and statutory auditors.

& Young ShinNihon discusses and verifies accounting issues asneeded and conducts appropriate accounting practices.
All of the certified public accountants that carry out work
have no more than seven years of continuous experience inauditing the Company, and the auditing firm has adopted

Five directors¥305 million

Four statutory auditors¥ 67 million(Two are external auditors)¥ (7 million)

Total: Nine persons¥372 million

autonomous measures to ensure that its employees who carryout work do not participate for longer than a designated period
in the Company’s account auditing.

Nomura Real Estate Holdings, Inc. Annual Report 200829

Compensation provided to Ernst & Young ShinNihon, theCompany’s accounting auditor, was as follows:

divided into NLB, which is engaged mainly in the managementof real estate associated with Nomura Securities Co., Ltd., andNomura Real Estate Development which conducts other realestate operations. In October 2004, it was decided that theCompensation based on operations

Company would become the holding company of the Nomura

Provided in article 2-1 of Certified Public

Real Estate Group. Accordingly, NLB assigned all the outstand-Accountants Law¥ 30 million

Other than above¥151 million

ing shares of Nomura Real Estate Development to the Company
as an in-kind contribution, and became the Company’s parent
company. Owing to the issuance of new shares associated with

Stock Option Compensation for Directors

the listing of the Company in October 2006 and sale of shares

The Company has been engaged in revising the compensation

by NLB; NLB held a 64.8% shareholding in Nomura Real Estatesystem for directors and statutory auditors so that it contributes

Holdings at the end of fiscal 2007.

to the further enhancement of the business performance andcorporate value of the Nomura Real Estate Group. During this2) Business transaction relationships

period, we abolished our system of retirement benefits for

In fiscal 2007, business transactions between NLB and companies

directors and statutory auditors, that tended to be inflexible

in the Nomura Real Estate Group amounted to ¥7 million inand based on seniority, on March 31, 2006.

the Building Business segment and other areas.

At the general meeting of shareholders on June 28, 2007,
approval was provided to grant stock options based on the3) Personal relationships

exercise of stock acquisition rights to Company directors in

To strengthen audit operations, the Company has accepted

each fiscal year. These stock options, with transfer restrictions

two external statutory auditors from NLB. They are Toshio Miura,

attached, are to be within the range of the amount of ¥650

an executive managing director of NLB, and Mitsuru Nakajima,

million per annum, as approved at the annual general meetinga director of NLB. Hirohisa Suzuki, the Company’s President, isof shareholders on June 26, 2006. The purpose of providing

the former President of NLB, but apart from the statutory audi-

these stock options is to endeavor to share interests with alltors mentioned above, no executives or employees of theshareholders and to further increase corporate value.

Company are concurrently serving at NLB or on secondmentfrom that company.

Matters Concerning Parent Company

The relationship between the Nomura Real Estate GroupThe Company’s parent company is Nomura Land and Building

and NLB is as described above, but it does not exert any influ-

Co., Ltd. (NLB).

ence on the Nomura Real Estate Group’s free marketing activi-1) Capital relationship with Nomura Land and Building

ties or management decisions. In addition, NLB has subsidiaries

Co., Ltd.

outside the Nomura Real Estate Group that are engaged in an

The former Nomura Real Estate Development Co., Ltd., theoverseas hotel management business and other areas, but theypredecessor of both Nomura Real Estate Development Co.,do not compete with the Group’s business operations.

Ltd., which is currently a subsidiary of Nomura Real Estate

The Company performs business management indepen-

Holdings, and NLB, the Company’s parent company, was estab-dently from the parent company based on the Company’s

lished on April 15, 1957. Subsequently, in January 1970, it was

own responsibility.

30 Nomura Real Estate Holdings, Inc. Annual Report 2008

Corporate Social Responsibility (CSR)

The Group Philosophy of the Nomura Real Estate Group isexpressed in the words “Bringing Tomorrow Today.” The word
“Tomorrow” does not give the idea of complacency or contentment with the current situation; rather, it is imbued with the spiritof challenge focused on the future. The word “Bringing” describes
the relationship among customers, society, and Group companies
and the high goals they share, and it expresses the will to accomplish things. Moreover, it is imbued with the sense that the products
and services the Nomura Real Estate Group provides will help
people realize their dreams of the future, while linking together
the good relationships and connections among customers, society,and the Nomura Real Estate Group. As such, “Bringing Tomorrow
Today” is the fundamental concept in all the Group’s various
corporate activities, and it includes endeavors to achieve sociallysustainable development.

Nomura Real Estate Group’s Environmental
Conservation and Social Contribution Activities
Environmental Conservation Activities
In its business activities, the Nomura Real Estate Group always
takes account of the impact on the environment. It strives tokeep to a minimum the burden that products and services orbusiness activities impose on the environment as far as it ispossible. An enormous amount of energy is consumed in theconstruction and usage period of buildings. Consequently,
when developing and operating housing and other buildings,

PROUD TOWER Nerima has acquired thehighest evaluation of the Tokyo Metropolitan
condominium environmental performanceindication.

the Group endeavors to pay sufficient consideration to theimpact on the environment, including the appropriate use ofresources and the alleviation of environmental load, from thedesign stage to the operating stage.

Social Contribution Activities
The Nomura Real Estate Group not only provides high-quality
products and services to customers, but also contributes toregional culture and communities. This leads to deeper communication between society and the Group and an improvement in service, as well as the creation of community activities
and a rich culture. We believe we can create truly comfortable

An exhibition entitled “Learning About theEnvironment through Fireflies” was held in the
Shinjuku Nomura Building.

living spaces for everyone, including our customers.

Nomura Real Estate Holdings, Inc. Annual Report 200831

Board of Directors and Statutory Auditors (As of June 28, 2008)

President
1Hirohisa Suzuki
Directors
2Mototsugu Takai

3Seiji Matsumoto
4Yoji Kurihara
5Takao Orihara

5

3

1

2

4

Statutory Auditors

1Toshio Miura

2Shigeaki Yoshioka
3Mitsuharu Sato
4Shigeru Matsushima
5Mitsuru Nakajima

5

3

32 Nomura Real Estate Holdings, Inc. Annual Report 2008

1

2

4

Financial Section

Contents
P34 Four-Year Financial Summary

P46 Notes to Consolidated Financial Statements

P35 Management’s Discussion and Analysis

P62 Report of Independent Auditors

P40 Consolidated Balance Sheets
P42 Consolidated Statements of Income
P43 Consolidated Statements of Changes in Net Assets
P45 Consolidated Statements of Cash Flows

Forward-looking Statements
This annual report contains forward-looking statements about the future plans, strategies and performance of
Nomura Real Estate Holdings, Inc. (“the Company”) and its consolidated subsidiaries (“the Group”). These forwardlooking statements are not historical facts. They are estimates, forecasts and projections based on information
currently available to the Company and are subject to a number of risks and uncertainties, which include economic
trends, intensification of competition in the real estate industry, the legal system and taxation system, and otherregulations. As such, actual results may differ from those projected.

Nomura Real Estate Holdings, Inc. Annual Report 200833

Four-Year Financial Summary
Nomura Real Estate Holdings, Inc.
The fiscal years ended March 31, 2005, 2006, 2007 and 2008

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

2005

2006

2007

2008

2008

¥345,894¥350,319¥367,237¥411,493$4,107,131

87,531

97,551

108,668

130,391

1,301,437

25.3%

27.8%

29.6%

31.7%

51,78953,28354,29460,569Fiscal Year
Revenues from operations
Gross profit
Gross margin ratio
Selling, general and administrative expenses

604,547

15.0%

15.2%

14.8%

14.7%

35,74244,26854,374

69,822

10.3%

12.6%

14.8%

17.0%

Income before income taxes and minority interests

16,35919,72147,86861,260611,442

Net income

6,474

12,717

26,29735,255351,877

Cash flows from operating activities(24,630)(99,830)(89,850)

7,639

76,249Cash flows from investing activities(20,462)(17,995)(26,787)(13,348)(133,226)

Cash flows from financing activities

63,444

113,818

100,863

8,791

87,740Cash and cash equivalents at fiscal year end

48,22344,21628,43731,511

314,507

Total assets

580,130

689,287

836,303891,700

8,900,091

Interest-bearing debt

300,247

413,039

394,885

408,016

4,072,422

Shareholders’ equity

46,64560,732

213,207

233,008

2,334,507

Shareholders’ equity ratio

8.0%

8.8%

25.5%

26.1%

Debt-to-equity ratio (times)

6.4

6.8

1.9

1.8

(Yen)

(U.S. dollars)

2005

2006

2007

2008

2008

¥203,859.93¥267,956.93¥1,427.80¥1,558.96$15.6244,367.78

56,109.84

200.47236.092.36–

2,000.00

20.00

30.00

0.30

SG&A ratio to revenues
Operating income
Operating margin

696,894

Fiscal Year End

Per Share Data (Note)
Shareholders’ equity
Net income
Cash dividends
Note: The Company carried out a 500-for-1 stock split on April 1, 2006.

34 Nomura Real Estate Holdings, Inc. Annual Report 2008

Management’s Discussion and Analysis

Trends in the Real Estate Industry

sector have boosted demand for office space and sparked a

In fiscal 2007, the year ended March 31, 2008, the housing

revival in urban centers, where vacancy rates have remained

sales market was characterized by a decline in supply of con-

low and rents have continued to rise, especially in centrally

dominiums in the Tokyo metropolitan area for the second

located urban buildings with excellent locations and facilities. In

consecutive year. This was due to the enactment in June 2007

the real estate investment market, turmoil in financial marketsof the amended Building Standards Law, which extended thecaused credit to tighten, leading to declines in prices of REIT

application period for building construction and caused a dra-

units and causing conditions for raising funds—key to making

matic fall in the supply of housing units. Another factor was

acquisitions that are vital for growth in the REIT market—tothe soaring prices of land and construction costs, whichbecome more difficult than ever.

pushed up sales prices and led to a decline in the overall con-Thus, the future trends of the real estate market aretract ratio. Meanwhile, projects in attractive locations soldincreasingly uncertain. The Group is committed to pushingwell, underscoring a clear polarization trend. In the officeahead with business strategies that pay careful attention tobuilding leasing market, improved earnings in the corporate

future market trends.

Average prices and contract rates forcondominiums in the Tokyo metropolitan area
For the calendar years(Millions of yen / %)
50
78.1

79.0

82.5

Vacancy rates in Tokyo’s 23 wards

J-REIT market’s total valuation

As of December 31(%)

As of March 31(Trillions of yen)

8.0

8.0

78.3

6.9
69.7

40

6.3

6.0

6.0

6.0

30

4.0

4.0
20

4.1

4.0

3.4

2.6
2.0

10

0

1.9

2.0

2.0

1.3

2003

2004

2005

2006

2007

■ Average priceContract rate
Source: Real Estate Economic Institute Co., Ltd.

