Advancing

Innovation,
UnlockingPotential
Integrated Report 2019

P2

“A Love for People.

A Love for the City ”

Forever Taking On New Challenges—The Mitsubishi Estate GroupThe Spirit of Mitsubishi: Three Principles“Shoki Hoko”“Shoji Komei”

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

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

“Ritsugyo Boeki”

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

The Mission of the Mitsubishi Estate GroupABOUT THE MITSUBISHI ESTATE GROUP

69

4

Marunouchi Today

6

The Marunouchi Area Going Forward70	Eleven-Year Summary of Selected Financial Data
(Consolidated)

8

Mitsubishi Estate’s Value Creation Model

10

Business Segments

P 18

Consolidated Statements of Changes in Net Assets

SPECIAL FEATURE

83

Consolidated Statements of Cash Flows84

Notes to Consolidated Financial Statements

107

Independent Auditor’s Report	Urban Development of Mitsubishi Estate for
Improving Corporate ValueSPECIAL FEATURE 1:	Marunouchi Nijubashi Building

24

SPECIAL FEATURE 2: Inspired. Lab

28

SPECIAL FEATURE 3: Miyako Shimojishima
Airport Terminal

108

Principal Mitsubishi Estate Group Companies

110

Corporate History

111

Organization

P 32

BUSINESS REVIEW

112

Corporate Information

34

Office Building Business

113

About Our Website

36

Lifestyle Property Business38

Residential Business

40

International Business

42

Investment Management Business

43

Hotel & Airport Business

44

Architectural Design & Engineering Business

45

Real Estate Services Business46

Business Creation Department

47	Business Development, Consulting &Solutions GroupP 48

ESG SECTION49

SUSTAINABILITY

52

HUMAN RESOURCE DEVELOPMENT

55

CORPORATE GOVERNANCE
Directors
Overview of Corporate Governance System

59

Outside Directors

60

Overview of Activities in Fiscal 2019

The Mitsubishi Estate Group Code of Corporate Conduct

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

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

A Word about Integrated Report 2019
We adopted this integrated report format starting from fiscal 2018, having publishedannual reports through to fiscal 2017. With this integrated report, we have expanded
coverage of non-financial information centering on environmental, social, andgovernance (ESG) compared with prior annual reports. In doing so, we aim toincrease readers’ awareness of our efforts to raise the corporate value of the
Mitsubishi Estate Group from a medium-to-long-term perspective. We hope that thisreport promotes a deeper understanding of the Group among all our stakeholders,
including shareholders and investors.
Definition of Term
“Fiscal 2019” refers to the Group’s fiscal year ended March 31, 2019, and other fiscal
years are referred to in a corresponding manner.
Caution Concerning Forward-Looking Statements
This integrated report contains forward-looking statements concerning Mitsubishi
Estate Co., Ltd., and its future strategies and earnings outlook, including
forecasts, plans, and decisions based on information available at thetime of publication. As with any forecast, plan, or decision,
forward-looking statements are inherently susceptible topotential risks, uncertainties, and assumptions. The
Company’s actual results may therefore varymaterially from those expressed or impliedin its forward-looking statements.

CO

NT

EN

61	Evaluation of the Effectiveness of
the Board of Directors / Shares Held for
Strategic Purposes

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

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

P 108 CORPORATE DATA

2058

We will act with integrity.

Consolidated Balance Sheets

81

56

3

Financial Review

78

MESSAGE FROM THE PRESIDENT

By building attractive, environmentally sound communities where people can live,
work, and relax with contentment, we contribute to the creation of a truly meaningful society.

We will strive to createa vibrant workplace.

72

P 12

Message from the Chairman of the Board

2

Japan’s Real Estate Market

80	Consolidated Statements of Income / Consolidated
Statements of Comprehensive Income

55

We will strive to earn
the trust of our clients.

FINANCIAL SECTION

Track Record of Mitsubishi Estate

We contribute to society through urban development.

1

P 69

2

62

Remuneration

63	Corporate Executive Officers, Executive
Officers, and Group Executive Officers
64	An Outside Director Discusses
Mitsubishi Estate’s Governance
66

RISK MANAGEMENT

For details on the Mitsubishi Estate Group Guidelines for Conduct:
http://www.mec.co.jp/e/company/charter/index.html(Formulated December 1, 1997; revised on August 1, 2002, January 1, 2006, and April 1, 2018)

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

1TS

ABOUT THE MITSUBISHI ESTATE GROUP

Focus shifted tomake the Marunouchi
Redevelopment Project
broader and morecomprehensive

Track Record of Mitsubishi Estate
The history of redeveloping Marunouchi as an attractive area

Second Phase ofDevelopment
First Phase ofDevelopment
Starting from Scratch
The history of Tokyo’s Marunouchi area began in1890 when Yanosuke Iwasaki purchased the areaat the request of the Meiji government of Japan.
At the time, the area was an expanse of flat,
grassy fields that became known as
Mitsubishigahara, or Mitsubishi Fields.
Iwasaki’s reasoning behind this acquisition was
his belief that, for Japan to become a modern
nation, the country needed a business centersuch as that of New York or London. The
purchase price was ¥1.28 million, about threetimes Tokyo’s annual budget at the time—amassive sum that speaks to the boldness andinspiration of Iwasaki’s decision.

The construction of the area’s first modern officebuilding, Mitsubishi Ichigokan, was completed in
1894. Soon after, three-story redbrick officebuildings began springing up, resulting in thearea becoming known as the “London Block.”

Purchase of
Marunouchi landand vision of a major
business center

02

As Japan entered an era of high economic
growth, there was a sharp increase in demandfor office space. Through the Marunouchi
remodeling plan that began in 1959, the area wasrebuilt with large-scale office buildings providing
a considerable supply of highly integrated officespace. Sixteen such buildings were constructed,
increasing the total available floor space by morethan five times.

3- 1

An abundanceof large-capacity
office buildings
reflecting a periodof rapid economic
growthDawning of afull-scalebusiness center
development

1

0
189

s—

0s
195

007

2
5—
9
9
1

Third Phase of Development(1995—2007)

2

s

196

0
198
0s—

3- 2

Turning Marunouchi
into a vibrant andbustling area

Following the announcement of the reconstruction of the former Marunouchi
Building in 1995, the Company began to redevelop the area around Tokyo
Station based on the concept of “Pursuing diverse and multifunctional urban
development,” with the aim of creating a landscape that would give a newimage to the area, which had up until then been purely a business district.
Starting with the completion of the Marunouchi Building in 2002,
Mitsubishi Estate rebuilt six buildings in line with the new concept.
Moreover, we widened the sidewalks of Naka-dori Avenue from six meters
to seven meters, began holding seasonal events, and took other measures
to transform the area into a space with a vibrant and bustling atmosphere.

Marunouchi Building

Shin-Marunouchi Building

The building that set the stage forthe transformation of Marunouchi

Along with the Marunouchi
Building, this symbolic and stately
building helps create a fitting urban
landscape as a gateway to Tokyo

2002

2007

ay
D
t
en

res

P
08 —

20

Third Phase of Development(2008—Present Day)
From 2008, the focus shifted to make the Marunouchi Redevelopment
Project broader and more comprehensive. Therefore, we have been strivingto spread the vibrant and bustling atmosphere of Marunouchi to the districtsof Otemachi and Yurakucho. We have also been promoting the establishment of a financial business center and a greater amenity infrastructure inorder to strengthen the international competitiveness of the area. Throughthe addition of a museum and other art and cultural facilities as well as
the pursuit of eco-friendly development, Mitsubishi Estate has aimed togive the area a fresh appeal based on a new sense of values.

Marunouchi Park
Building and
Mitsubishi Ichigokan

Marunouchi
Nijubashi Building

Faithful re-creation of the original
Mitsubishi Ichigokan—now an art
museum serving as a center ofcultural exchange and an officespace that sits in the midst of thepremium office zone in the
Marunouchi area

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

2009

2018

0

189

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

MITSUBISHI ESTATE CO., LTD. Integrated Report 20193

Yurakucho

Marunouchi

OtemachiKokyo (Imperial Palace) Gaien National Garden

Palace HotelTokyo

Otemon Tower•
JX Bldg.

PalaceBldg.

uctr o po li tan Ex

Marunouchi
2-chome Bldg.

St

atp re sTokyo International Forumr C irNihon Seimei
Marunouchi Bldg.

c ular Ro uMarunouchi
South Exit

Marunouchi
Central Exit

Tokyo Bldg.

HOSHINOYA Tokyo
Ote ma chi Na

Shin-Marunouchi
Center Bldg.

Marunouchi Oazo

Marunouchi
Nor th Exit

Marunouchi Marunouchi
Hotel
Kitaguchi Bldg.

ka- dor i Ave.

OTEMACHI FINANCIAL CIT Y
Nor th Tower
South Tower

Tokyo
SankeiBldg.

Ote ma chi Sta

JP TOWER

Infos
Yurakucho

In n eOtemachi Tower

Marunouchi Center Bldg.
MUFG Bank
Head Office

Tokyo Kotsu
Kaikan Bldg.
(Owned by a
Mitsubishi Estate
consolidated
subsidiar y)s w ayMarunouchi
Eiraku Bldg.

Tokyo Station, Marunouchi Line

Daimyo-koji Ave.

io nOtemachi
Bldg.

Otemachi Naka-dori Ave.

The Industr y Clubof Japan and
Mitsubishi UFJ
Trust andBanking Bldg.

Mitsubishi Bldg.

tion, Ma run ouc

292 haHong Kong Central

ad eYomiuri
Shimbun
Office Bldg.

Otemachi First Square

OTEMACHIFINANCIAL CIT Y
GR AND CUBE

KDDI
Otemachi Bldg.

mo n Lin e(Planned Completionin September 2020)

Marunouchi Naka-dori Ave.

Shin-Marunouchi
Bldg.

Marunouchi Bldg.

Shin-Tokyo Bldg.
Shin-Nisseki
Bldg.

(Annex)SMBC East Tower

O te machi Riv e rsid e Pro me n

Marunouchi Naka-dori Ave.

Marunouchi Park Bldg.
& Mitsubishi Ichigokan

Marunouchi 1st St.

Tokyo
Kaijo
NichidoBldg.

Yusen Bldg.

Gyoko-dori Ave.

Marunouchi 2nd St.

Marunouchi 3rd St.

MarunouchiNakadori Bldg.

Mitsubishi
Corp.
Head Office

Marunouchi
1-3 Project

Chiy oda Line181 haNew York Midtown

hi Lin e

NT T Communications
Otemachi Bldg.

178 haOtemachi Nomura Bldg.
Otemachi PLACE
WEST TOWERTokyo Marunouchi

NT T Communications
Otemachi Bldg. (Annex)
Urbannet
Otemachi Bldg.

Shin-Otemachi
Bldg.
NT T
Marunouchi
Bldg.

123 haOtemachi PLACE
E AST TOWER

NT T Data
Otemachi Bldg.

Singapore Downtown Core

Sumitomo Fudosan
Marunouchi Bldg.

Tokyo Stationte

Tokiwabashi District Redevelopment Project

Marunouchi
Central Bldg.

GranTokyo
South Tower

Marunouchi Today

GranTokyo
Nor th Tower

Marunouchi
Trust Tower Main

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

75 ha

nn
er

JFE Shoji
Bldg.

re
ss
wa
yI

ABOUT THE MITSUBISHI ESTATE GROUP

Eitai-dori Ave.

Sapia Tower

Pacific Century Place
Marunouchi Bldg.

Ci
rc
ula
rR
ou

te

o Me

Shin-Kokusai
Bldg.

Meiji Yasuda Seimei Bldg.

Kishimoto Marunouchi
Mitsui Bldg.
Bldg.

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

To k yOtem achi Stat ion,

Otemachi Station, Tozai Line

Yurakucho
Center Building( Yurakucho Marion)

Marunouchi 6th St.

Marunouchi 7th St.

ak

Yurakucho
Bldg.

Marunouchi
Nijubashi Bldg.

Tokyo Station, JR Keiyo LineYur

ShinYurakucho
Bldg.

Meiji Seimei Kan
Bldg.

Babasaki-dori Ave.

iya
Hi b

Yurakucho
Denki Bldg.

Marunouchi 4th St.

Kokusai Bldg.

SanshiKaikan Bldg.

Yurakucho Station, Yurakucho Line

tio

The
Peninsula
Tok yoSt a

DN
Tower 21

Togyo KaikanNippon Broadcasting
System Bldg.

Imperial
Theater

City of London

Otemachi Station, Toei Mita Line

Hibiya-dori Ave.
Nijubashimae Station, Chiyoda Line

Marunouchi 5th St.

ine
aL
ibi y

n, H

Toho
Twin Tower
Bldg.

Marunouchi
Police Sta.
HibiyaSankei Bldg.

Source: Mitsubishi Estate Co., Ltd.

