Mitsubishi Estate Co., Ltd.

November 8, 2018

Q & A from IR Presentation（IR Meeting for FY 2019-2Q）< General >（Capital Policy）
Q.

You mentioned, at the previous IR meeting for FY 2018, that you were not satisfied with thestock price at the time and also seeking what the capital policy should be. Has there being any
progress?

A.

We are still concerned about the current stock price. With our outside directors, we are engaging
a serious discussion on general management including capital policy. We think that our priority
needs to be given to a steady increase of profits generated from our main business in order for along-term sustainable growth. However, we also would like to consider roles of shareholders
return as well as financial stability preparing for unexpected situations.

Q.

A description on capital cost has been added to the revised corporate governance code. Have
you considered improving ROE by increasing financial leverage?

A.

We are definitely aware of ROE. However, being only concerned with ostensible numbers of
ROE could result in increasing the risk. As developers have many capital demands, financialstability is also an important indicator. We would like to keep the current leverage in current
Mid- Term Management Plan.

Q.

Do you have any plans for increasing financial leverage from the next Mid-Term Management
Plan onwards?

A.

The policy for the next Management Plan is currently under consideration. Too much financial
risks might restrict flexibility of business activities when the market deteriorates, so we’d liketo secure stability in order to handle various circumstances.

Q.

It seems that your comments on financial leverage are mostly assuming extreme situations.
Have you given any thoughts on making a little increase?

A.

We’d like to continue our discussion on capital policy toward formulating the next management
plan. In the past when buying opportunities for properties came at the time of deterioration ofmarket, we had difficulties for buying properties due to limited financing capacity. That is why
we need to take such situations into our discussion.

(Efficiency Improvement)
Q.

You set target for 4% in ROA. Which measurements listed in your IR presentation do you find1Mitsubishi Estate Co., Ltd.

November 8, 2018the most effective?
A.

Each measurement listed is equally important, but we consider expanding and strengthening fee
business is the most important. Most recently, we have been strengthening fee business by
M&A. We also would like to consider to dispose of less valuable strategic-holding stocks andlow-efficiency properties.

(Profit Growth)
Q.

Many investors find your company less attractive in terms of profit growth. I’d like to hear fromyou about ① current status of next redevelopment plans of Marunouchi area and ②
possibility of expanding Hybrid Investment Business Model in overseas.

A.

Marunouchi and Otemachi have been our main areas of redevelopment. Currently we arelooking into Yurakucho as our main area of development because there are many buildings tobe rebuilt. The guideline for the whole Yurakucho area, including around Yurakucho station,needs to be discussed. Thus we are currently working on discussions with public administration
people and land owners. In terms of profit growth, we are also trying to increase value ofexisting buildings, not by reconstructions, such as large-scale renovations of Otemachi
buildings. In terms of Hybrid Investment Business Model, in the United Sates, we are already at
the phase to expand the portfolio with funds from third-party equity. It is expected that fee
income will increase along with the expansion of the portfolio.
The same scheme has been underway in Asia and Europe, therefore, we are acquiring properties
in order to establish open-ended fund.

Q.

You stated the importance of sustainable profit growth. However, there are different kinds ofprofits. From shareholders point of views, EPS and NAV per share come first. I believe you
should manage your business to value your shareholders more.

A.

Our shareholders are important stake holders, thus we put importance on shareholders value.
On the other hand, in fact there are all sorts of investors from the ones who focus on short term
stock price changes to the ones who observe changes from mid to long term perspectives. In
addition, our business is largely supported by our society, thus we’d like to manage our businessby making sure the returns to various types of stakeholders are well balanced.

（Governance）
Q.

Do you think degree of NAV discount will make an impact on your judgment about renewal ofanti-takeover defense? Prior to the Lehman shock, it seems that your company had a risk of
takeover by foreign-affiliated company. Do you think that experience led you to a careful2

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November 8, 2018

judgment?
A.

We acknowledge that keeping stock price at the appropriate level will act against takeover. We
are discussing from scratch about how our company should be.

Q.

What kinds of discussion have been made with outside directors?

A.

We have 7 outside directors and their backgrounds vary from business management experts,
university professors, diplomats to the former Governor of Bank of Japan. We all sharecommon understanding that growth with 20-30 years span is important for our Group; thus they
provide various views and opinions on our future.
We are the company with nominating committee etc., but each committee engage in various
discussions beyond their designated themes from long-term perspective.

（Capital Gains）
Q.

I understand that buildings in Marunouchi area are such valuable assets and you would like tokeep hold of them.
However, a part of properties could be sold in order to be allotted for more efficient investment
as well as share buybacks. Have you consider this as an alternative choice?

A.

In Marunouchi, not all assets are high-profiting properties. Among properties which have beenacquired fairly recently for the purpose of redevelopment, there are some that profitability is notup to the satisfactory level. We are discussing disposing of these properties by considering
improvement of ROA.

Q.