0

2003

2004

2005

2006

0

2007

Source: K.K. Ikoma Data Service System

2004

2005

2006

2007

2008

Source: Tokyo Stock Exchange, Inc.

■

Analysis of Operating Results

Also contributing was the Investment Management & Develop-

Facing growing uncertainty in the real estate market, compa-

ment Business, which sold the AEON Yachiyo-Midorigaoka

nies in the Nomura Real Estate Group sought to strengthen

Shopping Center, developed as a profit-generating property, totheir market responsiveness and took various measures aimed

Japan Retail Fund Investment Corporation.

at further improving their earnings power. As a result, theOperating income rose ¥15,448 million, or 28.4%, toGroup achieved year-on-year increases in revenue and income,¥69,822 million. This major increase in earnings was duewith revenues from operations and all profit indicators reach-largely to the Investment Management & Development Busi-

ing record-high levels.

ness, which generated significant capital gains from the saleIn fiscal 2007, revenues from operations amounted toof profit-generating properties developed in-house.

¥411,493 million, up ¥44,256 million, or 12.1%, from fiscal

After payment of income taxes, net income for the year

2006. This increase stemmed from a number of factors. Theseamounted to ¥35,255 million, up ¥8,958 million, or 34.1%,

included solid gains in numbers of units sold and managed infrom the previous year.

the Residential Development Business, as well as a significant

Earnings by business segment are outlined on the follow-

year-on-year increase in the number of units handled by theing page. It should be noted that revenues from operations inrental housing business, centering on PROUD FLAT rental units.

each segment include intersegment sales and transfers.

Nomura Real Estate Holdings, Inc. Annual Report 2008

35

Segment earnings(Millions of yen)
2005

2006

2007

2008

¥251,925¥222,517¥205,950¥238,802

23,903

21,951

23,627

26,067

Revenues from operations

45,82648,28851,342

56,889Operating income

6,459

7,158

8,372

9,414

Revenues from operations

7,719

37,272

65,86780,555

Operating income

4,606

14,223

18,613

34,778

Revenues from operations

19,641

22,87436,48830,183Operating income

5,010

5,591

8,389

6,392

27,716

27,057

15,162

16,837

(203)

323

1,212

1,514

Years ended March 31

Residential Development Business:
Revenues from operations
Operating income
Building Business:

Investment Management & Development Business:

Property Brokerage & Consignment Sales Business:

Other Business:
Revenues from operations
Operating income (loss)

The pie chart below shows the percentage of operating income generated by each segment. The Group has achieved a wellbalanced business portfolio.

Breakdown of operating income in fiscal 2007
(Millions of yen / %)¥1,514(1.9%)¥6,392(8.2%)■ Residential Development Business■ Building Business■ Investment Management & Development Business¥34,778(44.5%)

Total¥69,821
million■ Property Brokerage & Consignment Sales Business¥26,067(33.4%)¥9,414(12.0%)

36 Nomura Real Estate Holdings, Inc. Annual Report 2008

■ Other BusinessNote: Since operating income for each business does not include“eliminations or corporate” in segment information, thesum of operating income of the businesses presented in thepie chart differs from the total amount shown in the centerof such pie chart. The shares of consolidated operating
income by business have been calculated based on operating income for each segment.

Major operating-related indices for each business are shown in the table below:
Years ended March 31

2005

2006

2007

2008

4,629

3,656

3,245

3,463

Residential Development Business:
Condominium sales (units)
Detached housing sales (units)

374

448

507

347

Gross margin ratio of housing sales (%)

19.2

20.5

22.2

22.7

Completed housing units held in inventories (units)

68

64

6

275

Rental condominium sales for investors (units)

0

36

248

747

86,38592,75897,847103,102

3.5

3.5

1.9

2.2

319,713460,320

771,211

1,031,528

Condominiums under management (units)
Building Business:
Vacancy rate (%)
Investment Management & Development Business:
Assets under management (millions of yen)
Property Brokerage & Consignment Sales Business:
Brokerage (number of transactions)
Brokerage-total transaction value (millions of yen)

3,698

3,923

3,949

4,047

323,389

347,990

388,479

406,635

94,966113,973

115,457

120,543

Other Business:
Members of MEGALOS

Analysis of Financial Position

Net property and equipment grew ¥20,280 million, or

As of March 31, 2008, current assets stood at ¥630,917 million,

11.6%, to ¥195,272 million, mainly reflecting the purchase ofup ¥50,401 million, or 8.7%, from a year earlier. One main

office buildings by the Residential Development Business.

factor in the increase was a ¥26,847 million rise in invento-

Investments and other assets declined ¥16,924 million, or

ries, stemming from the accumulation of properties slated for

21.7%, to ¥61,241 million, stemming mainly from a ¥17,173

development as profit-generating properties, including thosemillion decrease in investment securities due to falling prices

acquired by the Investment Management & Development

and sluggish securities markets. At fiscal year end, therefore,

Business, as well as from an increase in sponsor equity as thethe Group had total assets of ¥891,700 million, up ¥55,397

Group expanded the scale of private funds. Also boosting

million, or 6.6%, from a year earlier.

current assets was a ¥14,928 million increase in equity invest-

Current liabilities rose ¥33,256 million, or 14.4%, toments due to the broadened scale of private funds. By con-¥263,973 million, due primarily to an increase in accrued con-trast, the stock of land owned by the Residential Development

struction costs at fiscal year end, reflecting the high number

Business remained mostly unchanged. Since the Groupof condominiums completed in February and March 2008.

invests in equity from the viewpoint of being “in the same

Despite a ¥12,588 million decline in long-term debt, long-boat” as investors when undertaking the management ofterm liabilities edged up ¥1,056 million, or ¥0.3%, tofunds, the balance of equity investments increases in tandem¥392,175 million. This was due mainly to a ¥20,000 million

with assets under management.

issuance of corporate bonds made in October 2007 to fundAmong fixed assets, net property and equipment grew

future growth. Total interest-bearing debt rose ¥13,131 mil-

¥20.3 billion. This was due to the purchase of the Dainilion, to ¥408,016 million. As a result, total liabilities increased

Edobashi Building, as well as the reclassification of two¥34,312 million, or 5.5%, to ¥656,149 million.

profit-generating properties, deemed by the Company as

Net assets climbed ¥21,085 million, or 9.8%, to ¥235,551

best suited to long-term holding as rental properties, tomillion, owing mainly to the treatment of net income, totaling

property and equipment.

¥35,254 million, as retained earnings. This was despite a

By contrast, investment securities declined significantly.

¥10,214 million decline in net unrealized holding gains on

This was due to falling prices of two office and residential

securities, reflecting weak securities markets. Accordingly, the

REITS held by the Company as sponsor.

debt-to-equity ratio improved to 1.8 times, and the share-

Total liabilities increased ¥34.3 billion, to ¥656.1 billion.

holders’ equity ratio grew to 26.1%.

Within this amount, interest-bearing debt rose ¥13.1 billion,to ¥408.0 billion.

Nomura Real Estate Holdings, Inc. Annual Report 200837

Cash Flows

Risks Affecting the Business of Nomura Real Estate

Cash flows from operating activitiesGroup

Net cash provided by operating activities amounted to ¥7,639

We believe that the following major risks have the potential tomillion, compared with net cash used in such activities ofsignificantly impact the operating results and financial condi-¥89,850 million in the previous fiscal year. Major factors

tion of the Group, as well as the decisions of investors. Being

boosting cash flows included income before income taxes andproperly aware of the potential for such risks to materialize,

minority interests, which totaled ¥61,260 million. This was

the Group is establishing and strengthening its internal con-despite purchases of profit-generating properties by thetrol systems to ensure ongoing improvements, while at theInvestment Management & Development Business, as well assame time performing comprehensive risk management. It

active investments in line with an expansion of private funds.

should be noted that matters concerning the future in thisdocument have been determined based on information avail-

Cash flows from investing activities

able to the Group at the end of fiscal 2007.

Net cash used in investing activities totaled ¥13,348 million,¥13,439 million less than in the previous year. Major factors

1) Trends in the real estate market

included the purchase of the Daini Edobashi Building andIn fiscal 2007, the Group posted a solid performance, gener-

other property and equipment, as well as shares in Geo-Aka-

ating record-high operating earnings and operating income,matsu Co., Ltd. By contrast, there was a decrease in loans.

as it did in fiscal 2006. Going forward, however, certain events
could have an adverse impact on the Group’s business perfor-

Cash flows from financing activities

mance. These include a rise in interest rates, stagnant eco-

Net cash provided by financing activities was ¥8,791 million,

nomic conditions, deterioration in corporate earnings anddown ¥92,072 million from the previous year. Although theconsumer spending, and excess supply in the real estate

Company repaid long-term debt that came due during themarket. Such events could cause a decline in purchasing senti-

period, it also raised funds through long-term borrowings andment among customers of the Residential Development Busi-

the issuance of corporate bonds to meet funding demands

ness and the Property Brokerage & Consignment Sales

from its operating activities.

Business, our core businesses. For the Building Business andAs a result, cash and cash equivalents at fiscal year end stoodat ¥31,511 million, up ¥3,074 million from a year earlier.

the Investment Management & Development Business, moreover, such events could also spark declines in office rents,
increases in vacancy rates, or falls in asset values.

Basic Policy Concerning Profit Distribution
The Company’s basic policy regarding the distribution of prof-

2) Changes to real estate-related legislation or theits to shareholders requires that decisions take into account atax systembalance with retained earnings, after comprehensively consid-

A number of laws and regulations apply to the various busi-

ering such factors as business performance in the applicablenesses of the Nomura Real Estate Group, which will be subject

fiscal year, the operating environment going forward, andto new regulations as it expands its operational scope in thecapital investment plans. Our plan is to utilize retained earn-

future. Going forward, the Group may face new obligations

ings for proactive business investments, including inventory

and expense burdens if the Building Standards Law, the Build-purchases and equity investments, with the aim of generating

ing Lots and Buildings Transaction Business Law, or other realearnings in the future.

estate-related laws are revised, or if new legislation is imple-

In accordance with this basic policy, the Company declareda year-end cash dividend of ¥15.00 per share. Combined withmented. Such events could adversely affect the Group’s business performance.

the ¥15.00 interim dividend already paid, this brought annual

Furthermore, if the tax system related to real estate isdividends for the year to ¥30.00 per share. For fiscal 2008, therevised, this could lead to an increase in expenses for holding,Company intends to pay interim and year-end dividends ofacquisition, and sales of assets, or a decline in the purchasing¥20.00 each, for a total of ¥40.00 per share, up ¥10.00 fromsentiment of customers. It could also prompt a change in thefiscal 2007.

facility strategies of companies and revisions of their investment plans. Such events could have an adverse impact on theGroup’s business performance.