Keidanren
Kaikantio n, Ha nzo

Hibiya Station, Toei Mita Line

HibiyaMarine Bldg.

Wadakura-bori
Moat

Babasaki-bori Moat

Comparison of Area Sizes

JA Bldg.

Ote Center Bldg.

Ote ma chi Sta

Hibiya-bori MoatHi
Ch bi y ai y o St ada tioL i n n,Tokyo MidtowneHibiyaSMBC
Head Office
Bldg.

N

NIKKEI Bldg.
Otemachi 1-2 Project(Planned completion in F Y2020)

OtemachiPark Bldg.
Nippon Life
Marunouchi
Garden Tower

N

Nippon Bldg.

ky
To

Marunouchi
Trust Tower Nor th

oM

et

p
ro

n
ita
ol

Domesticp
Ex

Shibuya

86 ha

Nihonbashi■ Completion before 2002

76 ha

■ Completion after 2002
■ Completion after 2009

Tekko Bldg.

Marunouchi is an international business center that lies between Tokyo Station and the Imperial Palace. Mitsubishi Estate

Toranomon■ Completion scheduled
after 2020

owns and manages approximately 30 office buildings in the area that is the workplace of some 280,000 office workers.

58 ha

900m

Shinagawa

49 ha

1,800mMarunouchi by the Numbers
Number of Companies Listed on theFirst Section of the Tokyo Stock
Exchange*1

107 companies*2

Consolidated Net Sales of the 107
Companies in the Marunouchi Area

*2

Number of Office Workers

101 / Approx. 4,300 offices*2*2

Building Floor Space

Approx.

*2

810 hectares*2

28 lines,13 stations(Stations with the same name on different lines arecounted in number of lines)

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

Companies

Marunouchi

18

New York*2

280,000

Number of Major Corporate Headquarters and Offices
in Comparison with Other Main Tokyo City Areas(Including buildings under construction)*1	Number of listed companies on the First and Second sections of the Tokyo Stock Exchange with head offices in the Otemachi,
Marunouchi, and Yurakucho areas*2	Otemachi-Marunouchi-Yurakucho (OMY) District Redevelopment Project Council,“The Council for Area Development andManagement of Otemachi, Marunouchi, and Yurakucho 2018”4

Fortune Global Top 500 Companies

Railway Lines Servicing the Area

Equivalent to around 8.85% of GDP in Japan

Approx.

Number of Buildings(Including floor space of buildings under construction)

122 trillion

Approx. ¥PICK UP

Contracted Area and Tenant Composition in the Marunouchi Area

(Mitsubishi Estate only)

12

Marunouchi

32

16

London13

ShibuyaNihonbashi

Companies

ShibuyaNihonbashi
1

Toranomon

1

3

Source: Fortune Global Top 500, 2018,
and Mitsubishi Estate Co., Ltd.

Shinagawa

14.0%

Information

6.3%

March 2000

11

1
5

21

1

Top 50 company headquarters in terms of market capitalization
Overseas financial company offices
Top 100 law firm headquarters and offices
As of March 2019, Source: Mitsubishi Estate Co., Ltd.

Information

March 2019

Finance

4.0%

Trading

10.4%

20.3%

Trading

22.3%

1

23.9%

25.0%

42.6%

4.4%

Manufacturing

OthersManufacturing

Finance3

Toranomon
Shinagawa3

72

OthersProfessional Firms

9.8%

Professional Firms

17.0%

As of the end of March 2019, the contracted area in the Marunouchi area (Mitsubishi Estate only)
has increased about 1.7 times compared with the end of March 2000. In terms of tenantcomposition, the ratio of professional firms has been rising.

Concentration of Professional Firms
As of May 2019, all of the four major law firms in Japan and three of the four leading audit companies havetheir offices in Marunouchi.
Law firms:	Anderson Mori & Tomotsune, Nagashima Ohno & Tsunematsu, Nishimura & Asahi, Mori
Hamada & Matsumoto
Audit companies: KPMG AZSA LLC, Deloitte Tohmatsu LLC, PricewaterhouseCoopers Aarata LLC

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

5

O

P

E

ABOUT THE MITSUBISHI ESTATE GROUP

The Marunouchi Area
Going Forward
During the last 20 years of redevelopment, the Marunouchi area has
evolved from a purely office district into an open district equipped withcommercial and interactive functions.
Over the next 20 years, by accelerating the “Open Innovation Field”
initiative, we aim to create a Marunouchi brimming with possibilities,

N

I N

N

O

V A

T

I O

N

F

I E

L

D

where a diverse range of people will gather and a creative energy will
be generated.

6

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

MITSUBISHI ESTATE CO., LTD. Integrated Report 20197

Cities that conduct
management of climatechange, waste, andenergy issues

Creating a truly meaningful society throughattractive urban development

ABOUT THE MITSUBISHI ESTATE GROUP

Mitsubishi Estate’s
Value Creation Model

Borderless cities
respecting the diverse
backgrounds ofall peoples
Pleasant and abundantcities responding todemographic andlifestyle changes

Since purchasing the Marunouchi area, theCompany has been growing as acomprehensive developer. While leveraging

Safe and peaceful cities
of a sustainable andresilient natureand enhancing the Company’s strengths, we
aim to realize sustainable corporate value Innovative cities acting
as wellsprings foropen innovation

Cities conducive torealizing an
inclusive society

enhancement through our steadfast
commitment to creating attractive urban
environments that anticipate changes in thetimes and enrichingpeople’s lifestyles.

Cities that provide
interactive added value
through knowledge
accumulationand networks

Medium-Term Management Plan

Efficient and ecologicalcities where stock isutilized effectively

Materiality (Main business environment trends / social issues)

Pages 12—17 Message from the President

Fiscal 2018–Fiscal 2020

“Transform into a highly competitive corporate group by staying ahead of changes in the times”

The environment	Community

 he decliningTbirth rate and an
aging population

Globality	Diversity

Leveraging existing
properties

	Groupwide Initiatives to Achieve Innovative Changes 
1. Further reinforce existing strengths

Pages 20—27 Special Features 1 and 2

2. Optimize the use of management resources

Pages 28—31 Special Feature 3

3. Heighten the efficiency and quality of decision-making processes

Pages 49—51 Sustainability

Digital innovation

Pages 55—65 Corporate Governance

Mitsubishi Estate’s Strengths
	Huge Pool of Real Estate Assets 	A Wealth of Information Derived from Providing a Wide	Ownership of about 30 office buildings in the
Marunouchi area

Variety of Services 	Office Building Business	Hotel & Airport Business	Lifestyle Property
Business	Architectural Design &Engineering Business	Residential Business	Real Estate Services Business	Long-Cultivated Relationships with Various Stakeholders 	International Business	Listing in the FTSE4GOOD Global Index for the 17th
consecutive year	Investment Management
Business	Business Creation
Department

Pages 4—5 Marunouchi Today	Fiscal 2019 total assets: ¥5,774.1 billion; Unrealized gain
¥3,898.4 billion	170 million visitors annually to retail facilities managed
by the Mitsubishi Estate Group	Business Development,
Consulting & Solutions Group
Pages 32—47 Business Review

	Credible and Reputable Group Brand 	Development and management know-how and a trackrecord cultivated through continuous urban development for more than 100 years
	Awarded the Prime Minister’s Prize from the second
Nihon Service Award Program in June 2018

	Establishment of a Leading-Edge Corporate Governance
System 	A total of 15 directors, of whom seven are outside directors
	Transition to a“Company with Nominating Committee, etc.”	A remuneration system for officers designed to sharevalue with shareholders
Pages 55—65 Corporate Governance	Human Resources 	Consolidated number of employees 9,439
Pages 52—54 Human Resource Development

	Strong Financial Foundations 	External credit ratings R&I: AA–, S&P: A+, Moody’s: A2
	Issued the first 50-year corporate bond, the longestever such bond in the Japanese public offering market
Pages 69—107 Financial Section

8

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

MITSUBISHI ESTATE CO., LTD. Integrated Report 20199

ABOUT THE MITSUBISHI ESTATE GROUP

Business Segments
Office Building BusinessThis is Mitsubishi Estate’s core business,
which engages in the development,
leasing, and property management ofoffice buildings, mainly in Tokyo and othermajor Japanese cities. We promote urban
development that contributes to theincreased appeal of cities while maintaining a balance between properties forlease and properties for sale in ourasset portfolio.

Revenue from Operations¥

1,263,283 million

Lifestyle Property Business
The Mitsubishi Estate Group operates
PREMIUM OUTLETS®, MARK IS, and otherretail facilities using a comprehensive
system whereby it remains continuously
involved in all retail property operations,from the planning stage to ongoing
operations. Under the Logicross brand,
Mitsubishi Estate is pursuing logistics
facility business opportunities nationwide.
The Company is also expanding thevariety of its properties.

US$1 1,381 million*

Operating Income¥

Residential Business

229,178 million

We offer services to meet a variety ofneeds for condominiums, custom-built
housing, purchase and sales, leasing,brokerage areas, renovations, andmanagement. As the circulation ofexisting homes expands and people’s
lifestyles grow increasingly diverse, weare strengthening our remodeling,
construction, and renovation business toseize upon such changes.

US$2,064 million*

Total Assets¥

5,774,193 million

US$52,024 million*

Investment Management Business* The above amounts were translated into U.S. dollars at ¥110.99 = US$1.00, the approximate prevailing exchange rate on March 31, 2019.

Millions of yen

Revenue fromOperations

Operating
IncomeTotal Assets

Office Building Business

529,695

147,691

3,551,450

Lifestyle Property Business

106,182

32,560520,707

Residential Business

420,405

30,428665,788

International Business

81,84426,927

692,325

Investment Management Business

49,5889,231

68,977

Hotel & Airport Business

44,171

2,371

71,175

Architectural Design & Engineering Business

24,671

2,021

27,992

Real Estate Services Business

33,5862,603

28,739

Other

8,106

(196)

13,408(34,969)(24,459)

133,628

1,263,283

229,178

5,774,193

Fiscal year ended March 31, 2019 (consolidated)

Eliminations or Corporate
Total

10

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

For investors seeking real estate asset
management, we provide a wide range ofservices based on our specialized
expertise, utilizing collaboration among
our operating bases in Japan, the UnitedStates, Europe, and Asia excluding Japan.
These services include real estate
investment trusts (REITs) to meet
management needs for long-term
stability as well as private placement
funds to meet the specific management
needs of institutional investors.

Architectural Design & Engineering Business
Making use of the knowledge, ability, andcutting-edge technologies accumulated
over the 120 years since our founding in the
Meiji period, this full-service architecturaldesign and engineering business meets
societal needs through construction, civilengineering, and urban and regional
development planning and consulting.

International Business
The Mitsubishi Estate Group has pursued
business overseas since the 1970s,
undertaking real estate leasing anddevelopment businesses in the UnitedStates and the United Kingdom. In recent
years, we have also been actively
developing our office building, residential, commercial facility, and other realestate businesses in rapidly expanding
Asian markets and advancing into
continental Europe.

Hotel & Airport Business
Against a backdrop of strong demand foraccommodations, we are conducting hotel
development projects across a wide range ofcategories matching hotel market trends andthe characteristics of different locations.
Under the Royal Park Hotels brand, we areundertaking hotel management nationwide.
In our airport management business,meanwhile, we are working to raise the valueof airports where we have already begun
private management while also seeking tosecure new business opportunities.

Real Estate Services BusinessThis business provides one-stop, realestate problem-solving solutions forcorporations and high net worth individuals to maximize the value of real estateand optimize its use. Its services include
real estate brokerage, condominium andoffice building leasing management
support, parking lot management
support, and real estate appraisal.

MITSUBISHI ESTATE CO., LTD. Integrated Report 201911

MESSAGE FROM THE PRESIDENT

Into My Third Year as President
The Mitsubishi Estate Group’s Unchanging Mission
Around two-and-a-half years have passed since I assumed theoffice of president & chief executive officer of Mitsubishi EstateCo., Ltd., in April 2017. Managing the Group during this period, I
have come to feel strongly that the Group’s unchanging
mission is to provide value to society through the creation of
attractive urban environments from a long-term perspective.
As I will go on to describe, the Medium-Term Management

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

Plan that started when I took office is proceeding well, and theharvesting of the seeds that were steadily sown is under way.
However, the initiatives aimed at achieving the ongoinggrowth of the Group will not end with the three-year periodof the Medium-Term Management Plan. The Group, with its
wide array of assets in Japan’s business center,Marunouchi, plays a major role in heightening Tokyo’s
international standing. Looking ahead five or 10 years, oreven further into the future, we will strive to rapidly develop
attractive urban environments that are truly internationallycompetitive while engaging with a variety of stakeholders,
including the government, landowners, and tenants.