In the current Mid-Term Management Plan, around 40 billion yen of capital gains is expected
for every fiscal year. However, the market has been the best time to sell. Are there any
possibilities of additional disposal without any regard to budget of 39 billion yen of capitalgains in this fiscal year?

A.

We already have prospect on buyers and price for properties expected to be sold in this fiscalyear. Therefore, it might be difficult to make big changes for these. However, we can sell more
properties if we could get favorable offers.

Q.

Have you been accumulating stocks of properties to be sold from the next Mid Term
Management Plan onwards?

A.

Investment for our capital recycling business, such as hotels, logistics facilities, office buildings
and overseas assets, is progressing steadily. Particularly logistics facilities has been establishing
the flow of developing 2~4 properties every period and selling them for the logistics REIT
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November 8, 2018

listed in September 2017.

＜Office Building Business＞
Q.

I am aware that Shin Marunouchi Building and Marunouchi Building are the top rent inMarunouchi. Is it possible to raise the top rent reflecting the high demand for office spaces?

A.

THE PREMIER FLOOR series including THE PREMIER FLOOR in Marunouchi Building hasachieved the rent level much greater than the top rent for an ordinary floor. However, the floorarea is not that large; thus it might be difficult to be generalized. We continue to raise the appealof Marunouchi area, but it is not so easy to raise the top rent just because of tight office market.

Q.

It is stated that, in regards to the leasing of Tokiwabashi building A, you aim for the level of thetop rent in Marunouchi. Do you think it’s possible to achieve such level despite the fact that its
location is different from that of Marunouchi Building and Shin Marunouchi Building?

A.

Tokiwabashi area is located in the opposite side of Marunouchi across the JR railway track.
Therefore, at the time of formulating this project’s business plan, the rent was calculatedconservatively by considering such location. On the other hand, Tokiwabashi is right in front ofTokyo station (Nihonbashi Exit) and thus high in its convenience. Therefore we plan to startleasing with the level close to the top rent by considering current market situation.

Q.

In The Nikkei, one of your executive officers commented on office market and stated that strong
market would be expected to continue until 2022. What are some reasons behind stating “until2022”?

A.

One of reasons is that the increase of office buildings supply is expected in Yaesu and other area
in and after 2023. In addition, as far as we observe high demand for office spaces on
Tokiwabashi building A which will be completed in 2021, we think it is not necessary to beanxious about the market until around 2022 because supply volume is expected to remain low.

Q.

Various companies in real estate sector state “Open Innovation”. What do you think yourstrength is in terms of intangible factors other than the advantage in location of Marunouchi ?

A.

I think that concentration of companies is our strength. In Marunouchi, we are actively
attracting start-ups to join in the area. Large companies to be in collaboration, professionalfirms to support them with business development, financial institutions and general trading
companies to become prospective sponsors…all these companies are concentrated inMarunouchi. For attracting start-ups, that is the biggest strength. In Otemachi Building,“FinoLab”, which gathers FinTech start-ups, has been generating various values. We’d like to4

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November 8, 2018

expand collaborations among various companies other than in FinTech field. In addition, byattracting facilities operated by outsiders, such as WeWork, we can invite people who haven’t
had a chance to come to Marunouchi and promote diversity and communication.

＜Residential Business＞
Q.

In terms of Residential Business, around 4,000 units have been sold in every fiscal year recently.
Do you expect to keep the same scale?

A.

We are currently focusing on large-scale redevelopment projects and expect these to contributein mid 2020s. FY 2020 and FY 2021 are expected to be tough for our domestic residential
business. However, we will try not to be significantly less than 4,000 units for next 5 years
average.

＜International Business＞
Q.

In terms of Hybrid Investment Business Model, have equity from third-party been accumulated
from about 50 billion yen at the end of FY 2018?

A.

Yes, it has been increased.

Q.

In terms of International Business, due to some influence from Hybrid Investment Business
Model as well as a large scale renovation of 1271 Avenue of the America, the amount ofinvestments exceeds return have been demonstrated during current Mid-Term Management
Plan period. Is it OK to understand that, for the future, your company will be at the phase tocollect funds and thus the amount of net investment will decrease?

A.

The amount of return of cash is expected to increase, but in terms of investment, we’d like todiscuss the volume as we observe market environment.

＜Others＞
Q.

Do you plan to be actively involved in casino business?

A.

We are reluctant to manage and own casinos.
On the other hand, however, we also think that there might be some areas that our Group can beinvolved, such as architectural design and engineering business as well as management ofhotels expected to be constructed around casinos.

Q.

By considering increasing expected returns from equity investors, it is difficult for yourcompany to perform well beyond expected return because your company owns and develops
many A class buildings with lower risk and return. On the other hand, expected return from real5

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November 8, 2018

estate investors could be lower. Have you considered pursuing these investors to acquire yourstock?
A.

It is possible that some real estate investors might have held our stocks already, but we haven’t
actively approached them from our end.

Q.

Have you had any discussions on delisting among board members ?

A.

No, we haven’t had any concrete discussions. We find it meaningful to be listed in terms offlexibility of financing as well as social credibility.

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