38 Nomura Real Estate Holdings, Inc. Annual Report 2008

3) Licenses and permits for major businesses

In the event of external leakage of personal information due

The Group obtains the licenses and permits, such as real estate

to unforeseen circumstances, however, confidence in the Group

brokerage and construction licenses, when carrying out busi-

could be lost, leading to a decrease in sales and the incurrence

ness activities.

of expenses to pay compensation for damages. This could have

Currently, there are no reasons for any of these licenses oran adverse impact on the Group’s business performance.

permits to be cancelled or subject to penalties. However, inthe future, if such licenses or permits are cancelled or subject

7) Soil pollution

to penalties for whatever reason, this could adversely affect

Under the Soil Contamination Countermeasures Law, owners

the Group’s business performance.

of land are obliged to evaluate and report on the soil pollution
status of their properties with respect to the presence of spe-4) Impact of interest-bearing debt

cific harmful substances, and also to take measures to remove

The Group aims to increase earnings by aggressively advanc-such polluting substances.

ing its various businesses. In the Investment Management &When considering purchases of land for business use, theDevelopment Business, for example, our strategy is to increase

Group conducts historical and pollution assessments ininventories and expand equity investments. To meet such

advance. If the presence of pollution is confirmed, the Groupdemand for capital, the Group raises funds through borrow-either cancels the acquisition or engages specialists to remove

ings from financial institutions and the issuance of corporatesuch pollution. However, it is possible that the aforementioned

bonds. At the end of fiscal 2007, the balance of interest-bear-assessments fail to confirm the full extent of soil pollution, or

ing debt stood at ¥408,016 million, up ¥13,131 million fromthat the seller is unable to fulfill his or her guarantee against

a year earlier. (This was equivalent to 45.8% of total assets,

defects even if soil pollution is detected. Detection of soil pol-down 1.5 points from the end of the previous year.) Whenlution on land purchased by the Group, therefore, could leadraising funds by borrowing, the Group attempts to deal withto changes in the Group’s original business schedules or to thethe risk of a short-term rise in interest rates mainly by taking

incurrence of the additional expenses, which could have a nega-out long-term, fixed-rate loans. However, an increase in bor-

tive impact on its business performance or financial condition.

rowing costs due to a rise in market interest rates could havea negative impact on the Group’s business performance and8) Asbestos

financial condition.

Some of the buildings owned by the Group have beensprayed with materials that include asbestos. The Group has

5) Natural disasters

engaged third-party organizations to assess such buildings.

Natural disasters, such as earthquakes and wind and flood

According to the results of those assessments, the said mate-damage, as well as sudden accidents, could lead to damage orrials are showing no signs of age-related degradation anddestruction of real estate owned or managed by the Group.

are in stable condition. In the future, however, it is possible

Such incidents could have a negative impact on the Group’sthat asbestos may be scattered if age-related degradation

business performance and financial condition.

occurs. Such an event could require removal or containmentof the asbestos in question, resulting in the incurrence of6) Personal information

additional costs that could have an adverse effect on the

In the course of carrying out its operations, the various busi-

Group’s business performance or financial condition.

nesses of the Group handle large quantities of personal information. The Group endeavors to comply with various laws

9) Concentration of revenues in fourth quarterand regulations pertaining to personal information, such as

In the Residential Development Business, which accounts

the Law Concerning Protection of Personal Information, andfor more than 50% of the Group’s revenues, housing sales

also handle information in the proper manner. Moreover,are registered as sales when properties are handed over toGroup companies have produced various documents, such as

the customers. In many cases, however, the completion“Information Security Provisions,” “Rules for Handling Per-and handover occur in February or March of each year, insonal Information” and “Guidelines for Entrusting the Han-

accordance with the requirements of customers taking up

dling of Personal Information.” In these ways, the Group

residence. For this reason, a large proportion of the

strives to train and educate employees and protect the inter-

Group’s revenues is concentrated in the fourth quarter of

ests of customers.

each fiscal year.

Nomura Real Estate Holdings, Inc. Annual Report 200839

Consolidated Balance Sheets
Nomura Real Estate Holdings, Inc.
March 31, 2007 and 2008ASSETS(Millions of yen)(Thousands of
U.S. dollars)(Note 1)

2007

2008

2008

¥ 28,439¥ 31,513$ 314,527

Current Assets:
Cash and bank deposits (Note 2(3))
Notes and accounts receivable

9,305

9,041

90,240Inventories (Notes 5, 7 and 8)

427,774454,6214,537,590

Equity investments (Note 3)

77,94592,873926,969

Deferred income taxes (Note 9)

11,528

10,391

103,709

Other current assets

25,59532,551

324,893

(70)

(73)

(725)

580,516

630,917

6,297,203

Investment securities (Note 3)

36,75819,585

195,482

Lease deposits

28,18527,634

275,811

Deferred income taxes (Note 9)

11,832

12,336

123,130

Other

1,461

1,804

18,006

(71)

(118)

(1,178)78,16561,241

611,251

Land (Notes 5 and 7)

89,141110,094

1,098,849

Buildings and structures (Note 7)

141,057

141,279

1,410,115

Construction in progress (Note 5)

701

1,924

19,208

Machinery and equipment (Note 5)

5,587

5,832

58,206

236,486

259,1292,586,378(61,494)(63,857)(637,363)

174,992

195,272

1,949,015

2,630

4,270

42,622¥836,303¥891,700$8,900,091

Allowance for doubtful accounts
Total current assets

Investments and Other Assets:

Allowance for doubtful accounts
Total investments and other assets

Property and Equipment, at Cost:

Accumulated depreciation
Net property and equipment
Intangible fixed assets
Total Assets

40 Nomura Real Estate Holdings, Inc. Annual Report 2008

LIABILITIES AND NET ASSETS(Millions of yen)(Thousands of
U.S. dollars)(Note 1)

2007

2008

2008

Current Liabilities:¥ 39,058¥ 63,377$ 632,570

Short-term debt and current portion of long-term debt (Notes 4 and 5)

67,76673,185730,458

Accrued income taxes (Note 9)15,165

14,827

147,988

Deposits received

60,281

57,075569,670

Trade accounts payable

Deferred income taxes (Note 9)

185

165

1,651

Accrued bonuses to employees

3,665

4,104

40,964

Accrued bonuses to directors and corporate auditors

571

591

5,896

Provision for loss on liquidation of subsidiaries

628

280

2,792

Accrued interest

793

987

9,855

Accrued consumption taxes

1,588

584

5,825

Other accounts payable

5,308

5,131

51,217

Rents received in advance

17,50730,917

308,580

Other current liabilities (Note 7)

18,202

12,750127,258

230,717

263,9732,634,724

Total current liabilities
Long-term Liabilities:–

20,300202,615

Long-term debt less current portion (Notes 4 and 5)

327,120

314,532

3,139,356

Guarantees and deposits from tenants

31,03230,127300,704

Deferred income taxes (Note 9)

11,087

3,855

38,479Deferred tax liabilities on land revaluation (Note 9)

3,905

3,905

38,973

Allowance for employees’ retirement benefits (Note 6)
Provision for loss on subleasing business
Other liabilities

10,6993,812
3,465

12,1442,890
4,423

121,207
28,84644,142

391,120

392,176

3,914,322

621,837

656,149

6,549,046

Common stock

82,64682,646

824,897

Additional paid-in capital

59,97659,976598,623

Retained earnings

59,24589,273891,035

(0)

(1)

(9)
12,129Corporate bonds

Total long-term liabilities
Total Liabilities
Net Assets:
Shareholders’ equity (Note 10):

Treasury stock
Valuation, translation adjustments and other:

11,4291,215

Deferred gains/losses on hedges

(15)

0

(4)

Land revaluation reserve

(327)

(327)

(3,264)Foreign currency translation adjustments

253

9

85

–

217

2,167

1,259

2,543

25,386

Total Net Assets

214,466

235,551

2,351,045

Total Liabilities and Net Assets¥836,303¥891,700$8,900,091

Net unrealized holding gains on securities

Stock acquisition rights
Minority interests

See notes to consolidated financial statements.

Nomura Real Estate Holdings, Inc. Annual Report 200841

Consolidated Statements of Income
Nomura Real Estate Holdings, Inc.
Years Ended March 31, 2007 and 2008

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

2007

2008

2008

¥367,237¥411,493$4,107,131

Operating Revenues:
Revenues from operations
Operating Expenses:

312,863

341,6713,410,237

Cost of revenues from operations

258,569

281,1022,805,690

Selling, general and administrative expenses

54,29460,569604,547

Operating Income

54,374

69,822696,894

Other Income and Expenses:(6,506)(8,562)(85,452)

Interest income

373

159

1,587

Dividend income

71

58

579

Equity in earnings of unconsolidated subsidiaries and affiliates

–

13

129

Gain on liquidation of affiliates

–

474

4,736

–

138

1,380

Gain on reversal of provision for loss on subleasing business

1,291

356

3,554

Interest expense(6,514)(7,284)(72,703)

(65)

(0)

(0)

Gain on changes in equity of affiliates

Equity in loss of unconsolidated subsidiaries and affiliates

–

(48)

(476)

Distributions from silent partnerships(174)(1,050)(10,482)

Inventory write-downs

(869)

–

–

Other, net(619)(1,378)(13,756)

47,86861,260611,442

Current

21,64825,203

251,551

Deferred

(222)

549

5,483

Total

21,42625,752257,034

Minority interests

145

253

2,531

Net Income¥ 26,297¥ 35,255$ 351,877

Provision for allowance for doubtful accounts

Income before Income Taxes and Minority Interests

Income Taxes (Note 9):

See notes to consolidated financial statements.