Looking Back on Fiscal 2019
Third Consecutive Year of Record-High Consolidated
Operating Income
During fiscal 2019, the second year of the Medium-Term
Management Plan, we increased both consolidated revenue
and consolidated operating income for the third consecutive
year, partly thanks to favorable trends in our office building
leasing business, our principal source of income gains. These
trends included strong positive demand, which resulted fromfactors such as the expansion of human resource recruitment
by companies and the improvement of office environments,
as well as steady progress in leasing and robust activity in thereal estate transactions market. Consolidated operating
income rose 7.6% year on year, to ¥229.1 billion, a record forthe third consecutive year, and earnings per share (EPS)
increased 11.7% year on year, to ¥96.97.
We project consolidated revenue and consolidated
operating income to increase once again in fiscal 2020, thefinal year of the Medium-Term Management Plan. Although

We aim to realize sustainable value creation

we expect a decrease in profits from condominiums in thethrough a capital policy that places greater importance on dialogue

Investment Management Business, we forecast to generatewith capital markets and the strengthening of governance.

International Business, along with contributions to consoli-

Residential Business and a decline in capital gains in thecapital gains in both the Office Building Business and thedated revenue and consolidated operating income from thestart of full-scale operation of the Marunouchi Nijubashi
Building throughout fiscal 2020.

12

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

MITSUBISHI ESTATE CO., LTD. Integrated Report 201913

MESSAGE FROM THE PRESIDENT

Progress of the Medium-Term Management Plan

Strengthening Capital Policy and Corporate Governance

Forecasting the Attainment of All Quantitative Targets

also increasing steadily, with rental revenue from rental

A More Strategic and Flexible Capital Policy

dividends, making a total of ¥990.0 billion. We planned

We have set three quantitative targets in the Medium-properties at the end of fiscal 2019 having grown 1.5

In order for the Group to drive the sustainable growth

to offset these outflows with operating cash flows ofTerm Management Plan. Under the plan, we use

times compared with its level of five years ago. Thisof its businesses, there are two requirements: capital¥600.0 billion and net interest-bearing debt of ¥390.0

operating income as an indicator of growth potential,

increase was due to the steady progress in the Officeefficiency that exceeds capital costs and financial

billion. Subsequently, as the measures of the plan

return on assets (ROA) as an indicator of efficiency, andBuilding Business with regard to the leasing of new

stability that is based upon leveraging procurement

unfolded, operating cash inflows were revised upward

net interest-bearing debt divided by EBITDA as anbuildings and the upward revision of rents at existing

strength when market conditions are favorable forby ¥150.0 billion, while, in terms of cash outflows, theindicator of financial stability. As of the end of fiscal

properties. The new properties completed in 2018 andbuying. With the aim of further strengthening initiatives

net investment amount was reduced by ¥120.0 billion.

2019, we achieved all of the plan’s targets, and for the2019 have already been fully leased, and the averagefor balancing these two areas, we have set forth a

final year of the Medium-Term Management Plan, we

provisional leasing rate for buildings scheduled to be

more strategic and flexible capital policy.

forecast operating income of ¥230.0 billion, ROA of

completed between 2020 and 2021 stands at over 70%.

3.9%, and a net interest-bearing debt to EBITDA ratioof 7.4 times (6.9 times after hybrid debt deductions), allof which exceed the targets of the plan.
We expect that cumulative capital gains over theperiod of the Medium-Term Management Plan will

Of the improved cumulative total of ¥270.0 billion, we
have resolved to return ¥130.0 billion to sharehold-

The key to realizing a suitable capital policy is combin-ers—¥100.0 billion in share buyback and ¥30.0 billion in

Turning to existing buildings, we are making gooding growth investments, asset sales, shareholder returns,

increased dividends—while the remaining ¥140.0 billion

progress in filling secondary vacancies stemming fromand financing into the optimal form in accordance withwill be used to control the level of debt. As a result, thethe expansion of floor space and other factors, and wereal estate market conditions while aiming to enhance

total amount returned to shareholders over the three

forecast that we will be able to keep the vacancy rate ofcorporate value over the medium- to-long term.

years will be more than double the initially projected

our portfolio down to 1.5% at the end of fiscal 2020.

Specifically, we will accelerate property sales under theamount. The main objectives of share buyback are to

current market conditions, which are favorable for selling,

manage the total amount of shareholders’ equity andsurpass the initial targets of the plan by 40%—50%,

Asset efficiency and capital efficiency have improved

reflecting an upturn in sales prices due to favorable

remarkably. In fiscal 2019, ROA was 4% and ROE rose to

and allocate the cash derived from those sales for

improve capital efficiency with regard to such financial

real estate market conditions as well as additionala level of almost 8%. Moreover, we anticipate that

increasing shareholder returns and minimizing the levelindicators as ROE and EPS. In order to increase capitalsales of properties. Returns on property sales are alsoearnings per share in the final year of the Medium-of debt. In contrast, were a deterioration in market

efficiency, it is of course important to increase theat a high level, with the average internal rate of return

Term Management Plan will be double its level of fiveconditions to result in a temporary reduction in profits

numerator, profits; however, we also intend to control

before tax at around 10% in respect of the approximately

years ago, reaching ¥100 for the first time, supported inand shareholder returns, we would maximize ourthe denominator, shareholders’ equity.

20 properties sold in the domestic capital recycling

part by the impact of share buyback, about which I will

significant financial strength to conduct proactive

For fiscal 2019, we increased annual dividends per

business in the past two fiscal years. Income gains are

explain later.

investments to enable us to acquire real estate atshare (combined total of interim and year-end dividends)

comparatively cheap prices. Meanwhile, in our coreby ¥4 from the previous fiscal year, to ¥30. We previously

business of ownership and long-term development of

aimed to maintain a 25%-30% dividend payout ratio overoffice buildings centered on the Marunouchi area, wethe period of the Medium-Term Management Plan.

will continue to carry out investments regardless of

However, taking into account factors including businessmarket conditions, thereby generating stable cash flows.

performance and cash flow conditions, the dividend

Quantitative Targets
FY2019 (Results)

Growth Potential

Operating Income

Efficiency

Operating Income / Total Assets (ROA)
Net Debt / EBITDA

Stability(Hybrid finance reflected)

FY2020 (Estimates)

FY2020 (Targets)¥229.1 billion¥220.0 billion¥230.0 billion

4.0%

Around 3.5%

3.9%

6.7 times

Around 8.5 times

7.4 times

With regard to cash flows, when we formulated thearound 30%. Going forward, we intend to meet the(6.9 times)

Medium-Term Management Plan, we envisaged

expectations of shareholders by considering optimal

cumulative cash outflows over three years of ¥900.0

shareholder returns commensurate with such factors asbillion in net investments and ¥90.0 billion in cash

real estate market conditions and cash flow conditions.

(6.1 times)(Around 8 times)

Executing Share Buyback Totaling ¥100.0 Billion

Operating Income

ROA, ROE, and EPS

Billions of yen

%Yen

250
229.1

230.0

8.0

200

7.0

192.4

6.6
166.1
150

7.8

7.8

96.97

100.207.3

213.0

stand at 30.9%. For fiscal 2020, we will target a ratio of

A Flexible Capital Policy in Response to Real Estate Market Conditions (Increasing Corporate Value by Controlling the Balance Sheet)

125

Market conditions favorable for selling
100

86.78

Asset sales	 

74.00

6.0

payout ratio for fiscal 2019 surpassed that upper limit to75

Profits	 

5.6
100

5.0

50

4.0

60.13

Shareholder returns 	 

50

3.6

3.8

4.0

3.9

25

Market conditions favorable for buying

3.3
0

3.0

FY2016FY2017FY2018FY2019FY2020(Estimates)

0

FY2016

ROA (left scale)ROE (left scale)EPS (right scale)

14

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

FY2017FY2018FY2019FY2020(Estimates)

Aiming to maximize medium- to-long term corporate value by combining stable cash flow produced from long-term development andretaining projects, with capital recycling business that takes advantageof real estate market conditions.

Active acquisitions / Investments	 Capital gains 	 Shareholders returns 	 MITSUBISHI ESTATE CO., LTD. Integrated Report 201915

MESSAGE FROM THE PRESIDENT

Toward Governance That Places Importance on

medium- to -long-term basis by formulating appropri-

Dialogue with Capital Markets

ate measures based on dialogue with capital markets.
We are also promoting similar reforms from a sys-

In conjunction with a new capital policy, we arestrengthening governance. (See Corporate Governancetematic perspective. In 2016, the Company transitioned toon pages 55—65.) The decision not to renew the counter-a “Company with a Nominating Committee, etc.,” andmeasures to large-scale acquisitions in May 2019 isestablished three committees, all of which are composed

one part of that strengthening process. Of course, asof a majority of independent outside directors. Since Junelong as the businesses of the Group as a whole are2019, the Nominating Committee and the Remuneration

contributing to the formation of social infrastructure,

Committee have comprised entirely independent outsidethat is, cities, it is necessary to have a certain amountdirectors, while the chairman of the Audit Committee

of consideration for maintaining the independence ofis also an independent outside director. In addition, wethe business’s nucleus. This decision not to renew theare implementing the sale of strategic-holding stocks.

countermeasure program was made not to put in place

In the past four years, we have sold a cumulative total

systematic safeguards, but rather as an expression ofof 28 stocks for the amount of ¥31.5 billion, and we project

our determination to enhance corporate value on a

the amount in fiscal 2020 will be ¥10.0 billion.

Human Resource Development and Business Model Innovation
Urban Development Is People Development

space is allocated to a group or team) and increased

It is our human resources—the Group’s most impor-shared office space for easier communication.

tant management asset—that underpin our ongoingMoreover, through the New Business Proposal

creation of value, and we have introduced a variety of

System, we are seeking business proposals and ideas

measures to cultivate our human resources.

from employees. The New Business Creation(

Department, which was repositioned in 2017 under mySee Human Resource Development on pages 52—54.)

Nowadays, amid an increasing lack of transparency

direct control, is in charge of new business development

in society and the accelerating pace of technologicaland also serves as a secretariat for the proposal

innovation, we will not be able to keep up with thesystem. As such, the proposal system helps nurture achanging times by using orthodox or unimaginative

corporate culture in which employees are encouraged

approaches to doing business. In order to realize

to take on challenges. In fact, the Airport Business, one

innovations under such conditions, it is necessary to beof the main projects of “business model innovation,”*able to create “something” from “nothing.” To realize

adopted under the Medium-Term Management Plan,

new value, we must embrace a diverse range of people,

was originally a business derived from the New Business

expose ourselves to original ways of thinking, and look

Creation Department. Going forward, in order tofor ways to cooperate with those who possess qualities

develop the Airport Business as one of the Company’sthat we do not. Going forward, I would like our employ-business pillars, we created the Hotel & Airport

ees to freely and promptly exchange opinions and ideas

Business in fiscal 2018, while Miyako Shimojishima

in a variety of fields and to grasp opportunities that could

Airport Terminal was opened in March 2019 as sched-lead to new business development. As an example ofuled. All other projects are progressing well.

our efforts to generate new value, in tandem with our(head office relocation in January 2018, we adopted agroup address system (under which a specific office

See Special Feature 3 Miyako Shimojishima Airport Terminal

The Urban Development of Mitsubishi Estate,
Aiming to Be a Front-Running ESG-Conscious Company
Breathing Life into and Nurturing Cities

Urban development does not end with the comple-

The history of the Mitsubishi Estate Group began intion of a building. Developers must constantly breathe

1890 when Yanosuke Iwasaki, the president of the

new life into cities and nurture them to ensure that

Mitsubishi Company, purchased the Marunouchi area,

they can deliver new value and attract a diverse arrayan expanse of fields at the time, from the Meiji govern-of people. Enhancing the value of cities vitalizes Japan,

ment of Japan. His aspiration was to build a businessand the Mitsubishi Estate Group in turn receives rents

center in Japan that would rival those in Europe andand fees from companies that have grown after reap-

North America. Constantly keeping this aspiration ining the benefits. Perpetuating this virtuous cycle with amind, we have overseen the development of thevariety of stakeholders represents the essence of the

Marunouchi area over the last 120 years. During that

Company’s approach to urban development and is inperiod, Marunouchi has been transformed into Japan’s

itself an ESG initiative. Furthermore, our approach topreeminent business center and has contributed to theurban development, which embodies our basic mission

enhancement of Tokyo’s international competitiveness“to contribute to society through urban development,"

as a global city. Starting with the reconstruction of theis consistent with our efforts to achieve the Sustainable

Marunouchi Building, 20 years have passed since weDevelopment Goals. Together with stakeholders whoembarked upon the redevelopment of Marunouchi. We

share this conviction, we will pursue sustainable

are now moving forward with various projects, includ-

growth while firmly maintaining our presence. We

ing infrastructure development, in order to spread thekindly ask for the continuing support of all our share-

vibrant and bustling atmosphere of the area toholders and investors in our endeavors.