42 Nomura Real Estate Holdings, Inc. Annual Report 2008

Consolidated Statements of Changes in Net Assets
Nomura Real Estate Holdings, Inc.
Years Ended March 31, 2007 and 2008

(Millions of yen)
Number ofsharesissuedCommonstock

Additional
paid-in
capitalRetainedearnings

Treasurystock

Net unrealized
holding gains
on securities

Balance at March 31, 2006

226,650¥22,670¥

Issuance of common stock

149,098,350

59,976–¥33,288¥–¥ 4,772

59,976––

Cash dividends paid

–

–

–

–

(453)

–

Net income

–

–

–

–

26,297––Purchases of treasury stock
Other changes

–

–

–

–

(0)

–

–

–

–

113

–

6,657

149,325,000¥82,646¥59,976¥59,245¥(0)¥11,429

Cash dividends paid

–

–

–

(5,227)––

Net income

–

–

–

35,255––Purchases of treasury stock

–

–

–

–

(1)

–

Other changes

–

–

–

–

–

(10,214)

149,325,000¥82,646¥59,976¥89,273¥(1)¥ 1,215

Deferred
gains/losses
on hedges

Landrevaluation
reserve

Foreigncurrencytranslation
adjustments

Balance at March 31, 2006

¥ –¥(213)¥215

Issuance of common stock––

Cash dividends paid––

Net income––

Balance at March 31, 2007

Balance at March 31, 2008

(Millions of yen)

Purchases of treasury stock

StockacquisitionrightsMinority
interests

Total net
assets

¥

–

¥ 988

¥ 61,720–––

119,952

–

–

–

(453)

–

–

–

26,297

–

–

–

–

–

(0)

Other changes

(15)

(114)

38

–

271

6,950

Balance at March 31, 2007¥(15)¥(327)¥253–¥1,259¥214,466

Cash dividends paid

–

–

–

–

–

(5,227)

Net income

–

–

–

–

–

35,255¥Purchases of treasury stock

–

–

–

–

–

(1)

Other changes

15

(0)

(244)

217

1,284

(8,942)¥ 0¥(327)¥¥217¥2,543¥235,551

Balance at March 31, 2008

9

Nomura Real Estate Holdings, Inc. Annual Report 2008

43

(Thousands of U.S. dollars)(Note 1)
Commonstock

Additional
paid-in
capitalRetainedearnings

Treasurystock

Net unrealized
holding gains
on securities$824,897$598,623$591,322$(2)$ 114,076

Cash dividends paid––

(52,164)––

Net income––

351,877––

Purchases of treasury stock

–

–

–

(7)

–

Other changes

–

–

–

–

(101,947)$824,897$598,623$891,035$(9)$ 12,129

Balance at March 31, 2007

Balance at March 31, 2008

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

Balance at March 31, 2007

Deferred
gains/losses
on hedges

Landrevaluation
reserve

Foreigncurrencytranslation
adjustments

StockacquisitionrightsTotal net
assets$2,140,591$(154)$(3,263)$ 2,528–$12,564

Cash dividends paid

–

–

–

–

–

(52,164)

Net income

–

–

–

–

–

351,877

Purchases of treasury stock
Other changes
Balance at March 31, 2008$$

Minority
interests

–

–

–

–

–

(7)

150

(1)

(2,443)

2,167

12,822(89,252)(4)$(3,264)$$2,167$25,386$2,351,04585

See notes to consolidated financial statements.
Notes:
(1) Effective the fiscal year ended March 31, 2007, minority interests have been included in net assets.
(2) T he increase of 149,098,350 shares in the total amount of issued common stock comprises an increase of 113,098,350 shares due to a stock split and anincrease of 36,000,000 shares due to a capital increase by public offering.																		44 Nomura Real Estate Holdings, Inc. Annual Report 2008

Consolidated Statements of Cash Flows
Nomura Real Estate Holdings, Inc.
Years Ended March 31, 2007 and 2008

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

2007

2008

2008

¥47,868
4,546
65
10
1,566
(118)
(2,068)(444)
6,514(2,047)(87,219)(36,374)(1,413)(7,551)
7,646¥61,260
4,892
(13)
48
1,445
(348)
(922)
(217)
7,284
467
(35,383)(14,928)
24,257(3,235)(3,099)$611,442
48,829(129)478
14,421(3,476)(9,206)(2,166)
72,7034,659(353,159)(148,997)
242,115(32,292)(30,932)(69,019)
1,151(6,303)(15,679)

41,508128(7,076)(26,921)414,290
1,276(70,622)(268,695)(89,850)

7,639

76,249(9,196)
154

(8)
178

(77)
1,775

–

(997)

(9,950)(26,917)(18,174)(181,398)

141
(82)
112
(524)
1,796
(3,295)
10,800
224

12
(15)
5,131
(1,162)
1,820(3,668)
3,218
317

116
(150)
51,218(11,595)
18,167(36,611)
32,118
3,161(26,787)(13,348)(133,226)(36,200)
76,768(53,122)–(5,600)
119,428
49
(453)
(7)
(0)

6,350
54,315(67,989)
20,182(25)
0
1,192(5,226)(7)(1)

63,380542,120(678,601)
201,439(249)
0
11,892(52,165)(69)(7)

100,863

8,791

87,740Net (Decrease) Increase in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of the Fiscal Year
Decrease in Cash and Cash Equivalents Resulting from
Change in Scope of Consolidation(15,774)
44,216

3,082
28,43730,763283,832

(5)

(8)

(88)

Cash and Cash Equivalents at End of the Fiscal Year (Note 2(3))¥28,437¥31,511$314,507

Cash Flows from Operating Activities:
Income before income taxes and minority interests
Depreciation
Equity in loss (gain) of unconsolidated subsidiaries and affiliates
Increase in allowance for doubtful accounts
Increase in allowance for employees’ retirement benefits
Decrease in provision for loss on liquidation of subsidiaries
Decrease in provision for loss on subleasing business
Interest and dividend income
Interest expense(Increase) decrease in accounts receivable
Increase in inventories
Increase in equity investments(Decrease) increase in trade accounts payable
Decrease in deposits received
Other, net
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash (used in) provided by in operating activities
Cash Flows from Investing Activities:
Payments for purchases of investment securities
Proceeds from sales of investment securities
Payments for purchases of subsidiaries' stock resulting inchange in scope of consolidation
Payments for purchases of property and equipment,
and intangible fixed assets
Proceeds from sales of property and equipment, and intangible fixed assets
Increase in loans
Decrease in loans
Increase in lease deposits
Decrease in lease deposits
Decrease in guarantees from tenants
Increase in guarantees from tenants
Other, net
Net cash used in investing activities
Cash Flows from Financing Activities:(Decrease) increase in short-term debt
Proceeds from long-term debt
Repayment of long-term debt
Proceeds from issuance of corporate bonds
Payments for redemption of corporate bonds
Proceeds from issuance of shares
Proceeds from issuance of shares to minority shareholders
Cash dividends paid
Payments for dividends to minority shareholders
Net increase in treasury stock
Net cash provided by financing activities

See notes to consolidated financial statements.
Nomura Real Estate Holdings, Inc. Annual Report 200845

Notes to Consolidated Financial Statements
Nomura Real Estate Holdings, Inc.
March 31, 2007 and 2008

1. Basis of Presentation of Consolidated Financial Statements
The accompanying consolidated financial statements of Nomura Real Estate Holdings, Inc. (the “Company”) and its consolidated
subsidiaries (collectively, the “Group”) have been prepared in accordance with the provisions set forth in the Financial Instruments
and Exchange Law of Japan and its related accounting regulations, and accounting principles generally accepted in Japan (“Japanese GAAP”), which are different in certain respects as to the application and disclosure requirements of International Financial
Reporting Standards.
The accompanying consolidated financial statements have been compiled from the consolidated financial statements of theCompany prepared in accordance with Japanese GAAP, and translated into English for the understanding of readers. In addition,
the notes to the consolidated financial statements include information which may not be required under Japanese GAAP but ispresented herein as additional information.
The translations of the Japanese yen amounts into U.S. dollars are included solely for the convenience of readers using theprevailing exchange rate at March 31, 2008 of ¥100.19 = U.S.$1.00. These translations should not be construed as representations that the Japanese yen amounts have been, could have been, or could in the future be, converted into U.S. dollars at this or
any other rate of exchange.

2. Significant Accounting Policies(1) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries that the Company
controls directly or indirectly. Companies over which the Company exercises significant influence in terms of their operating andfinancial policies have been included in the accompanying consolidated financial statements on an equity basis.
All significant intercompany balances and transactions have been eliminated in consolidation. All material unrealized profit
included in the assets resulting from transactions among the consolidated companies has been eliminated.

(2) Foreign Currency Translation
All current and non-current accounts denominated in foreign currencies are translated into Japanese yen at the spot exchange
rates in effect at the consolidated balance sheet date. Differences arising from such translation are recognized as gain or loss. The
asset and liability accounts of the overseas subsidiaries and affiliates are translated into Japanese yen at the exchange rates prevailing at the respective balance sheet dates of the subsidiaries and affiliates and the revenue and expense accounts are translated
into yen at the average rates of exchange for the year. Differences arising from such translation are presented as “Foreign currency translation adjustments” in Net Assets.

(3) Cash and Cash Equivalents
In preparing the Consolidated Statements of Cash Flows, cash on hand, readily-available deposits and short-term, highly-liquid
investments with maturities not exceeding three months at the time of purchase and with an insignificant risk of market value
fluctuation are considered to be cash and cash equivalents.
As of March 31, 2008, the balance of “Cash and cash equivalents” differed from the balance of “Cash and bank deposits”
because it did not include time deposits with deposit terms exceeding three months of ¥2 million ($20 thousand).
As of March 31, 2007, the balance of “Cash and cash equivalents” differed from the balance of “Cash and bank deposits”
because it did not include time deposits with deposit terms exceeding three months of ¥2 million.

46 Nomura Real Estate Holdings, Inc. Annual Report 2008

(4) Recognition of Revenues
Revenues from sales of housing and other real estate are recognized upon delivery and acceptance by customers.

(5) Inventories
Effective the fiscal year ended March 31, 2007, inventories are mainly stated at cost, determined by the specific identification cost
method (the amounts of inventories in the accompanying Consolidated Balance Sheets are computed based on the write-down
method reflecting decreased profitability).
Prior to April 1, 2006, inventories were mainly stated at cost, determined by the specific identification cost method. The Company
adopted “Accounting Standard for Measurement of Inventories” (Statement No. 9 issued by the Accounting Standards Board of Japanon July 5, 2006) effective the year ended March 31, 2007. As a result, income before income taxes and minority interests for the year
ended March 31, 2007 decreased by ¥869 million from the amount that would have been recorded using the previous method. The
effects of this change on segment information are described in Note 13.

(6) Marketable and Investment Securities
Held-to-maturity debt securities are stated at amortized cost by the straight-line method.
Available-for-sale securities with market value are stated at fair market value based on market quotations at the balance sheet date.
Unrealized gains and losses are reported, net of the applicable taxes, as a separate component of Net Assets. Cost of securities sold isdetermined by the moving-average method. Available-for-sale securities without market value are stated at cost by the movingaverage method.

(7) Property and Equipment
Depreciation of property and equipment is computed mainly by the straight-line method.
Estimated useful lives used in the computation of depreciation are generally as follows:
Buildings and structures

2 to 65 years

Effective the fiscal year ended March 31, 2008, pursuant to an amendment to the Corporation Tax Law, the Company and its consolidated subsidiaries have changed their method of accounting for depreciation of tangible fixed assets acquired on or after April 1,
2007. The effect of this change on income for the year ended March 31, 2008 was minimal.
Similarly, effective the fiscal year ended March 31, 2008, pursuant to an amendment to the Corporation Tax Law, the Company andits consolidated subsidiaries depreciate the difference between 5% of the acquisition cost of assets acquired on or before March 31,
2007 and the memorandum value of said assets uniformly over a five-year period, starting the year following the fiscal year in which
the book value of said assets reaches 5% of the acquisition cost using the method of depreciation applied prior to the date when theamendment to the Corporation Tax Law went into effect. Depreciated amounts are included in depreciation expense. The effect of thischange on income for the year ended March 31, 2008 was minimal.