Otemachi and Yurakucho. (See Special Feature 1

Marunouchi Nijubashi Building on pages 20—23.)

August 2019

To enable Tokyo to triumph in the intensifying
competition among the world’s major cities, it will beessential for the special area that is Marunouchi toconstantly transmit a variety of surprises, discoveries,
and innovations. Conversely, amid the maturation of
the domestic consumer market owing to the declining
population and other factors, to do otherwise may
reduce the attractiveness of Japan as a whole. Taking
these issues into consideration, the Company has

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

established one incubation hub after another in thearea since 2002, and has provided support for AI andfinancial technology start-ups. Marunouchi is now acenter for start-up companies that offers opportunities
for collaboration with major corporations, distinct from
Shibuya and other areas. (See Special Feature 2

Inspired. Lab on pages 24—27.)

on pages 28—31.)* Involves developing existing businesses and proactively entering new growth areas
in order to realize further growth in the 2020s

System for Creating New Businesses
Platform for Creating New Businesses in the Mitsubishi Estate Group
Venture Co-Creation Platform
Venture Capital
Funding

VentureBusiness
Funding

Corporate
Accelerator
Program

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

16

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

New Business Proposal
System (Individual)

Business Start-Up Meeting(Department)Internal Policy

MITSUBISHI ESTATE CO., LTD. Integrated Report 201917

SPECIALF E AT U R E

1

P 20

2
3

SPECIAL FEATURE 1

Marunouchi Nijubashi Building

Spreading from the Intersection of Business, Commerce,	and Culture—Bolstering Urban Functions andRedeveloping the Yurakucho Area

P 24

SPECIAL FEATURE 2

Inspired. Lab

A Collaborative Hub for Spurring New Innovations
	

P 28

SPECIAL FEATURE 3

	Miyako Shimojishima
Airport Terminal
Promoting Regional Revitalization as the	Second Gateway to the Miyako Archipelago

SPECIAL FEATURE
Urban Development of Mitsubishi Estatefor Improving Corporate Value

18

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

The Mitsubishi Estate Group engages in the continuous redevelopment of the Marunouchi area,
which plays a vital role at the heart of the Japanese economy, enabling it to maintain its high levelof international competitiveness while continuing to function as a hub of new value creation.
At the same time, the Group is beginning to take up the challenge of realizing new business fields
that only it can.
By promoting urban development that heightens the value of the entire area,
we will realize sustainable growth while responding to the changing needs of society.

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

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Marunouchi
Nijubashi Building
Spreading from the Intersection of Business,
Commerce, and Culture—Bolstering Urban Functions
and Redeveloping the Yurakucho Area
The Marunouchi Nijubashi Building, completed in October 2018, represents theconsolidation of three buildings: the Fuji Building, the Tokyo Chamber of Commerce andIndustry Building, and the Tokyo Kaikan Building.
Located at the intersection of Marunouchi, Japan’s business center, and Yurakucho, which isadjacent to an area boasting many retail and cultural facilities, this building possesses offices
with views of the Imperial Palace National Garden. It will also meet the needs of a diverse
array of people through its MICE* facilities and enliven the surrounding area as a whole
thanks to its integrated development with street-level retail facilities.
Moreover, the expansion of the utility tunnel that was carried out in conjunction with thedevelopment of this building has significantly improved the Marunouchi area’s disastermanagement functions and environmental performance.
With the completion of this building, we will expand the redevelopment of the Marunouchi
area to Yurakucho and will continue building a more attractive and internationallycompetitive urban area going forward.
* MICE: An acronym for Meetings, Incentives, Conferences (orConventions), and Exhibitions. Refers to business events that
attract large groups of people

Building No. 13 (predecessor of the Fuji Building)

20

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

Second Tokyo Chamber of Commerce and Industry Building

Third Tokyo Chamber of Commerce and Industry Building

Tokyo Kaikan, Original Main Building

Tokyo Kaikan, Second Main Building
MITSUBISHI ESTATE CO., LTD. Integrated Report 201921

Grand Hall, 5th Floor,
The Tokyo Chamber of Commerce and Industry

When leasing the building, we expected that the

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Marunouchi Nijubashi Building
Spreading from the Intersection of Business,
Commerce, and Culture—Bolstering Urban Functions
and Redeveloping the Yurakucho Area

together with stakeholders, and an important matter

Imperial Palace National Garden and its proximity tothat must be addressed in order to flexibly advance thethe lively areas of Ginza and Hibiya, which boast many

redevelopment of the Yurakucho area going forward.

Yuichi Kanbayashi joined Mitsubishi Estate in 2004.
After working in the Yurakucho Tenant Relations &Building Management Department and the
Corporate Planning Department, he wastransferred to the Marunouchi Development
Department in April 2014, where he was involved in
the development of the Marunouchi Nijubashi
Building. He took up his current post around thetime of the building’s completion, October 2018.

Yurakucho, an already well-equipped district withfactors in attracting tenants. However, in addition to

excellent transportation infrastructure, possesses

the aforementioned, we received a lot of feedback withgreat potential for redevelopment. Moreover, it isregard to this office building’s attractive exterior andadjacent to Ginza and Hibiya, lively areas with a strong

specifications as well as its sophistication and pres-commercial and cultural flavor that see a lot oftige. The diverse range of industries from which wepedestrian traffic. The question of how to organicallyhave attracted tenants has exceeded our expectations.

connect Yurakucho to Marunouchi and Otemachi inorder to revitalize the entire area, while leveraging

Expanding the Redevelopment Area while Solving

those regional characteristics, is an issue needing

Social Issues

consideration in the redevelopment of the Marunouchi
area going forward. I think that this building, located

The utility tunnel that was expanded in tandem with thebetween the two areas, can play a role in determining

development of the Marunouchi Nijubashi Building is an

the direction of that redevelopment.

important factor in heightening the value of theAmid increasing diversification of work styles, I believe

Marunouchi area. The disaster-management functions

that attractive cities in the future will be places whereand environmental performance of the entire area havepeople can gather, meet with whom they want, and feel abeen greatly improved by connecting this building to thesense of pride and positivity about working in such cities. In

underground service tunnel. In earthquake-prone

order to realize that vision, we must play a strategic role

massive project that could not be allowed to fail as it

Japan, strengthening disaster-management functions in

not only on the “hard front,” such as infrastructure devel-

involved the rebuilding of their respective head offices.

Marunouchi, the center of the Japanese economy, is an

opment and property redevelopment, but also on the “softAlthough there were inconveniences such as having toissue of which the government is strongly conscious. In

front,” such as holding events and creating communities.

Although the redevelopment of the Marunouchi area

relocate while the rebuilding took place, we were able toaddition, contemporary energy problems have led toGoing forward, we will develop Marunouchi into an evenhas been proceeding principally in Otemachi in recent

embark upon this joint development because all of thecalls for more efficient energy use. Responding to such

more attractive area through open discussions on those

years, we have given companywide consideration toparties involved knew our track record of developing thesocial issues through the ongoing development of theissues that engage a variety of stakeholders, including the

expanding the area to Yurakucho. Against that back-Marunouchi area over more than 100 years and theutility tunnel is both the mission of the Company, whichgovernment, landowners, and tenants.

drop, we launched the Marunouchi Nijubashi Building

benefits of consolidating three buildings into one.

Realizing Value Creation Only Possible throughJoint Development

development project following discussions on the

In carrying out this joint development, negotiations onreconstruction of the Fuji Building, located at thefacility plans and on costs ran into difficulties and someintersection of Marunouchi and Yurakucho.

aspects of the project did not proceed as expected.

Mitsubishi Estate, as the company responsible for the

22

Umekita Development OfficeKansai Branch
Mitsubishi Estate Co., Ltd.

has for many years undertaken urban development

advantages of its location facing the front of theretail and cultural facilities, would prove to be major

Yuichi Kanbayashi

Rose Room, 3rd Floor, Tokyo Kaikan

However, the development concept was refined throughdevelopment and management of the Marunouchi area,

repeated discussions and we were eventually able toconsidered development of the area while giving impor-complete an original building that adds new value to thetance to enhancing the entire district’s sustainable value

Marunouchi area, which we would not have been able toand improving its disaster-management functions andachieve alone. For example, the large hall and banquet

energy efficiency. As a result, we came up with a plan tospace that contribute to the strengthening of MICE

consolidate three buildings—the Fuji Building and thefunctions, the front entrance allowing one to experiencebuildings adjacent to it, the Tokyo Chamber of Commerce

Tokyo Kaikan’s traditions, the scenic views of the lushand Industry Building, and the Tokyo Kaikan Building—green Imperial Palace National Garden, and otherinto one new building. For the Tokyo Chamber offeatures all enhance the stature of the building, thereby

Commerce and Industry and Tokyo Kaikan, this was a

helping attract a more diverse array of people.

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

Plan (Future Projection)

Utility Tunnel Redevelopment
Since the 1970s, the Mitsubishi Estate Group has been developing
utility tunnels centered on the Marunouchi area, with the aim ofbuilding a “district heating and cooling system” that provides astable and efficient supply of heat to the entire area. By connecting
newly completed buildings and the surrounding buildings withservice tunnels and supplying heat generated via highperformance plants installed in the new buildings to thesurrounding buildings, we are improving energy efficiency in thearea as a whole. At the same time, we are able to continuously
provide a heat supply without adversely affecting the surrounding
buildings when a building is being redeveloped. Moreover, since
underground areas are relatively resistant to earthquakes, it is very
meaningful to expand and upgrade the service tunnel networkfrom the perspective of disaster management. By reinforcing
mutual supply systems between plants, we are enhancing thedisaster preparedness of the area.

Future extension ofutility tunnel
facilities (projected)

Scope of service
tunnel facilities
under current plan

Marunouchi
Nijubashi Building
Main
plant
Subplant

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

MITSUBISHI ESTATE CO., LTD. Integrated Report 201923

Promoting the Prompt Realization of Purposeful Innovations
In addition to providing office space, Inspired. Lab features a workshop
where ideas generated through design thinking* can be turned into
prototypes on the spot, thereby facilitating the seamless development of
new products and services. Moreover, participating companies canundertake demonstration tests at not only the Otemachi Building but also
across the entire Marunouchi area.
In addition to the creation of open spaces and event spaces that attract
a diverse mix of individuals, companies acting as mentors and partners
are also taking part in Inspired. Lab. A system is thereby established forsupporting the new businesses of start-up companies and large
corporations through a variety of methods.

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* An iterative, human-centered approach for creatively solving problems

2

Inspired. Lab
A Collaborative Hub for Spurring New Innovations
A new value creation hub, Inspired. Lab, opened in February 2019 in the Otemachi Building,the most historic building in Tokyo’s Marunouchi area.
Inspired. Lab aims to build an ecosystem that accelerates new innovations by
being a place where start-up companies and large corporations possessing technologies
that will transform the industrial structure of the future can gather and collaborate.
By adding the new function of “Technology Start-Up Hub” to the Marunouchi area,
which has grown as the business center of Japan, we will develop Marunouchi into a vibrant,
diverse, and attractive area.

24

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MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

25

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Inspired. Lab

2

A Collaborative Hub for Spurring New Innovations

Promoting the Growth of Companies and Cities byStrengthening the Ecosystem
Kamada: Interaction among people at Inspired. Lab isfostered in a variety of settings, including a café where
non-members can come and go freely, event spaces,
and glass-walled offices. In such environments, it is so
important that a diverse range of people work together
in a spirit of friendly rivalry. Regardless of the scale ofthe companies to which they belong, all members have
Dialogue between a Developer, Start-Up Director, and Mentor

a burning desire to create new innovations, and thishas fostered an extremely positive atmosphere. I havehigh expectations for the progress of Inspired. Lab
going forward.
Fukuoka: Along with a greater diversity of people, I

would like to see more robots. I think that a future inwhich buildings and cities are brimming with robots
will be here very soon, so it would be great if Inspired.

Yoshio Sakai

Muneaki Fukuoka

Dr. Tomy Kamada

xTECH Leasing and Promotion
Department & Office Leasing and
Tenant Relations Department
Mitsubishi Estate Co., Ltd.

Director and Chief Technology Officer
WHILL, Inc.

Chief Executive Officer and Founder
TomyK Ltd.

After graduate school, Mr. Fukuoka wasinvolved in the research and development of
medical devices at Olympus Corporation. In
2009, aiming to solve social issues throughtechnology, he founded an organization ofengineers called Sunny Side Garage, thepredecessor of WHILL, Inc. He has held his
current post since 2012.

Dr. Kamada founded the software venturecompany Access Co., Ltd. while a student at
the University of Tokyo, and then listed it on
the Mothers Section of the Tokyo Stock
Exchange in 2001. After leaving Access in
2011, he established TomyK Ltd., which
supports start-ups. He now participates inInspired. Lab as a mentor.