(8) Software
Costs of software for internal use are amortized using the straight-line method over an estimated useful life of five years.

Nomura Real Estate Holdings, Inc. Annual Report 200847

(9) Amortization of Goodwill
Goodwill is amortized using the straight-line method over a period of five years.

(10) Allowance for Doubtful Accounts
In order to prepare for possible bad debt losses on notes and accounts receivable and loans, allowance for doubtful accounts is provided at an amount calculated on the basis of a historical bad debt ratio for a certain reference period for normal claims, plus anestimated uncollectible amount determined on the basis of individual assessments for specific claims with potential losses.

(11) Leases
Except for finance lease agreements under which ownership of the leased assets is deemed to be transferred to the lessee, lease fees
are charged in the same manner as operating leases.

(12) Income Taxes
Current income taxes are stated at the estimated amount payable during each fiscal year for corporation, enterprise and inhabitants’
per capita taxes in the Consolidated Statements of Income.
The tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting and income tax
purposes is recognized as deferred income taxes.

(13) Allowance for Employees’ Retirement Benefits
In order to provide for employees’ retirement benefits, the Company and its subsidiaries account for the liability for retirement benefits
based on the estimated amounts of projected benefit obligation and plan assets at the end of the fiscal year.
Actuarial gain or loss is included in the Consolidated Statements of Income from the year following the fiscal year in which the gainor loss is recognized on a straight-line basis over a 10-year period, which is shorter than the average remaining service period of theeligible employees.

(14) Allowance for Directors’ and Statutory Auditors’ Retirement Benefits
The Company and certain of its subsidiaries approved resolutions for the final payment of retirement benefits for directors and statutory auditors following the termination of the retirement benefit plan for directors and statutory auditors based on the approval of aresolution at the annual general meeting of shareholders held in June 2006.
As a result, “Allowance for directors’ and statutory auditors’ retirement benefits” has been included in “Other current liabilities”
effective the year ended March 31, 2007.

48 Nomura Real Estate Holdings, Inc. Annual Report 2008

(15) Per Share Information
Basic net income per share is computed by dividing the net income available for distribution to shareholders of common stock by theweighted-average number of shares of common stock outstanding during each fiscal year. Diluted net income per share is computedby dividing the net income available for distribution to the shareholders by the weighted-average number of shares of common stock
outstanding during each fiscal year assuming full conversion of convertible bonds and full execution of warrants.
Diluted net income per share for the year ended March 31, 2008 was ¥236.06 ($2.36), and the amounts for the year ended March
31, 2007 have not been presented since no potentially dilutive shares of common stock were outstanding as of March 31, 2007.

(16) Land Revaluation
Under “The Law Concerning Revaluation Reserve for Land” promulgated on March 31, 1998, the Company revalued its land held
for business use. The tax amount for the difference between the appraisal value and the carrying amount is accounted for as“Deferred tax liabilities on land revaluation” in Liabilities and the net of such tax amount is recorded as “Land revaluation reserve”
in Net Assets.

Method of revaluation:
Value of land is determined based on a reasonable adjustment to the assessed value of the fixed assets as stipulated in Item 3, Article
2 of the “Enforcement Ordinance Concerning Land Revaluation” (Ordinance No. 119 enacted on March 31, 1998).
Date of revaluation: March 31, 2002
Market value was less than book value after revaluation by ¥4,099 million at March 31, 2007 and ¥4,075 million ($40,669 thousand)at March 31, 2008.

(17) Derivative Financial Instruments
In principle, net assets and liabilities arising from derivative financial instruments are measured at fair value, with any changes in unrealized gain or loss credited or charged to income. Hedging transactions are accounted for using deferral hedge accounting, which
requires the unrealized gains or losses to be deferred as assets or liabilities until the losses or gains on the underlying hedged items arerecognized.
As to interest rate swaps and interest rate caps that meet certain hedging criteria, the Company applies exceptional treatment
where the Company does not record these instruments at fair value but charges or credits the net cash flows from these instruments
to the interest arising from the hedged borrowings and corporate bonds. For currency swaps and foreign exchange forwards that meetcertain hedging criteria, the Company records cash flows from securities and loans denominated in foreign currencies at an amountdetermined by the swaps and forwards, and no gain or loss is recognized.

(18) Accounting Standard for Presentation of Net Assets in the Balance Sheet
Effective the year ended March 31, 2007, the Company adopted an accounting standard for the presentation of net assets in thebalance sheet and the related implementation guidance. In addition, effective the year ended March 31, 2007, the Company isrequired to prepare consolidated statements of changes in net assets instead of consolidated statements of shareholders’ equity.

Nomura Real Estate Holdings, Inc. Annual Report 200849

3. Securities
The following tables summarize the acquisition cost, book value and market value of securities which the Company held as of March
31, 2007 and 2008:(1) Held-to-maturity Debt Securities with Market Value(Millions of yen)
2007

Securities whose market value exceeds book value:
Government and municipal bonds, etc.
Subtotal
Securities whose market value does notexceed book value:
Government and municipal bonds, etc.

Book
value

Market
value

¥

¥

5
5

Difference

5
5

¥0
0

291

287

(4)

Subtotal

291

287

(4)

Total

¥296

¥292

¥(4)

2008

Book
value

Marketvalue

Securities whose market value exceeds book value:
Government and municipal bonds, etc.

¥ 35
35
271

(Millions of yen)

Subtotal
Securities whose market value does notexceed book value:
Government and municipal bonds, etc.

(Thousands of U.S. dollars)

Difference

Book
value

Marketvalue

Difference

¥ 36

¥1

$ 351

$ 356

$5

36

1

351

356

5

270

(1)

2,700

2,695

(5)

Subtotal

271

270

(1)

2,700

2,695

(5)

Total

¥306

¥306

¥0

$3,051$3,051$0

Acquisition
cost

Book
value

Difference

Securities whose book value exceeds acquisition cost:
Stocks¥ 1,357
Other
35,435¥ 3,537
52,533¥ 2,180
17,09856,07019,278(2) Available-for-sale Securities with Market Value(Millions of yen)
2007

Subtotal
Securities whose book value does notexceed acquisition cost:
Stocks

36,792

12

8

(4)

12

8

(4)

¥36,804¥56,078¥19,274

Acquisition
cost

Book
value

Securities whose book value exceeds acquisition cost:
Stocks¥ 1,338
Other
19,858¥ 2,202
22,944

21,196

Subtotal
Total(Millions of yen)(Thousands of U.S. dollars)
Acquisition
cost

Book
value

Difference

864
3,086

$ 13,356
198,207$ 21,977
229,004$ 8,62130,79725,146

3,950

211,563

250,981

39,41855
22,15649
20,274(6)(1,882)

549
221,137492
202,350(57)(18,787)

Subtotal

22,211

20,323(1,888)

221,686

202,842(18,844)

Total¥43,407¥45,469¥ 2,062$433,249$453,823$20,574

2008

Subtotal
Securities whose book value does notexceed acquisition cost:
StocksOther

50 Nomura Real Estate Holdings, Inc. Annual Report 2008

Difference¥(3) Sales of Available-for-sale Securities
The table below describes sales of available-for-sale securities for the years ended March 31, 2007 and 2008:(Millions of yen)(Thousands of U.S. dollars)

2008

2007

2008

Sales
amountAggregate
gains

Aggregate
lossesSalesamountAggregate
gains

Aggregate
lossesSalesamountAggregate
gains

Aggregate
losses¥9,009¥156¥–¥39,332¥292¥1$392,577$2,910$5(4) Securities Without Market Value
The following table summarizes the book value of securities without market value as of March 31, 2007 and 2008:(Millions of yen)(Thousands of
U.S. dollars)

2008

2008

2007

Available-for-sale securities:
Unlisted stocks

¥

555

¥

560

$

5,590

Preferred investments

4,554

4,714

47,048Investments in silent partnerships

53,031

61,334

612,180

–

99

987

Investment in limited liability partnership(5) Redemption Schedule for Available-for-sale Securities with Maturities and Held-to-maturity Securities
The following tables summarize the redemption schedule for securities classified as available-for-sale securities with maturities andheld-to-maturity securities as of March 31, 2007 and 2008:(Millions of yen)

2007

Bonds:
Government and municipal
bonds, etc.
Total

Due within
1 yearDue after
1 yearand within
5 years

Due after
5 years
and within
10 years

Due after
10 years

¥–

¥290

¥ 5

¥–

¥–

¥290

¥ 5

¥–

Due within
1 yearDue after
1 yearand within
5 years

Due after
5 years
and within
10 years(Millions of yen)

2008

Due after
10 years(Thousands of U.S. dollars)

Due within
1 yearDue after
1 yearand within
5 years

Due after
5 years
and within
10 years

Due after
10 years

Bonds:
Government and municipal
bonds, etc.

¥–

¥295

¥10

¥–

$–

$2,944

$100

$–

Total

¥–

¥295

¥10

¥–

$–

$2,944$100$–

Nomura Real Estate Holdings, Inc. Annual Report 200851

4. Short-term and Long-term Debt and Corporate Bonds
Short-term debt as of March 31, 2007 and 2008 mainly consisted of borrowings from banks with a weighted-average interest rate of 1.1%.
Long-term debt and corporate bonds as of March 31, 2007 and 2008 are summarized as follows:(Millions of yen)(Thousands of
U.S. dollars)

2007

2008

–

¥ 10,000

Unsecured bonds (2.1%), due 2017–

10,00099,810

Secured bonds (3.0%), due 2009

–

300

2,994

Unsecured bonds (1.7%), due 2014

¥

2008

$

99,810

Secured41,07017,349173,161

Unsecured

328,815

338,868

3,382,251

Subtotal

369,885

376,517

3,758,026

Less amounts due within one year

(42,765)(41,685)(416,055)¥327,120¥334,832$3,341,971

Long-term debt consisted mainly of loans from domestic banks and life insurance companies. The weighted-average interest rates
were 1.3% and 1.5% at March 31, 2007 and 2008, respectively.
The details of maturities of long-term debt less current portion and corporate bonds subsequent to March 31, 2008 were as
follows:
Maturities of long-term debt less current portion and corporate bonds for the years ending March 31(Millions of yen)(Thousands of
U.S. dollars)$ 731,480

2010¥ 73,2872011

72,229720,924

2012

61,180610,6362013

65,023648,9932014 and thereafter

63,113629,938¥334,832$3,341,971(Millions of yen)(Thousands of
U.S. dollars)

2007

2008

2008

¥31

¥–

$–

3

–

–

¥ 3

¥–

$–

5. Pledged Assets and Secured Liabilities
Pledged assets and secured liabilities at March 31, 2007 and 2008 are summarized as follows:(1) Pledged Assets and Secured Liabilities

Pledged assets:
Machinery and equipment
Secured liabilities:
Short-term debt and current portion of long-term debt
Total

52 Nomura Real Estate Holdings, Inc. Annual Report 2008

(2) Pledged Assets and Secured Liabilities for Non-recourse Loans(Millions of yen)(Thousands of
U.S. dollars)

2007

2008

2008

Inventories (land for sale)¥51,847¥ 5,869$ 58,578

Land

15,56015,201

151,718

575

1,036

10,341

67,982

22,106

220,637

1,015

2,175

21,709Pledged assets:

Construction in progress
Total
Secured liabilities:
Short-term debt and current portion of long-term debt
Long-term debt less current portion

40,052

15,174

151,452

Total¥41,067¥17,349$173,161

Pursuant to Article 128 of the Law Concerning Liquidation of Assets (Law No. 105, 1998), Shinjuku Development, an SPC (special
purpose company), has pledged assets as security for ¥300 million in special corporate bonds, with a payment obligation limited tothat amount.