Mr. Sakai joined Mitsubishi Estate in 2002.
After five years in building development andplanning, he was seconded to Rockefeller
Group, Inc. in the United States. On returning
to Japan, he set up FINOLAB, Japan’s first
financial technology (FinTech) hub, managed
by Mitsubishi Estate, in 2016. Subsequently,
he helped establish Inspired. Lab.

Lab and its surrounding area could become the firsttesting site for this future. I am hoping for conditions inwhich a new platform provider could emerge throughinteractions with various robots and their developers.
Sakai:As a real estate developer, we will offer any

support we can in order to accelerate the growth ofindustries and companies that should be further
developed going forward. If the propagation of WHILL’s
mobility products in society helps eradicate the hitherto psychologically and physically demanding aspects

Marunouchi’s Advantages as a Hub for

robotics, whose distinguishing feature is that their

at Inspired. Lab, we are able to utilize the Otemachi

of travel, then society will be better for it. The ideal

Technology Start-Ups

technologies will be deployed in the real world. When

Building and the entire Marunouchi area as well. Withoutcome is to establish a cycle whereby the products

promoting these kinds of start-ups, it is essential to

Mr. Sakai as a contact, we can access the area’sborn of the Inspired. Lab ecosystem contribute tocollaborate with large corporations that possess

various networks and infrastructure highly efficiently,

society while the Marunouchi area prospers together

was to support start-ups capable of developing prod-

overwhelming strengths in terms of infrastructure, andfor which I am very appreciative.

with the growth of the lab’s participating companies.

ucts that would invigorate Japanese industry andnecessary to involve the government from a legal

society as a whole. I worked with a resolve to turndevelopment perspective. Marunouchi is a very attrac-

Tokyo’s Marunouchi area into Japan’s hub for technol-

tive area in which to carry out such activities because

ogy start-ups. It was under those circumstances that I

large corporations are gathered there in one location,

met Dr. Kamada, whose company was investing in andwhile the area has good access to universities,

supporting technology start-ups, including WHILL. I

research organizations, and government agencies.

Sakai:

When establishing Inspired. Lab, my priority

consulted him about taking part in Inspired. Lab as amentor supporting promising start-ups.

Fukuoka: For me, the predominant role of Mitsubishi

Estate in the development and operation of the entire

26

COLUMN

WHILL Autonomous Drive System—
Making Last-Mile Transportation Comfortable
The WHILL Autonomous Drive System was created with the aim of making transportation
enjoyable and smart for all people, regardless of their physical limitations or abilities. The
first commercial model—the WHILL Model A—was launched in September 2014, and WHILL is

Kamada: Mr. Sakai contacted me just as I was thinking

Marunouchi area was a major benefit. I heard about

about how I wanted to create a place where start-ups

Inspired. Lab at a time when I had been thinking about

could gather and collaborate. Marunouchi, with its

how to popularize our WHILL, personal mobility

ideal location, was the perfect fit. In the past, start-ups

devices. I wanted to provide not only products but also

were mainly thought of as businesses that did every-

a way to use them. In order to link WHILL devices tothing on the Internet, from developing games, social

existing infrastructure and develop them into evennetworking services, and so forth to providing services.

more convenient, next-generation mobility devices, it isHowever, we are targeting technology start-ups

necessary to carry out demonstration tests in a variety

devices to be used in pedestrian domains all over the world in the future, as is the case withinvolved in such fields as AI, automated driving, andof indoor and outdoor settings. By becoming a tenant

public transportation systems.

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

currently marketing a product lineup composed of several models, such as those intended for
the U.S. market, and other models at an affordable price.
In order to optimize last-mile journeys from an existing means of transportation to a finaldestination, we believe that it is vital to not only enhance personal mobility devices themselves
but also link them to infrastructure. At the Otemachi Building, in cooperation with Mitsubishi
Electric, WHILL has implemented a demonstration test in which an unmanned WHILL
mobility device moved across floors by using the Internet of Things. The company aims for its

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

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3

Miyako Shimojishima
Airport Terminal

Since its opening in 1979, Shimojishima Airport has been used as Japan’s only pilot-training airport, helping
nurture a great many pilots. However, as the use of real planes for training declined due to the progress of
simulator-based training, a need arose for the airport to be used in a different capacity. With the opening of the
Miyako Shimojishima Airport Terminal in March 2019, the airport acquired a new role as the second gateway
to the Miyako Archipelago in Okinawa, one of Japan’s leading resort destinations.

Promoting Regional Revitalization as the Second Gateway
to the Miyako Archipelago

For the Mitsubishi Estate Group, which has adopted stock utilization as a Groupwide material issue, theMiyako Shimojishima Airport Terminal, which leverages existing infrastructure, is of considerable significance.
In addition to creating new value, we aim to expand this business so that its operations go beyond the
management of an airport passenger terminal while utilizing the insight and expertise we have accumulated
thus far as a comprehensive developer.

Entrance to terminal

28

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

Baggage claim

Check-In area

Poolside seating area

Café and bar

Departure lounge
MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

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Miyako Shimojishima Airport Terminal
Promoting Regional Revitalization as the Second Gateway to the Miyako Archipelago
Irabu Island
Shimojishima
Irabu Bridge
Shimojishima
AirportAtsushi Hirano

About 20 km

Miyako Airport

Location of Shimojishima Airport

Senior Executive Officer & General Manager,
Planning Manager
Shimojishima Airport Management Co., Ltd.
After joining Mitsubishi Estate Co., Ltd. in 2005,
Atsushi Hirano was involved in the development ofoffice buildings in the Commercial Asset
Development Department and the Commercial
Property Development and Investment Department.
He then transferred to the Business Creation
Department in October 2014, where he worked in the
Airport Business. Since overseeing the entire
development process for the Miyako Shimojishima
Airport Terminal, from the business proposal stage
to its opening, he has been in charge of the airport’s
operations. He took up his current post in April 2018.

Miyako Island

Airplane landing at Shimojishima Airport

Potential as the Second Gateway to the Miyako

believed that the positive results seen on Ishigaki Island

Archipelago

could be replicated on Miyako Island. Ever-increasing
demand resulting from inbound tourism and dramatically

The Miyako Shimojishima Airport Terminal originated withimproved access from Shimojishima to Miyako Island due

a broad invitation for business proposals from the private

to the opening of the Irabu Bridge in 2015—as well as thesector by the prefectural government of Okinawa in 2014 on

bridge’s potential to become a tourist attraction itself—

how to utilize Shimojishima Airport, the use of which forwere all advantageous to our proposal.

pilot training had declined considerably, and its surrounding

Although the history of our Airport Business is short,area. Upon learning about this project, I recalled how I had

the high evaluation of our business proposal, our track

been struck by the abundant nature when I visited Miyako

record as a comprehensive developer, and, above all, ourIsland, the largest island in the archipelago. I felt that if

bold proposal to create new value while utilizing the

Shimojishima Airport’s wonderful facilities, such as its

existing Miyako Airport led to the approval of our proposal.

excellent runway, could be leveraged through the openingof an airport passenger terminal, it would help attract more

Energizing Miyako Island through Sustainable Urban

domestic tourists as well as promote inbound tourism.

Development

After repeatedly examining the issue of how best to
utilize the airport from various angles when preparing our

In addition to bolstering the operations of the airport

business proposal, we established a policy in conjunction

terminal as the number of flights and terminal users

with Okinawa Prefecture to focus on domestic low-cost

increase, we intend to expand business activities, such as

carrier (LCC) flights and international flights in order tothose of our resort hotel business, that further energize

develop the airport as the second gateway to the Miyako

the islands by leveraging the insight and expertise of theArchipelago, by incorporating new demand at

Group, which operates businesses in a variety of fields.

Shimojishima Airport that could not be accommodated at

On the other hand, it is a fact that as development

Miyako Airport, which serves flights by the major domestic

expands, concerns about the environmental impact ofairlines from all over Japan. Miyako Island is one ofsuch development will grow. For Miyako Island, whose

Japan’s leading resort destinations and the route toabundant nature is its greatest tourist attraction, envi-

Miyako Island is important for the major domestic airlines.

ronmental destruction through overtourism is the

The attraction of the Miyako Island route for LCCs, withbiggest matter of concern. In response, we are promot-

their competitive pricing advantage, is obvious. In addition,

ing environmental preservation activities such as thealthough offering international flights was a long-heldconservation of coral reefs, the cleaning of beaches, andtarget by those in senior government positions in Okinawa

the protection of migratory birds in cooperation with ourPrefecture, it was difficult to realize that target due to such

Sustainable Management and Promotion Department,

factors as the inadequate capacity of Miyako Airport.

The Nature Conservation Society of Japan, and non-

There was some debate on whether having LCC flights

30

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

profit organizations (NPOs). As we advance a businessto Shimojishima Airport would result in tourists who toleveraging the social capital of an existing airport, I feeldate had flown with the major domestic airlines to Miyako

more determined to pursue business operations with an

Airport simply flying with LCCs to Shimojishima Airport

even greater awareness of sustainability.

instead. However, the 2013 opening of a new, expanded

Urban development, for which we are responsible,

airport to accommodate LCC flights on Ishigaki Island, anneither ends with the completion of a building nor is it

outlying island also in Okinawa, dispelled those fears. The

something that we are capable of achieving on our

new, expanded airport had no adverse effects on tourist

own. Going forward, we intend to conduct business

numbers to surrounding areas. In fact, the number ofdevelopment in line with the pace of the islands while

visitors is actually increasing as a result. For an outlying

cooperating closely with involved parties, including

island, where points of entry are limited, an airport itself

Okinawa Prefecture, Miyakojima City, airline carriers,

is a critical factor in determining tourist numbers, thus I

local people, and community organizations.

MITSUBISHI ESTATE CO., LTD. Integrated Report 201931

BUSINESS REVIEWThe Mitsubishi Estate Group operates the Office Building Business and various other businesses inJapan and overseas.
We will enhance our earnings power in each segment through business strategies that leverage
our competitive advantages, as well as actively working to establish new businesses that pursue
synergies with our established businesses.

P47
P46
P42
P40
P38
P36
P34

Investment
Management
Business
International
Business

Residential
Business

P45
P44
P43

Business
Development,
Consulting &Solutions Group

Business Creation
Department
Real Estate Services
Business

Architectural Design &Engineering Business
Hotel &
Airport Business

Lifestyle Property
Business
Office Building
Business

32

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

MITSUBISHI ESTATE CO., LTD. Integrated Report 201933

BUSINESS REVIEW

Office Building Business

Office buildings

Business Concept

Marunouchi area (mainly theproperty development andleasing business)

Property management

As one of the growth strategies for the Office Building Business in the MediumTerm Management Plan, we are promoting the “Open Innovation Field” initiativein the Marunouchi area. The initiative entails bringing people and companies
that find opportunities in innovation together and interact. Accordingly, we aim
to provide a constantly stimulating city environment that inspires creativity anda willingness to realize new possibilities and embrace change.
Specifically, we are focusing on the fields of AI, the Internet of Things (IoT),
and robotics and seeking to actively promote practical tests with systems andField Test of Self-Driving Taxi Conducted
between Otemachi and Roppongi
services that utilize state-of-the-art technology. In the office building leasing
The world’s first autonomous taxi to be operated on public roads
business, we are providing small offices targeted at growing companies both inJapan and overseas as well as start-ups working on the application of advanced technologies. We are working to build a platform
for providing a point of contact between different players and support the formation of networks for lively exchanges between
start-ups and large companies. (See pages 24—27 for details.)

Master leases

Revenue from Operations

Operating Income / Operating Income Ratio

Billions of yenBillions of yen600

The “Open Innovation Field” Initiative in the Marunouchi Area

Main non-asset type businesses

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

%

200

40

150

30

100

20

50

10

Office Building Business

Office Building Business

Overview

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

500
400
300

TOP

ICS

200
100
0

0

FY2015FY2016*FY2017FY2018FY20190

FY2015FY2016*

Operating income (left scale)

FY2017FY2018FY2019Operating income ratio (right scale)* From fiscal 2016, responsibility for domestic retail and logistics property business operations (not including some multipurpose facilities) was transferred from the Office Building Business to theLifestyle Property Business.

Competitive
Advantages

Marunouchi Area	Generally, redevelopment enables rental revenue to be increased by expanding building floor space and raising
rents per square meter. In the Marunouchi area, we aim to promote continuous redevelopment that raises
value through individual redevelopment projects as well as by realizing synergies across the whole area.
	We intend to strengthen the functions of Marunouchi through the “Open Innovation Field” initiative tocultivate new communities and undertake field trials with leading-edge technologies.
Main Office Areas in Japan	We aim to strengthen our development pipeline by using the know-how we have accumulated throughredevelopment in the Marunouchi and other areas.