6. Employees’ Retirement Benefits(1) Outline of Retirement Benefit Plans
The Company does not have a retirement benefit plan. Among its consolidated subsidiaries, one subsidiary has lump-sum payment
and tax-qualified pension plans, which are defined benefit pension plans with a retirement benefit trust. Four subsidiaries have only
adopted lump-sum payment plans, and one subsidiary has only a tax-qualified pension plan. Also, one consolidated subsidiary has alump-sum payment plan (defined benefit type) and a pension plan (defined contribution type). In certain cases, additional retirement
benefit payments have been made.

(2) Details of Retirement Benefit Obligation(Millions of yen)

(1) Projected benefit obligation(2) Plan assets at fair value(3) Unfunded retirement benefit obligation (1)+(2)(4) Unrecognized actuarial gain or loss
(5) Allowance for employees’ retirement benefits (3)+(4)(Thousands of
U.S. dollars)

2007

2008

2008

¥(21,229)¥(22,126)$(220,840)

8,783

7,275

72,608(12,446)(14,851)(148,232)

1,747

2,707

27,025¥(10,699)¥(12,144)$(121,207)

Note: Certain of the consolidated subsidiaries applied a simplified method to calculate their projected benefit obligation.

Nomura Real Estate Holdings, Inc. Annual Report 200853

(3) Details of Retirement Benefit Expenses(Millions of yen)(Thousands of
U.S. dollars)

2007

2008

2008

(1) Service cost

¥1,270¥1,305$13,022(2) Interest cost

392

412

4,117

(3) Less: Expected return on plan assets

(192)

(176)

(1,753)(4) Amortization of actuarial gain or loss

378

390

3,893

(5) Additional retirement benefit payments

54

45

448

(6) Other

99

120

1,197

¥2,001¥2,096$20,924

Retirement benefit expenses

Notes:
1. Retirement benefit expenses of consolidated subsidiaries applying a simplified method are included in “(1) Service cost.”
2. “ (6) Other” shows the contributions paid to defined contribution pension plans. Certain of the consolidated subsidiaries use a simplified method to calculate theirprojected benefit obligation.

Assumptions used in accounting for the retirement benefit plans are summarized as follows:
2007

2008

Discount rate

2.00%

2.00%

Expected rate of return on plan assets

2.00%

2.00%

7. Unrealized Transaction
The following unrealized transaction was performed during the year ended March 31, 2008:
Kaihin Makuhari Development Co., Ltd., a consolidated subsidiary of the Company, entrusted a block of rental condominiums
developed for sale to a trust bank and assigned its beneficiary rights to Smile Retail Eight, Ltd., an SPC (special purpose company), on
March 17, 2008. However, as Nomura Real Estate Development Co., Ltd., also a subsidiary of the Company, has retained equity holdings in silent partnerships (Tokumei Kumiai) in amounts exceeding 5% of the transfer value to Smile Retail Eight, the risks and economic benefits of the assets were consequently not deemed to have been transferred in their entirety to other parties through the SPC.
Therefore, the transaction has been accounted for as a financing transaction in accordance with “Practical Principles Concerning
Accounting Treatment of Assignor in Liquidation of Real Estate Property Using Special Purpose Companies” (July 31, 2000) for the year
ended March 31, 2008.
As a result, the related assets were not accounted for as having been sold and, accordingly, were included in the accompanying
Consolidated Balance Sheets at March 31, 2008, while liabilities of ¥8,202 million ($81,860 thousand) were recorded in “Other current liabilities” in the accompanying Consolidated Balance Sheets at March 31, 2008.
The book value of these assets (inventories) as of March 31, 2008 was ¥5,166 million ($51,564 thousand).

8. Reclassification of Assets
As of March 31, 2008, following a reassessment of the purposes for holding assets, inventories amounting to ¥12,561 million($125,381 thousand) were reclassified to property and equipment, and property and equipment amounting to ¥4,026 million($40,184 thousand) was reclassified to inventories.

54 Nomura Real Estate Holdings, Inc. Annual Report 2008

9. Income Taxes
The statutory tax rate in Japan was 40.7% for the years ended March 31, 2007 and 2008.
The table below presents an itemized breakdown of factors generating differences between the statutory tax rate and the effective
tax rate of the Company and its domestic subsidiaries for the year ended March 31, 2007:

Significant differences between the statutory tax rate and the effective tax rate
2007

Statutory tax rate

40.7%

Adjustments:
Permanent differences including entertainment expenses

0.5

Valuation allowance

3.0

Other

0.6

Effective tax rate

44.8%

A reconciliation of the statutory and effective tax rates for the year ended March 31, 2008 has been omitted because the difference
between these tax rates was less than 5%.
The table below presents an itemized breakdown of deferred tax assets and liabilities as of March 31, 2007 and 2008:

Significant components of the Company’s deferred tax assets and liabilities(Millions of yen)(Thousands of
U.S. dollars)

2007

2008

2008

¥11,592¥13,148$131,234

6,787

4,635

46,265

Deferred tax assets:
Unrealized profits
Inventory write-downs
Allowance for employees’ retirement benefits

4,336

4,928

49,185

Loss on subleasing business

2,810

2,435

24,303

Accrued bonuses

1,488

1,683

16,804

Trust assets for retirement benefits

703

–

–

Loss on impairment of fixed assets

702

–

–

–

790

7,884

Excess of depreciation
Accrued enterprise taxes

1,287

1,184

11,814

Other

3,469

3,536

35,290Gross deferred tax assets

33,17432,339322,779

Valuation allowance(3,540)(3,409)(34,023)

Total deferred tax assets

29,63428,930288,756

Reserve for deferred income taxes(8,641)(8,516)(84,997)

Net unrealized gain on securities(7,844)(835)(8,333)Gain on contribution of securities to retirement benefit trust

(662)

(437)

(4,359)

Other

(399)

(436)

(4,359)Total deferred tax liabilities(17,546)(10,224)(102,048)

Net deferred tax assets¥12,088¥18,706$186,708

Deferred tax liabilities:

Nomura Real Estate Holdings, Inc. Annual Report 200855

10. Shareholders’ Equity
Companies in Japan were previously subject to the Commercial Code of Japan (the “Code”); however, the Code was superseded by
the Companies Act of Japan (the “Act”) which went into effect on May 1, 2006.
Under the Act, all funds obtained through the issuance of common stock must be treated as common stock and, by resolution of
the board of directors, an amount equivalent to less than half of those funds may be appropriated to the capital reserve (a componentof additional paid-in capital).
The Act provides that an amount equal to 10% of the amount to be distributed as distributions of capital surplus (other than thecapital reserve) and retained earnings (other than the legal reserve) be transferred to the capital reserve and the legal reserve, respectively, until the sum of the capital reserve and the legal reserve equals 25% of the capital stock account.
As of March 31, 2008 and 2007, the Company’s capital reserve amounted to ¥59,976 million ($598,623 thousand), and no retained
earnings reserve was recorded.

11. Derivative Financial Instruments
It is a policy of the Company and its consolidated subsidiaries to utilize derivative financial instruments only for the purposes of hedging interest rate risk and currency risk, and not for speculative purposes.
The purpose of interest rate swap and interest rate cap contracts is to hedge the risk of increases in financing costs in the future by
fixing interest payments for loans, while the purpose of foreign exchange forward contracts and cross currency swap contracts is tohedge the risk of currency fluctuation in securities denominated in foreign currencies.
Interest rate swap and interest rate cap transactions are subject to the risk of changes in interest rate. Foreign exchange forward
and currency swap transactions are subject to the risk of changes in foreign exchange rates. The derivative financial instruments are
executed with creditworthy financial institutions, and the Company’s management believes there is little risk of default by the counterparties to its derivatives positions.
The derivative transactions are executed and managed by the Company’s Finance Department in accordance with the establishedpolicies and plans of risk management set forth and approved by the officer in charge of the Finance Department based on the applicable internal regulations. The Finance Department also reports the transaction status to the officer in charge on a regular basis.
Regarding the Company’s consolidated subsidiaries, the derivative transactions are executed and managed in accordance with thedesignated procedures based on their respective internal regulations.
Details of derivative financial instruments used by the Company are summarized as follows:
Hedging instruments

Hedged items

Interest rate swap and interest rate cap contracts

Loans

Currency swap and foreign exchange forward contracts

Securities denominated in foreign currencies

Fluctuation in cash flows or total market fluctuation of hedged items is compared with that of the hedging instruments to assess
the effectiveness of the hedges based on the ratio of the fluctuation.

56 Nomura Real Estate Holdings, Inc. Annual Report 2008

12. Leases
Finance lease transactions, other than those which are deemed to transfer ownership of the leased property to the lessee, areaccounted for as operating lease transactions.
Details of significant lease transactions are as follows:
A summary of the pro forma amounts of acquisition cost, accumulated depreciation, and net book value of leased properties as ofMarch 31, 2007 and 2008 is as follows:(Millions of yen)(Thousands of
U.S. dollars)

2008

2008

2007

Acquisition cost:
Buildings and structures
Machinery and equipment

¥

30
2,196

¥

15

1,957

$

153

19,529

293

264

2,640

Accumulated depreciation(1,320)(1,112)(11,099)

Net book value¥ 1,199¥1,124$11,223

Other

Note:
1. T he above acquisition cost includes the imputed interest expense portion, since the year-end balances of the future rental expense accounts were only a small
percentage of the year-end balances of property and equipment.
2. P ro forma depreciation equivalents were computed using the straight-line method over the respective lease periods assuming a nil residual value or a residual
indemnity.