Non-Asset Businesses and Others	We intend to expand and strengthen non-asset businesses, including property management and master
leases, and businesses that utilize existing stock, such as through the renovation of aged buildings.
	We aim to leverage relationships built through office building development and the office building leasing
business to expand other businesses and create new businesses.

34

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

Otemachi Financial City
Grand Cube

Otemachi Park Building

Marunouchi Nijubashi
Building

Marunouchi 1-3 Project

Tokyo Tokiwabashi Project

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

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

Total Floor Area: 174,100 m2
Completion: Oct. 2018

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

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

FY2017

Tokyo(Outside of Marunouchi)

See the next page.

* Building A, currently under construction, was awarded a five-star rating, the highest such designation, for “plan certification” in fiscal 2019.

Marunouchi Area

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

In the Marunouchi area, we completed the construction of the new Marunouchi Nijubashi Building in October 2018.
(
See pages 20—23 for details.) We also commenced the redevelopment of the Marunouchi 1-3 Project in January 2018 as wellas the construction of Tokyo Tokiwabashi Project Building A in February of the same year.
Tokyo Tokiwabashi Project is a large-scale redevelopment project being conducted in phases during a period of over 10 years. It
will be developed over a 3.1-ha area in front of Tokyo Station and connect the major business districts of Marunouchi and Yaesu /Nihonbashi. For this project, we are creating 7,000 m2 of open space and implementing various state-of-the-art initiatives toward
strengthening disaster prevention and reducing environmental burden. In terms of environmental burden reduction efforts, we areaiming for Tokyo Tokiwabashi Project to become the first-ever integrated urban building development project in Japan to receive the
SITES® certification, while being on course* to acquire the highest rating for the DBJ Green Building Certification, which is sponsored by the Development Bank of Japan and recognizes real estate properties with high environmental and social awareness.
Further, for the appropriation of funds to construct Building A, we issued publicly offered green bonds with a term of five years andin the amount of ¥20 billion in June 2018, becoming the first major real estate developer in Japan to do so.

FY2018FY2019FY2020

FY2021

FY2022

FY2028msb Tamachi (musubu Tamachi)

Shinjuku Station South Project

CO•MO•RE YOTSUYA

Kita-Aoyama 2-Chome Project

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

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

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

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

* Tower South, hotel

MITSUBISHI ESTATE CO., LTD. Integrated Report 201935

BUSINESS REVIEW

Lifestyle Property Business

Retail properties

Business Concept

Outlet shopping malls

Independent shopping
centers

Property
management

	We aim to capture inbound demand by taking various initiatives that give full play to the distinctive featuresof our facilities.

Revenue from Operations

Operating Income / Operating Income Ratio

Billions of yenBillions of yen

%

40

40

30

30

20

20

10

10

120

Logistics Facilities
	We intend to make acquisitions of land and undertake leasing operations by making use of our multiple information networks and tenant relationships.

100	We aim to generate stable capital gains by leveraging our logistics business platform to sell developed
properties to Mitsubishi Estate Logistic REIT Investment Corporation, which is managed by Mitsubishi
Jisho Investment Advisors, Inc., and other parties.

80
60

	We intend to generate synergies Groupwide by sharing the information networks and management knowhow acquired by the Tokyo Ryutsu Center, which has been involved in logistics facility business operations
for over 50 years.

40
20
0

0

FY2015FY2016*FY2017FY20180

FY2019FY2015FY2016*

Operating income (left scale)

FY2017FY2018FY2019Operating income ratio (right scale)* The Lifestyle Property Business was established as a new segment in fiscal 2016, taking over responsibility for domestic retail and logistics property business operations(not including some multipurpose facilities) from the Office Building Business.

Competitive
Advantages

Retail Properties
	The top customer drawing power in Japan of the
PREMIUM OUTLETS® shopping mall chain.
	Information networks and tenant relationships built
through wide-ranging Group businesses, including
developments in the Marunouchi area.

Area Map of Main Retail Properties

maruyama classI ZUMI PARK TOWN
Tapio

AQUA CITY ODAIBA

Sano Premium Outlets®

	Extensive development and management know-how
gained through a portfolio consisting of three different
business formats, business coverage in Japan stretching beyond Tokyo all the way from Hokkaido to Kyushu
and a tenant network covering approximately 3,800
stores (as of the end of March 2019).

GOTEMBAPREMIUM OUTLETS®

Logistics Facilities	A business platform with a broad range of functions
related to logistics facilities, from land acquisition anddevelopment to building operations, ownership, andasset management.

Business Platform of Logistics Facilities	Tenant relationships and information networks throughwide-ranging Group businesses, including developments in the Marunouchi area.
	Management know-how and experience gained throughTokyo Ryutsu Center Inc. (TRC) and its competitivenessunderpinned by being based in Heiwajima, a location
providing excellent access to central Tokyo and Haneda
Airport.

36

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

	Regarding independent shopping centers, we are developing distinctive facilities tailored to diverse
demand based on detailed analyses of the location, local demand characteristics, tourism potential, anddiscussions with tenants.
	With integrated urban facilities, we are aiming to deliver wide-ranging eating and drinking options andshops as well as various service providers to offer better amenities and convenience for office workers
while also drawing in people for shopping and tourism.

Main non-asset type business

Logistics
facilities

Integrated urban
facilities

Business
Strategies

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

 HISUI PREMIUMS
OUTLETS®

 OSU PREMIUMT
OUTLETS®

MARK IS minatomirai
 INKU PREMIUMR
OUTLETS®

LeasingLandacquisition

Development

Businessplatformof logistics
facilities
Building
operations

Asset
management
Ownership

TOP

ICS

Retail Properties
In November 2018, we opened MARK IS Fukuoka Momochi in Fukuoka City, Fukuoka
Prefecture. Home to 163 stores, including new business formats and the first-everlocations in Fukuoka, MARK IS Fukuoka Momochi is the largest retail property for the
MARK IS brand and the biggest MARK IS retail property within Fukuoka to the west ofTenjin. It also represents the Group’s first-ever complex development project combining alarge-scale retail property with a housing complex. Meanwhile, construction of the WEST
tower of The Parkhouse Fukuoka Towers—a housing complex featuring two towers
consisting of 584 units—is scheduled for completion at the end of December 2019, whileconstruction of the EAST tower is slated for completion at the end of December 2020.
Through the project’s retail property and condominiums that leverage the Group’s
collective strengths and know-how, we will contribute to enhancing the value of this area.
Logistic Facilities
In January 2019, we completed the construction of Logicross Nagoya Kasadera in
Nagoya City, Aichi Prefecture. This multi-tenant logistics facility is conveniently
located near major roads and highways and offers tremendous potential as alogistics base for deliveries not only within Nagoya City but also throughout theentire Chubu region. The facility comes equipped with ramps that allow vehicles toaccess storage areas on each floor and offers excellent versatility and functionality through the installation of LED lighting and other features throughout thebuilding. Logicross Nagoya Kasadera also provides support to the region in theform of business continuity planning (BCP) with its designation as an emergency
evacuation building in the case of a large tsunami.
In May 2019, we completed the construction of LOGIPORT Kawasaki Bay, amulti-tenant logistics facility, jointly developed with LaSalle Investment
Management K.K. and NIPPO Corporation. One of the largest logistics facilities inJapan, LOGIPORT Kawasaki Bay offers exceptional access to Tokyo and Yokohama,and this access is expected to further improve with the construction of the Rinko
Road Higashi Ogishima Mizue-cho Line scheduled to be completed in fiscal 2024.

MARK IS Fukuoka Momochi

Logicross Nagoya Kasadera

MITSUBISHI ESTATE CO., LTD. Integrated Report 201937

Lifestyle Property Business

Lifestyle Property Business

Overview

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

BUSINESS REVIEWResidential BusinessResidential condominiums

Business Concept

Domestic

Overseas

Business
Strategies

Management

Brokerage

Custom-built
housing

Residential Condominiums, Overseas	While exploring business opportunities through collaboration with leading developers in different countries, we are also pursuing growth by utilizing the Group’s planning capabilities and development and sales
know-how.

Renovation

Revenue from Operations

Operating Income / Operating Income Ratio

Billions of yenBillions of yen

%

40

12

30

9

20

6

10

3

500

400

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

300

200

100

0

0

FY2015FY2016*FY2017FY2018FY2019	We intend to optimize material costs and construction costs by utilizing our leading business scale inresidential condominium development in Japan.
	We are promoting redevelopment projects that make full use of our abundant know-how related to realestate development and of the comprehensive capabilities of the Mitsubishi Estate Group.

Main non-asset type businesses
Rental apartments

Residential Condominiums, Domestic	We aim to expand our customer base by strengthening our brand power through the enhancement of
product appeal, reliability, and services and by leveraging said brand power to acquire loyal “fans.”

Residential BusinessResidential Business

Overview

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

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

0

FY2015FY2016*

Operating income (left scale)

FY2017FY2018FY2019Operating income ratio (right scale)* From fiscal 2016, certain operations of Mitsubishi Jisho House Net Co., Ltd., were moved from the Real Estate Services Business to the Residential Business.

TOP

ICS

Competitive
Advantages

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

Rental Apartments (featuring CLT)In February 2019, we completed the construction of PARK WOOD Takamori within the area of
Izumi Park Town in Izumi-ku, Sendai City, Miyagi Prefecture. This 10-story rental apartmentcomplex is the country’s first-ever high-rise building that uses CLT* as a flooring material. In
addition to reducing the weight of the building and lowering the burden placed on frame
construction, the use of CLT allowed us to shorten the construction schedule by aroundthree months compared with construction using conventional reinforced concrete. For ouruse of CLT, we received subsidies from the Forestry Agency in fiscal 2017 and the Ministry ofLand, Infrastructure, Transport and Tourism in fiscal 2018. Through efforts to promote theuse of timber in buildings, we were able to reduce construction costs and shorten the timerequired for construction. In this way, PARK WOOD Takamori is socially recognized forcontributing to the circulation of forestry resources in Japan.
* CLT (Cross Laminated Timber): Layers of large timber panels stacked and laminated together. A type of construction material rolled
out mainly in Austria from around 1995.

Overseas Residences
Mitsubishi Estate Residence Co., Ltd. has formed an alliance with residential property developer Crown Group Holdings, based in Sydney, Australia, to develop a 374-unit condominium
called Mastery.
Located within a four kilometer radius of Sydney’s central business district, Masteryoffers exceptional convenience in the form of a subway station, retail properties, a large park,and other facilities all located within walking distance. The project was designed by
Japanese architects Kengo Kuma and Koichi Takada and features a Japanese restaurant andother products and amenities themed on Japan. Sales of units began on November 17, 2018,with construction of the entire property scheduled for completion in 2021.

38

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019PARK WOOD Takamori

CG rendering of Mastery after completion

MITSUBISHI ESTATE CO., LTD. Integrated Report 201939

BUSINESS REVIEWInternational BusinessBusiness
Strategies

Europe	We aim to develop business particularly in markets where different functions are handled by separate
professional enterprises as an asset manager responsible for overseeing all aspects of projects.
	We intend to expand our portfolio by acquiring properties with a view to redevelopment, centering on
management properties in the Office Building Business.
	We aim to strengthen investment with the Hybrid Investment Model* utilizing Europa Capital’s resources.
Asia and Oceania
	We are expanding and diversifying our investment and development business jointly with leading local partners.
	In countries and regions where high and stable growth can be expected, we are focusing on asset
types–and particularly properties for sale–that are likely to see strong demand given the particular characteristics of different areas.

Operating Income / Operating Income Ratio

Billions of yenBillions of yen

%

30

60

25

50

20

40

15

30

10

20

5

10

80

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

Revenue from Operations
100

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

International Business

International Business

Overview

The Mitsubishi Estate Group’s
International Business began with theestablishment of a company in the United
United States
EuropeStates in the early 1970s. Its geographicalMitsubishi Estate
Rockefeller Group, Inc.
coverage has since expanded to include
London Limited
Mitsubishi Estate
New York Inc.
Europa Capital
the United Kingdom, mainland Europe,
Group*
TA Realty LLC*
and Asia and Oceania. We have been
Asia and Oceania
strengthening our portfolio with both
Mitsubishi Estate Asia Pte. Ltd.
Mitsubishi Estate (Shanghai) Ltd.
management properties predicated on
Mitsubishi Estate Taiwan Ltd.
returns from rental fees and properties forPan Asia Realty Advisorssale premised on raising their value under(Singapore) Pte. Ltd.*
Mitsubishi Estate Vietnam Company Limited
a capital recycling business model. We are
PT. Mitsubishi Estate Indonesia
promoting business expansion with
* Group companies under the Investment Management Business segment
respect to the real estate trading rules andbusiness customs of each country. We seek to apply optimal business models for each market based on
macroeconomic data and analysis of capital and real estate markets to identify
the right time to enter.

	We aim to expand investment with our Hybrid Investment Model* through PA Realty, our joint venture with
CLSARE.
* Hybrid Investment Model: Funds structured by Group companies that combine Mitsubishi Estate’s and third-party equity.

60

40

20

0

0

FY2015FY2016*FY2017FY2018FY20190

FY2015FY2016*

Operating income (left scale)

FY2017FY2018FY2019Operating income ratio (right scale)* From fiscal 2016, the international investment management business was transferred from the International Business segment to the Investment Management Business segment.

Competitive
Advantages

United States	The sourcing power of Rockefeller Group International, Inc. (RGI), and its development know-how andtrack record, as well as the name recognition it brings.
	TA Realty’s networks and track record in raising the value of properties.
Europe	The sourcing power based on business achievements over a long period.
	The establishment of development teams and operational effectiveness.
	Europa Capital’s networks and track record in raising the value of properties.
Asia and Oceania
	Development know-how gained in the business in Japan.
	Acclaim the Group has won for its track record in Japan among businesses in leading cities in Asia
excluding those in Japan.
	Relationships with leading local partners.
	The networks Pan Asia Realty Advisors (PA Realty) has established together with CLSA Real Estate
Partners (CLSARE), which handles the real estate fund management business in Asia and Oceania.

40

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

TOP

ICS

United States
The Rockefeller Group (RGI), a U.S.-based wholly owned subsidiary of the Company
specializing in real estate development and operation, completed constructionof the Optimus Logistics Center, a two-tower logistics facility, in California in
September 2018. Large-scale renovation of 1271 Avenue of the Americas, amajor office building in Manhattan’s Midtown area owned by RGI, is also on
course to be completed by its scheduled completion date of December 2019.
EuropeIn March 2019, the 8 Bishopsgate project (tentative name) broke ground in
London, the U.K. The new 51-story high-rise office building will replace thetwo existing office towers, 6—8 Bishopsgate and 150 Leadenhall Street, andoffer approximately 2.8 times more leasable floor space than the two existing
towers combined.
Asia and Oceania
In May 2019, Mitsubishi Estate entered into a strategic partnership agreementwith China Vanke Co., Ltd., a leading urban and rural development and living
services provider in China, for a real estate development project in the Yangtze
River Delta of East China. Taking advantage of Mitsubishi Estate’s developmentknow-how regarding office buildings, retail properties, and various otherfacilities and Vanke’s expertise in project development in China, we will leveragethese strengths toward the growth of this project. Further, we participated inPhase 3 development of the Singapore-Hangzhou Science & Technology Park
(SHSTP), a large-scale complex office building development project conductedby the Ascendas-Singbridge Group in Hangzhou, China. The project brokeground in March 2019.

Optimus Logistics Center

CG rendering of SHSTP Phase 3 after completion

MITSUBISHI ESTATE CO., LTD. Integrated Report 201941

BUSINESS REVIEW

Hotel & Airport Business	Through the execution of M&A deals andother activities overseas, we have established a strategic global investment
management platform. This enables us toprovide global asset management services
to clients by leveraging our expertise andachievements fostered in Japan, the UnitedStates, Europe, and Asia excluding Japan.

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

Competitive
Advantages

Japan Real Estate AssetManagement Co., Ltd.

Competitive
Advantages

Mitsubishi Jisho Investment
Advisors, Inc.
Europa Capital	In our airport management operations, we are making full use of the experience we have gained with thedevelopment and management of diverse commercial facilities and the knowledge gained in businesses
related to demand from inbound visitors to Japan in our outlet and hotel operation businesses.

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

Business
Strategies

	In Japan, we meet the needs of domestic and overseas investors by providing a diverse lineup of products,
including listed REITs, private REITs, and private funds, as well as dependable asset management services.
Revenue from Operations

Assets under Management by Area

Billions of yenBillions of yenEurope350

20

Overseas
1,390

10Total:
UnitedStates approximately
3,100
1,000

JRE
1,020

FY2017FY2018

60

10

50

8

40

6

30

4

20

2

10

0

0

Operating income (left scale)

FY2019Operating income ratio (right scale)* From fiscal 2016, the Overseas Investment Management Business has been moved from theInternational Business to the Investment Management Business.

42

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

50

8

MJIA
700

6

4
20
2

0

FY2015

As of end-March 2019

FY2016FY2017FY2018FY2019*Operating Income / Operating Income Ratio
%

3

9

2

6

1

3

ICS

12

FY2018TOP

Billions of yenTOP%

FY2017

Revenue from Operations

Billions of yenBillions of yen

FY2016*

	In our Airport Business, we aim to unearth demand by enhancing the appeal of airports and their surrounding areas by working with appropriate partners and applying our experience in urban development
and the management of commercial facilities.

0

FY2019Operating Income / Operating Income Ratio

FY2015	With the Royal Park Hotels brand, we aim to steadily increase operating income by improving the operating income
ratio at existing hotels while actively expanding hotel networks by leasing properties developed by other companies
as well as utilizing various schemes, including management contracts and franchise contracts.

100FY2016*

Business
Strategies

30

Domestic
1,720

40

30

	In the Hotel Business, our main focus is the development of hotels under the Royal Park Hotels brand onsites we have acquired ourselves. We also actively look to lease properties to other operators and generate
capital gains through the sale of properties after holding them for a certain period of time.

40

Asia and Oceania
40

50

FY2015

	Applying more than 30 years of hotel management experience with the Royal Park Hotels brand, we havebeen expanding our networks of full-service hotels and accommodation-oriented, limited-service hotels.

TA Realty

	By utilizing our hybrid investment model strategy, through which we co-invest our principal investment
capital alongside our clients’ in funds that our Group companies manage, we seek to capture demand forcross-border property investments. Through this approach, we are simultaneously pursuing the expansionof our overseas portfolio while benefiting from enhanced investment diversification as well as expanding
and strengthening our investment management businesses.

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

Hotel & Airport Business

Investment Management Business

Investment Management Business

0ICS

In April 2018, in order to respond to the high demand foraccommodation, we accelerated the expansion of the HotelBusiness and reinforced the activities of the Airport
Operation Business. We also established the Hotel & Airport
Business Group to generate synergies between the two.
Royal Park Hotels and Resorts Company, Limited,which operates hotels throughout Japan, is moving
ahead with the expansion of new locations in Tokyo,
Osaka, Kyoto, and other areas. The company plans to
expand from its 3,047 units as of June 2019 to approximately 4,350 units in 2022.
In the Airport Business, we commenced operations of
Takamatsu Airport in April 2018, which was followed by
opening of the Miyako Shimojishima Airport Terminal in
March 2019 and the start of operation of Mt. Fuji
Shizuoka Airport in April 2019.

0

FY2015FY2016

Operating income (left scale)

FY2017FY2018FY2019*Operating income ratio (right scale)* Shows results for the former Hotel Business segment through to fiscal 2018.
* We established the Hotel & Airport Business segment in fiscal 2019, bringing together thebusinesses listed below.
• The former Hotel Business segment• The Hotel Development Business of the Lifestyle Property Business segment• The Airport Project Promotion Office under the Business Creation Department and the
Resort Hotel Development Business

Rendering of Mt. Fuji Shizuoka Airport in the future

MITSUBISHI ESTATE CO., LTD. Integrated Report 201943

BUSINESS REVIEWReal Estate Services Business	As a full-service architectural design and engineering firm, we have extensive experience in urban
planning covering such areas as the design and management of buildings for various applications andproposal-based consulting, including large-scale complex developments in the Marunouchi area, anddesigning underground spaces that take into account traffic conditions.

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

Competitive
Advantages

Competitive
Advantages

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

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

	We have access to a wealth of information on China and Southeast Asian countries through a network
centered on local subsidiaries established in Shanghai and Singapore.
	In addition to handling design project orders from within the Group and from long-established clients, theArchitectural Design & Engineering Business is working closely with the Business Development,
Consulting & Solutions Group to win new orders.

Business
Strategies

Real Estate Services BusinessArchitectural Design & Engineering BusinessArchitectural Design &Engineering Business	We are aiming to be the top company in CRE strategy support, real estate consulting, and recreational land
and recreational facility management by providing services to enterprises and high net worth individuals as
our core customers.

Business
Strategies

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

	We are strengthening our value chain, which combines a variety of service menus of the Business
Development, Consulting & Solutions Group and of each of the Group’s businesses, while expanding therange of services we provide to existing customers.

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

Revenue from Operations
25

12

20

8

15

6

10

4

5

2

0

0

FY2015FY2016

Revenue from Operations

TOP

Billions of yen

FY2017FY2018FY2019Operating Income / Operating Income Ratio
Billions of yen

%

2.4

12

2.0

10

1.6

8

TOP

Billions of yen

ICS

ICS

40

Mitsubishi Jisho Sekkei Inc. handled the architecturaldesign and engineering work for the JAPAN SPORTOLYMPIC SQUARE, on which construction was completed
in May 2019. The Japan Sport Association and theJapanese Olympic Committee will be in charge of constructing and managing the facility. The building’s exteriordons a three-dimensional design inspired by the key
words “sports = generating movement.” Inside the building, there are over 60 offices occupied by sports-affiliatedorganizations as well as the Japan Olympic Museum.
Overseas, we are advancing the Yungu School Project,
an international school located in the Hangzhou region ofZhejiang, China. The project was established by Jack Ma,a founder of Alibaba Group, with the intention of creating
new educational facilities in his hometown of Hangzhou.
The project is scheduled for completion in June 2020.
Photo by Koji Fujii /Nacása & Partners Inc.

30

20

10

0

FY2015FY2016*FY2017FY2018FY2019Operating Income / Operating Income Ratio
Billions of yen

%

3.0

12

2.5

10

2.0

8

1.5

6

1.2

6

0.8

4

1.0

4

0.4

2

0.5

2

0

0

0

FY2015FY2016

Operating income (left scale)

FY2017FY20180

FY2015FY2019Operating income ratio (right scale)

In February 2019, Mitsubishi Real Estate Services Co.,
Ltd., which operates the Real Estate Services Business,
commenced the leasing of CIRCLES. Developed by
Mitsubishi Estate, CIRCLES is a series of buildings
featuring exceptionally designed and comfortablecompact offices for companies that have grown out of
their shared offices and other small office spaces.
Starting with the completion of CIRCLES Shiodome inAugust 2019, we are targeting the development of 30
towers, mainly in the five central Tokyo metropolitan
wards, within the next five years. Through such efforts,
we will move forward with our rental business backed byour comprehensive support system developed throughMitsubishi Real Estate Services’ years of experience.

FY2016*

Operating income (left scale)

FY2017FY2018FY2019Operating income ratio (right scale)* From fiscal 2016, certain operations of Mitsubishi Jisho House Net Co., Ltd., have been moved
from the Real Estate Services Business to the Residential Business.

Exterior of JAPAN SPORT OLYMPIC SQUARE

44

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

CG rendering of CIRCLES Shiodome after completion

MITSUBISHI ESTATE CO., LTD. Integrated Report 201945

BUSINESS REVIEWBusiness Development, Consulting &Solutions Group

Business Creation Department

	Strategic sales organization comprising­horizontally integrated segments	Robust solutions using Groupwide resources	Ability to identify problems through consulting

Value Drivers

	We have created a platform for new business creation that embraces both in-house and external parties
and supports sustainable innovation that goes beyond the boundaries of established business fields.

Business
Strategies

	We aim to raise the added value of established businesses through innovative approaches that involve
introducing new functions to existing buildings, utilizing new materials, and making use of the latest
technology to offer new services and make maintenance more efficient.
	The Company has set a budget of ¥100.0 billion over three years for Groupwide business model innovation.
We have also put in place a platform for new business creation to promote new businesses that go beyond
the boundaries of our existing Group business framework.
	We are actively pursuing open innovation through cooperation with external partners.

TOP

Scope of
Activities

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

Business Flow of Consulting Services
and Solutions

ICS

In February 2019, our investments in start-ups and venture companies in Japan and overseas, conducted mainly by our Business
Creation Department, reached ¥10.0 billion (including commitments). As part of our efforts to create new businesses, we haveestablished seven focus areas, including Real Estate Tech, AI, and renewable energy, to generate new sources of earnings.
Further, in our Corporate Accelerator Program, in which we solicit proposals from venture companies and work closely withthem, we received 203 entries in the second round of applications held in August 2018. For the five proposals deemed to be mostpromising, the Company has begun taking full-fledged measures to create new businesses with the provision of funding andcommencement of services at its facilities.