The table below presents the future lease payments under finance leases subsequent to March 31, 2007 and 2008:(Millions of yen)(Thousands of
U.S. dollars)

2007

2008

2008

Due within 1 year

¥ 396

¥ 421

$ 4,204

Due over 1 year

803

703

7,019

¥1,199¥1,124$11,223

Finance leases

Future lease payments:

Total

The table below presents the future lease payments under operating leases subsequent to March 31, 2007 and 2008:

Operating leases(Millions of yen)(Thousands of
U.S. dollars)

2007

2008

2008

Future lease payments:
Due within 1 year

¥ 7,882¥ 7,937$ 79,219

Due over 1 year

46,28841,223

411,447

Total¥54,170¥49,160$490,666

Future lease receipts:					Due within 1 year

¥ 5,911¥ 5,171$ 51,610

Due over 1 year

30,881

19,859198,218

Total¥36,792¥25,030$249,828

Note: Future lease receipts are calculated before deducting interest charges, because the book value equivalent of future lease receipts accounts for only a small
percentage of property and equipment.

Nomura Real Estate Holdings, Inc. Annual Report 200857

13. Segment Information
The Company and its consolidated subsidiaries mainly operate in five business segments: (1) Residential Development, (2) Building, (3)Investment Management & Development, (4) Property Brokerage & Consignment Sales, and (5) Other.
Results by segment for the years ended March 31, 2007 and 2008 were as follows:

Results by segment for the fiscal year ended March 31, 2007
(Millions of yen)
Investment
Management &Building
Development

Residential
Development

Property
Brokerage &Consignment
Sales

Other

Subtotal

Eliminations
or
corporate

Total

Revenues from operations
and operating income
Revenues from operations:
External customers¥205,365¥ 46,912¥ 65,653¥34,486¥14,821¥367,237

585

4,430

214

2,002

341

7,572

Inter-segment
Subtotal¥–¥367,237(7,572)–205,950

51,342

65,86736,48815,162374,809(7,572)367,237

Operating expenses

182,323

42,97047,25428,09913,950314,596(1,733)

312,863

Operating income¥ 23,627¥

8,372¥ 18,613¥ 8,389¥ 1,212¥ 60,213¥ (5,839)¥ 54,374¥836,303

Total assets, depreciation,and capital expenditure
Total assets¥257,184¥180,587¥275,202¥72,531¥24,004¥809,508¥ 26,795

Depreciation

213

3,232

115

98

674

4,332

214

4,546

Capital expenditure336

11,98824,549218

1,039

38,130(10,019)

28,111Results by segment for the fiscal year ended March 31, 2008
(Millions of yen)

Residential
Development

Building

Investment
Management &Development

Property
Brokerage &Consignment
Sales¥238,289¥ 51,886¥ 78,246¥27,163

Other

Subtotal¥15,909¥411,493

Eliminations
or
corporate

Total

–

¥411,493

Revenues from operations
and operating income
Revenues from operations:
External customers

¥

513

5,003

2,309

3,020

928

11,773(11,773)–

238,80256,88980,55530,183

16,837423,266(11,773)

411,493

Operating expenses

212,735

47,47545,777

23,791

15,323345,101(3,430)341,671

Operating income¥ 26,067¥

9,414¥ 34,778¥ 6,392¥ 1,514¥ 78,165¥ (8,343)¥ 69,822¥259,781¥203,563¥322,937¥72,736¥26,819¥885,836¥ 5,864¥891,700Inter-segment
Subtotal

Total assets, depreciation,and capital expenditure
Total assets
Depreciation

217

3,559

50

122

740

4,688

204

4,892

Capital expenditure

304

28,084

2,776

239

1,459

32,862(14,977)

17,88558 Nomura Real Estate Holdings, Inc. Annual Report 2008

(Thousands of U.S. dollars)

Residential
Development

Investment
Management &Building
Development

Property
Brokerage &Consignment
Sales

Other

Subtotal

Eliminations
or
corporate

Total

Revenues from operations
and operating income
Revenues from operations:
External customers
Inter-segment$2,378,375 $ 517,880 $ 780,975
5,121

49,93523,053$271,113 $158,788 $4,107,131 $
30,141

9,260

117,510– $4,107,131(117,510)–

2,383,496

567,815804,028

301,254

168,048

4,224,641(117,510) 4,107,131

Operating expenses

2,123,321

473,853456,905

237,461

152,935

3,444,475(34,238) 3,410,237

Operating income$ 260,175 $

93,962 $ 347,123$ 63,793 $ 15,113 $ 780,166 $ (83,272) $ 696,894$2,592,886 $2,031,771 $3,223,247$725,975 $267,684 $8,841,563 $ 58,528 $8,900,091

Subtotal

Total assets, depreciation,and capital expenditure
Total assets
Depreciation

2,172

35,522

496

1,218

7,386

46,794

2,035

48,829

Capital expenditure

3,038

280,308

27,707

2,381

14,564

327,998(149,487)

178,511

Notes:
1. Business segments are determined according to the business activities of each company in the consolidated group.
2. P rincipal products and services within each segment
Residential Development Business
Sale of condominiums, detached housing and residential lots, overall management of condominiums
Building BusinessLeasing and overall management of office buildings, district heating and cooling services
Investment Management & Development Business
Development and sale of profit-generating property management of and investment in real estate funds
Property Brokerage & Consignment Sales Business
Real estate brokerage and consulting services, sales representation of condominiums and detached housing, insurance brokerage
Other Business
Fitness club management and construction of custom-made housing
3. O perating expenses for the fiscal years ended March 31, 2007 and 2008 consisted of ¥5,607 million and ¥6,200 million ($61,884 thousand), respectively, ofunallocatable operating expenses which were included in “Eliminations or corporate.” The principal items were expenses related to general administration of theCompany and its consolidated subsidiary, Nomura Real Estate Development Co., Ltd.
4. T otal assets at March 31, 2007 and 2008 consisted of ¥55,188 million and ¥40,987 million ($409,090 thousand), respectively, of assets not allocated to asegment which were included in “Eliminations or corporate.” The principal items were surplus funds (cash and bank deposits), long-term investment funds(investment securities), deferred tax assets, and assets related to general administration of the Company and its consolidated subsidiary, Nomura Real Estate
Development Co., Ltd.
5. C
 hange in accounting policy (for the fiscal year ended March 31, 2007)
Accounting standard for measurement of inventories
As described in Note 2(5), the Company adopted “Accounting Standard for Measurement of Inventories” (Statement No. 9 issued by the Accounting Standards Board of Japan on July 5, 2006) effective the year ended March 31, 2007. As a result, total assets in the “Other” business segment decreased by ¥869
million from the amount which would have been recorded under the previous method.
6. C hange in business segmentation
Until the year ended March 31, 2007, the Group’s profit-generating property development business, handled by the corporate brokerage division of Nomura
Real Estate Development Co., Ltd. (a consolidated subsidiary), was included in the Property Brokerage & Consignment Sales Business segment. Effective thefiscal year ended March 31, 2008, however, part of that business has been transferred to the Investment Management & Development Business segment. The
expanding profit-generating property development business serves as a valuable source of brokerage information for Nomura Real Estate Development Co., Ltd.
which has established a dedicated department to handle and promote that business. The change in segmentation was made to better reflect the actual status of
the income-producing real estate development business.

Nomura Real Estate Holdings, Inc. Annual Report 200859

Segment information for the fiscal year ended March 31, 2007 under the revised segmentation is presented below:(Millions of yen)
Investment
Management &Building
Development

Residential
Development

Property
Brokerage &Consignment
Sales

Other

Subtotal

Eliminations
or
corporate

Total

Revenues from operations
and operating income
Revenues from operations:
External customers¥205,365¥ 46,912¥ 69,156¥30,983¥14,821¥367,237

585

4,430

214

2,002

341

7,572

Inter-segment
Subtotal¥–¥367,237(7,572)–205,950

51,342

69,37032,985

15,162374,809(7,572)367,237

Operating expenses

182,323

42,97049,33026,023

13,950314,596(1,733)

312,863

Operating income¥ 23,627¥

8,372¥ 20,040¥ 6,962¥ 1,212¥ 60,213¥ (5,839)¥ 54,374¥836,303

Total assets, depreciation,and capital expenditure
Total assets¥257,184¥180,588¥297,632¥50,100¥24,004¥809,508¥ 26,795

Depreciation

213

3,232

115

98

674

4,332

214

4,546

Capital expenditure336

11,98824,549218

1,039

38,130(10,019)

28,111

14. Contingent Liabilities
Contingent liabilities as of March 31, 2007 and 2008 were as follows:

Guarantees for home loans of house purchasers frombanks and other
Guarantees for loans to business partners in thebusiness of commercial buildings for rent
Guarantees for borrowings by affiliates(Millions of yen)(Thousands of
U.S. dollars)

2007

2008

2008

¥44,411¥49,925$498,304

1,188

1,134

11,315

–

298

2,974

¥45,599¥51,357$512,593

15. Subsequent Event
Payment of Dividends
At the 4th annual general meeting of shareholders held on June 27, 2008, a resolution for the payment of dividends of ¥15.00 ($0.15)
per share, ¥2,240 million ($22,356 thousand) in total, to shareholders of record as of March 31, 2008 was approved.

60 Nomura Real Estate Holdings, Inc. Annual Report 2008

16. Stock Options
In accordance with the Corporation Law of Japan, on November 30, 2007, the Company granted certain stock options to certain
officers and employees of the Company and its consolidated subsidiaries.
Information regarding the Company’s stock option plans is summarized as follows:

Nomura Real Estate Holdings,
Inc.
1st issue of stock options

Nomura Real Estate Holdings,
Inc.
2nd issue of stock options

Nomura Real Estate Holdings,
Inc.
3rd issue of stock options

Directors of the Company(5 persons)

Directors of the Company’s
subsidiaries (43 persons)

Directors of the Company(5 persons)

1. Description
Recipients

Directors of the Company’s
subsidiaries (45 persons)
Employees of the Company’s
subsidiaries (116 persons)Type/number of shares
reserved (see Note)

Common stock: 14,800 shares

Common stock: 52,300 shares

Common stock: 180,400
sharesGrant dateNovember 30, 2007

November 30, 2007

November 30, 2007

Vesting conditions

No conditions attached

No conditions attached

No conditions attachedService period

No period specified

No period specified

No period specified

Exercisable period

November 30, 2008 –November 29, 2013

November 30, 2008 –November 29, 2013

November 30, 2009 –November 29, 2014

2. Scale of offer and status ofchanges(1) Number of stock options
Non-vested:(shares)
Previous fiscal year end
Granted

–––14,80052,300180,400

Forfeited–––

Vested:14,80052,300

1,200

–

–

179,200

End of the year
Vested:(shares)
Previous fiscal year end
Vested:–––14,80052,3001,200

Exercised–––

Forfeited–––

14,80052,3001,200

Exercise price (¥)

1

1

3,380

Average price upon exercise (¥)

–

–

–

2,903

2,903

714

End of the year
(2) Unit price data

Fair value on grant date (¥)

Note: With respect to stock options outstanding at March 31, 2008, the number of stock options is calculated based on the numberof shares of common stock which would be required to be issued if all such stock options were to be exercised.

Nomura Real Estate Holdings, Inc. Annual Report 2008

61

Report of Independent Auditors

62 Nomura Real Estate Holdings, Inc. Annual Report 2008

History of Nomura Real Estate Group

April 1957
Nomura Real Estate Development Co., Ltd. established in
Chuo-ku, Tokyo

June 2004
Nomura Real Estate Holdings, Inc. established in Shinjuku-ku,
Tokyo

May 1961
Started purchasing residential land in
Kajiwarayama, Kamakura, and entered housing development business as a developer

October 2004
Nomura Real Estate Holdings, Inc. started business activities
as a holding company upon assignment of the entirety ofoutstanding shares of Nomura Real Estate Development Co.,
Ltd. from Nomura Land and Building Co., Ltd. as an in-kind
contribution

October 1963
Launched condominium development business with theconstruction of Co-op Take-no-Maru in Yokohama
May 1978
Headquarters moved to Shinjuku Nomura
Building
March 1988
Started construction of Yokohama Business Park (YBP), the largest businessdevelopment solely in the private sector
November 1989
Launched the fitness club business with the opening of the
Tsurukawa Midoriyama Club
March 1994
Started selling A-City Hills and Towers at Seifu-Shinto residential
and commercial area, in Hiroshima Seibu Kyuryo City,
Hiroshima
April 2000
Launched property information
website nomu.com®

December 2004
Holding company system established by implementing a Groupreorganization through corporate separations
October 2006
Nomura Real Estate Holdings, Inc. listed on
First Section of the Tokyo Stock Exchange
February 2007
Nomura Real Estate Residential Fund, Inc. listed on
the Tokyo Stock Exchange
April 2007
50th anniversary of foundationof the Group
July 2007
Geo-Akamatsu Co., Ltd. became a Group member
November 2007
Megalos Co., Ltd. listed on the Jasdaq Securities
Exchange

April 2001
Nomura Real Estate Development Co., Ltd. established in-housecompany system (three companies for residential services,
corporate services and investment management)
December 2002
Unified brand named PROUD establishedfor residential products and service
December 2003
Nomura Real Estate Office Fund,
Inc. listed on the Tokyo Stock Exchange

Nomura Real Estate Holdings, Inc. Annual Report 2008

63

Group Companies

A Group Framework Linking New Value With “Bringing Tomorrow
In 2004 the Nomura Real Estate Group established a holding company system, the first comprehensive real estate company
in the industry to do so. Nomura Real Estate Holdings, Inc., the holding company, provides strategic management for theentire Group and enhances the growth and brand power of the entire Group by rigorously developing customer-oriented
businesses. The Group companies are working to make the leap to further growth as a powerful corporate group by

Nomura Real Estate Development Co., Ltd.

Nomura Living Support Co., Ltd.

http://www.nomura-re.co.jp/english/

http://www.nomura-ls.co.jp/ (Only in Japanese)

nnnnn

n

Nomura Real Estate Development is active in three distinct
business fields. These are: the residential development
business, which operates condominium and detachedhousing development and sales under the PROUD brand;
the corporate real estate business, which offers real property development and brokerage services for corporateclients; and the investment management business which
conducts high-profit investment management services.

Nomura Living Support responds to a broad range ofcustomer needs from managing condominiums to renovation, interior coordination and consultation. This company
is also responsible for the management and maintenanceaspects of the Nomura Real Estate Group’s development,
sales and management operations for the residential
development business.

Nomura Real Estate Urban Net Co., Ltd.

Nomura Real Estate Investment
Management Co., Ltd.

http://www.nomura-un.co.jp/company/english/n
Nomura Real Estate Urban Net aims to be the No.1 brandfor services and consulting such as residential property
brokerage for helping customers in changing their placeof residence; corporate brokerage for corporate clients; acondominium and detached housing sales agency; andprofit-generating property development.

Nomura Building Management Co., Ltd.
http://www.nomura-bm.co.jp/ (Only in Japanese)nNomura Building Management offers building management, including facility maintenance, and efficient property
management as well as the renewal of building interiors.
The company also provides expertise regarding all aspectsof management related to buildings.

64 Nomura Real Estate Holdings, Inc. Annual Report 2008

http://www.nreim.co.jp/english/n
Nomura Real Estate Investment Management sets up andmanages private funds with a wide range of risk-returnarrangements. These funds precisely meet the varying needsof investors regarding real estate investment, with investment goals including commercial facilities and logistics
facilities.

Nomura Real Estate Asset Management
Co., Ltd.
http://www.nre-am.co.jp/english/n
In line with its basic policy of pursuing stable mid- andlong-term asset management, Nomura Real Estate AssetManagement manages two listed REITs: Nomura Real
Estate Office Fund, which invests in office buildings, andNomura Real Estate Residential Fund, which invests inresidential facilities.

Today”
creatively combining the competitive capabilities of each Group company with the comprehensive power of the entire
Group. By making full use of their business characteristics in their respective fields, each company provides products andservices that meet market needs. As a result, the companies are raising the corporate value of the entire Group andproviding new value to all shareholders, other stakeholders and society at large.

n Residential Development Businessn Building Businessn Investment Management & Development Businessn Property Brokerage & Consignment Sales Businessn Other Business

Nomura Real Estate Capital Management
Co., Ltd.
http://www.nrecm.com/ (Only in Japanese)n

Geo-Akamatsu Co., Ltd.
http://www.geo-akamatsu.co.jp/foreign/english.html

nNomura Real Estate Capital Management specializes inmanaging securitized real estate funds varying from fundof-funds to Commercial Mortgage-Backed Securities(CMBS). It is also entrusted with the investments of pension
funds and other institutional investors.

Geo-Akamatsu provides a full range of property consulting
and other services that make the most of 40 years ofexperience and accumulated expertise. These services
include surveys concerning commercial facilities, projectplanning, tenant leasing, commercial space design andproperty management.

Megalos Co., Ltd.

PRIME X Co., Ltd.

http://www.megalos.jp/ (Only in Japanese)

http://www.prime-x.co.jp/ (Only in Japanese)nnWith its business philosophy slogan of “transforming customer
satisfaction into happiness,” Megalos plans, develops andmanages fitness facilities with top-level service and equipment,housed in the best facilities in the region.

Based on its expertise accumulated in the course of realestate activities, Prime X develops Internet advertisingbusinesses that specialize in the real estate and residential
business fields. Prime X offers proposals that maximize
customer benefits, ranging from the creation of corporatewebsites and project homepages to building up and managing membership organizations, and conducting sales
promotions for projects.

Yokohama Business Park Heating andCooling Supply Co., Ltd.
n
Responsible for the supply of heating and cooling services
to Yokohama Business Park, a large-scale business district,through its local heating and cooling system. Using a ‘best
mix’ system based on both gas and electricity, the company
uses energy efficiently to help keep costs down and reduce
environmental effects.

Nomura Real Estate Holdings, Inc. Annual Report 2008

65

Investor Information (As of March, 31, 2008)

Common Stock:¥82,646 million

Number of Authorized Shares:

450,000,000

Number of Shares Issued:

149,325,000

Market Listing:First Section ofComposition by Number of Shareholdings (%):
Individuals and Others
13.1%

Tokyo Stock Exchange
Minimum Trading Unit:

100 shares

Number of Shareholders:

47,397

Financial Institutions 9.4%
Financial Instruments Firms
0.4%

Other Foreign
Investors
11.8%

Other Japanese Firms
65.3%

Ten Largest Shareholders:Name of Shareholder

No. of shares

Shareholding (%)

Nomura Land and Building Co., Ltd.

96,817,500

64.83

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

2,680,200

1.79Japan Trustee Services Bank, Ltd. (Trust account)

2,524,700

1.69

Nomura Real Estate Holdings Employee Shareholding Association

2,191,282

1.46

The Bank of NY Treaty JASDEC Account

1,758,900

1.17Japan Trustee Services Bank, Ltd. (Trust account 4)

1,439,200

0.96

Masa Japanese Equity

787,700

0.52

BNP Paribas Securities (Japan) Limited

714,865

0.47

Mitsui Asset Trust and Banking Company, Limited (Nominee account no. 1)

701,600

0.46

NIPPON VEST

700,000

0.46

Stock Price and Trading Volume on the Tokyo Stock Exchange
Stock price (Yen)
5,000
4,000
3,000
Trading volume (thousand shares)
2,000

120,000

1,000
20,00010,000

0

Oct.
2006

Nov.

Dec.

Jan.
2007

66 Nomura Real Estate Holdings, Inc. Annual Report 2008

Feb.

Mar.

Apr.

May

Jun.

Jul.

Aug.

Sep.

Oct.

Nov.

Dec.

Jan.
2008

Feb.

Mar.

Apr.

May

Corporate Data (As of March 31, 2008)

Corporate Name:

Nomura Real Estate Holdings, Inc.

Representative:

Hirohisa Suzuki

Head Office:Shinjuku Nomura Building, 1-26-2 Nishi-Shinjuku, Shinjuku-ku, Tokyo 163-0566, Japan

Date of Establishment:

June 1, 2004

Number of Employees:

4,347 (on a consolidated basis)

Fiscal Year:

From April 1 to March 31

General Meeting of Shareholders:

JuneManagement Structure:
Board of Statutory
Auditors

Board of Directors

Statutory Auditors

President

Budget Committee

Group Management
Meeting

Finance Department

Risk Management
Committee

Corporate Planning
Department

Corporate Communications &Investor Relations Department

Compliance Department

Internal Audit Department

Website of Nomura Real Estate Holdings:

Top Page

To Our Shareholders and Investors

IR Library

http://www.nomura-re-hd.co.jp/english/

http://www.nomura-re-hd.co.jp/english/

Visit this webpage to view various informativeindex.html

ir_01.html

materials, including the prospectus, securities

Visit our website to learn about features ofVisit this webpage for links to information forreport and other legal documents, and thethe Nomura Real Estate Group and strengths

shareholders and investors.

annual report and messages to shareholders.

of each business.

Nomura Real Estate Holdings, Inc. Annual Report 2008

67

Nomura Real Estate Holdings, Inc.

Nomura Real Estate Holdings, Inc.
Shinjuku Nomura Building, 1-26-2
Nishi-Shinjuku, Shinjuku-ku, Tokyo 163-0566, Japan
URL: http://www.nomura-re-hd.co.jp/

Annual Report 2008

Printed in Japan
This Annual Report was printed with vegetablebased ink on recycled paper. Product names may
be trademarks of their respective companies.