Analysis and hypothesis

Identification of issues
ProposalBusiness
Development,
Consulting &Solutions Group

Communication

Customers
Decision-making

Seven Focus Areas and Main Investment Targets for Creating New Businesses

Support for businesspromotion
Consultation

Real estate tech
Infrastructure

AI

PPP

Robotics

PFI

Platform
HealthFood and agriculture
Biodiversity
Renewable energy

46

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

Tourism
Inbound

Real Estate Development

Real Estate Investment

Real Estate Liquidity

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

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

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

Building Operation andManagement

Comprehensive Building
Analysis and Renovation

Design, Supervision, andConstruction

CRE Strategy Support

New Business DevelopmentE arthquake resistance analysisF acility managementE nergy saving and IT utilization inbuildings and facilities
Interior and exterior renovation
Barrier-free facility construction
Protective measures for buildings
and facilities
Conversion
Building renovation business(renovation of existing buildings andsubsequent leasing)E nvironmental assessment andresearch
Consulting for urban development
and private finance initiatives (PFIs)
Consulting, design, and supervision
for environmental andcivil-engineering solutions
Construction management
Design and supervision forbuildings and structures
Design and supervision for interiors
and exteriors
Single-unit homes and rental andcorporate housingR esidential and office renovation

Organization of CRE information
CRE valuation
Support for strategy formulationand implementation

Business partnership
Investment / M&AO peration and management plan
analysis and proposals
Long-term maintenance plan consulting
Commissioned operation andmanagement of buildings,
retail facilities, and hotels
Subleasing
Tenant marketing

MITSUBISHI ESTATE CO., LTD. Integrated Report 201947

Business Development, Consulting & Solutions Group

Business Creation Department

Competitive
Advantages

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

SUSTAINABILITY

Identifying Materiality 
The Mitsubishi Estate Group aims to build mutually
profitable relationships with stakeholders and enhance
corporate value over the long term by becoming afront-running, ESG-conscious corporation. With the goalof realizing a sustainable society and enhancing corporate value over the long term, we are accelerating
initiatives designed to resolve social issues through ourbusiness activities. To that end, we established aGroupwide working group in fiscal 2019 to identify matters requiring close attention from the perspectives of

ESG SECTION

the SDGs, materiality (important issues for sustainable
management), and related opportunities and risks.
(Meeting of the working groupSee pages 50—51.)

Meetings of the working group are attended byrepresentatives from each of the Group’s businesses,with the president in attendance at the opening meeting of the project.

Process for Identifying Materiality

The basic mission of the Mitsubishi Estate Group is “to contribute to society through urban development.”

Step

Adopting a long-term perspective, the Group believes that it is of great importance to pursue business activities

1

in harmony with society.

• Formulate the processes for each business• Clarify Company strengths and characteristics (the source of value creation)

In light of the growing momentum in Japan and overseas behind environmental, social, andgovernance (ESG) investment, as well as initiatives for the United Nations Sustainable Development Goals (SDGs),

Step

we will aim to realize a sustainable society and enhance corporate value over the long term by conducting

2

governance more rigorously than ever before while pursuing initiatives that pay close attention tosociety and the environment.

• Identify social issues and trends such as the SDGs
• Establish links between business processes and social issues and trends such as the SDGs
• In addition to determining connections between business processes and social issues and trends,
conduct screening of these issues and trends from the perspectives of the Medium-Term Management
Plan and the secretariat

Step• Identify business opportunities and risks associated with each social issue and trend• Categorize materiality taking into consideration opportunities and risks• Implement screening at the secretariat of the working group

Step• Propose materiality and conduct interviews with stakeholders• Report progress to management

3

4

TOP

ICS

SDG Initiatives
Among the 17 SDGs, No. 11, “Make cities and human settlements inclusive,
safe, resilient, and sustainable,” is an indispensable goal that is of direct
relevance to the Group’s business activities. We strive to steadily adhere tothat goal through our business activities. Moreover, with regard to theother SDGs, we recognize that there are many areas to which we, as acomprehensive developer, can give consideration and contribute. We also
had many discussions that incorporated SDG viewpoints when identifying
materiality at meetings of the working group.
Furthermore, we signed the UN Global Compact in April 2018 to clearly
demonstrate our stance on SDG initiatives and sustainable urban development. Meanwhile, the Mitsubishi Estate Group’s greenhouse gas emissions
reduction targets were approved by the Science Based Targets initiative in
April 2019.

48

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

MITSUBISHI ESTATE CO., LTD. Integrated Report 201949

SUSTAINABILITY

At meetings of the Groupwide working group in fiscal 2019, 24 social issues and trends related to the Group’sbusiness activities were determined and materiality and related opportunities and risks were identified,by classifying those issues and trends into seven categories. Going forward, we will establish new key
performance indicators (KPIs) and revise current KPIs from the standpoint of sustainability as well as
considering the Group’s vision for the future, thereby enhancing the promotion of sustainability activities.
(More information regarding our ESG initiatives will be available on our website in due course.)

24 Social Issues and Trends

Materiality	Deterioration of the natural environment and depletion of natural resources	Increase in real estate investment and urban
development opportunities overseas

	Exhaustion of existing natural resources and resultant changes in energy
configuration in society as a whole	The environment	Increase in frequency of natural disasters (including earthquakes)
	Risk of rise in associated costs	Further penetration of the Internet of Things (IoT) (including virtualization andacceleration of the proliferation of information)

Globality	Improvements in artificial intelligence (AI) (including the spread of automateddriving technology)
	Increase in e-commerce and omni-channel commerce, and diversification of
payment methods

Community	Progress of globalization (including increases in inbound and outbound tourism
and rise in immigration)
	Economic growth of emerging nations, principally in Asia
	Global population growth and shortage of food supplies

	Diversity

	Rise in need for response to the needs of diverse
consumers, including those from overseas
	Increase in need for real estate, urban
development, and management withsecurity that is highly resistant to acts ofterrorism and crime	Expansion in demand for facilities and services
that respond to diverse lifestyles, work styles,
and consumption styles
	Greater demand for cities that respond tochanges in population movements	Increased calls for redevelopment andrenovation, and use of existing stock inmajor cities
	Potential utilization of smart communities,
houses, and offices

	Rise in interest in physical and mental health, medical care, and wellness	Decline in the total population and working-age population of Japan	Acceleration of the aging population and changing position of the elderly insociety in JapanThe
declining birth rate andan aging population

	Emergence of risks in the supply chain (including worsening of human rights issues)	Progress of the social advancement of women and the diversification of society	Increase in number of foreign workers in Japan	Growth in need for social integration and universal design	Leveraging existing properties	Restructuring and revitalization of regional communities (including regional
depopulation and population increases of major cities)
	Increase in prevalence of aging public infrastructure and housing stock (including
vacant housing)	Promotion of private sector vitality, as a result of the privatization of public facilities
Changes in lifestyles and work styles
Diversification of consumption patterns, such as the sharing economy

Main Ways to Provide Value	Heightening of need for development andmanagement of real estate with lessenvironmental impact and superior
resistance to natural disasters

	Worsening of climate change	Increase in social unease due to terrorism and crime (including risks from theoutbreak of infectious diseases)

Main Opportunities

Digital innovation

Main Risks
	Reduction in the value of assets and increasein costs of measures and maintenancestemming from a large-scale natural disaster	Intensification of competition globally among cities
	Increase in country risks and compliance risks,
including those related to supply chain
management
	Deterioration of public order and reductionin the value of real estate in surrounding areas
stemming from the aging of buildings andincrease in vacant housing	Safe and peaceful cities of a sustainable
and resilient nature	Cities that conduct management ofclimate change, waste, andenergy issues

	Borderless cities respecting thediverse backgrounds of all peoples

	Cities that provide interactive added
value through knowledge accumulationand networks	Cities conducive to realizing an
inclusive society	Pleasant and abundant cities responding
to demographic and lifestyle changes	Efficient and ecological cities where
stock is utilized effectively

	Innovative cities acting as wellspringsfor open innovation

	Changes in office needs as a result of adecline in the working-age population and the
expansion of diverse work styles
	Changes in business practices and the employment environment due to the emergence of AI

50

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

51

HUMAN RESOURCE DEVELOPMENT

Urban development with true value is predicated on understanding the needs of people working andliving in the area while also having insight into how the times are changing. Such insight comes fromour people being highly attuned to society. The Mitsubishi Estate Group seeks to nurture andCultivation of Broad Perspectives through Job Rotation 

strengthen diverse human resources as the source of new value creation and business growth by

At Mitsubishi Estate, new graduates account for theestablishing an environment that inspires creativity and encourages people to take on challenges.

great majority of new employees. For these newgraduates, we have introduced a personnel system

Examples of Job Rotation
Multifaceted perspectives cultivated through knowledge, skills, and experience
gained via on-the-job training

under which they work in three departments for aDevelopment ofbuildings

period of about 10 years after joining. Under the job
rotation system, an employee might move from theApproach to Human Resource Development 
The Mitsubishi Estate Group recognizes that employees

systematic training programs in the workplace withare its most important management capital.

training tailored to the needs of people in different

What we seek in our employees are the following

positions and at various career stages. In addition to

five attributes: vision, professionalism, integrity, teamholding human resource development training

building, and challenge and innovation.

sessions, which is one of the most important issues for

We have implemented job rotation taking into

managers, we are working on preparing divisionspecific human resource development plans.

account career growth stages and also set up

Residential Business to the Office Building Business,or from development operations to a business management role. The intention here is to help young

are helping build a broad range of human networks

partners, to national and local governments in charge

with Mitsubishi Estate alone having 899. That is only

20s, are assigned challenging work.

of urban planning, and to the communities in the areas

people to take on challenges beyond establishedthat employees gain new insight and knowledge. Job

tion of each employee in the Group is large. To put itbusiness frameworks, including developing newrotation is a mechanism that creates valuable opportu-

another way, productivity per employee is high. This isservices that utilize the latest technology and embrac-nities on a sustained basis and helps our people

partly a reflection of the Group’s organizational culture

ing open innovation with venture companies.

broaden their horizons and gain an understanding of
the business of real estate developers from multiple(Reference) Productivity per Employee

Operatingincome1,263,283

229,178

Mitsubishi
Estateperspectives.

Number ofProfitemployees
attributable toowners of parent (Consolidated)

134,608

9,439

FY2019(Millions of yen)

Operatingincome per
employee

Profitattributable toowners of parent
per employee

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

New businessdevelopment
International
businesses
Sale ofbuildings
1

2

Knowledge, skills, human
networks, etc., obtained in theoperation of international
businesses

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

3

4

5

6

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

133.8

24.2

14.2

We launched our New Business Proposal System inachieve further growth in the 2020s” in the Medium-Term

2009, which has evoked a wide range of proposals andManagement Plan that began in April 2017. We haveideas from our employees. The Business Creation

updated and strengthened the New Business Proposal

Department has, since its establishment in 2014,

System to create an environment that is more conducive

worked as a secretariat for the proposal system at theto employees taking up challenges as part of a newsame time as developing new businesses itself. It aims

business creation platform, one of the measures in theto prepare the ground for employees to take up the

Medium-Term Management Plan. Interest in this systemchallenge of new value creation.

among employees is higher than ever. More than 90

Mitsubishi Estate Residence’s business of renovating

The Group has established a staff training system withawareness. Furthermore, we have been encouraging thethe aim of developing the skills of each employee anddevelopment of human resources with the skills needed

second-hand condominium units was born out of araising awareness of their roles at the different stages

to perform on a global basis. For example, we haveproposal put forward by an employee. After the proposalof their careers.

introduced programs under which employees gain

was passed in 2011, we examined the feasibility of the

We provide a broad range of cross-group training

practical experience by being appointed for one or twobusiness from various angles. Doing so led to theprograms, including those for new employees and newly

years to work in overseas offices of the Mitsubishi Estateestablishment of the Property Renovation Department inappointed managers, aiming to create a framework toGroup or external companies. We have also been

2014, and then the business took off. As a more recent

support high-level achievements and demonstrate thefostering human resources who will be able to perform

example, a meditation studio business, Medicha, pro-

Mitsubishi Estate Group’s comprehensive strengths. In

effectively in a global setting by sending employees toposed in 2017 by two female employees in their fifth year

order to encourage the acquisition of business-related

study abroad. Moreover, we have introduced a self-of employment at the Company, started its operations inknowledge and skills for developing the capabilities ofdevelopment support system to help all employees with

June 2019. We established a wholly owned subsidiary to

all staff, we offer a wide range of training programs

various backgrounds develop their capabilities and apply

operate this new business and appointed the two

throughout the Group aimed at developing the capabili-

them to the fullest extent. We are working on multifac-

employees who proposed it as directors. We also plan toties of all staff. These programs range from marketing

eted training programs to meet the needs of diverse

introduce a paid stock-option system for the first time.

and financial strategy to compliance and human rights

human resources.

proposals have been submitted since its launch, 10 ofwhich have been developed into businesses.

Medicha interior

The creation of new business was highlighted as animportant theme for “business model innovation to

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

Sale of retailproperties

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

New Business Proposal System Encouraging Employees to Take On Challenges 

Revenue fromoperations per
employee

Multifaceted Staff Education and Training 

52

Operation ofbuildings

we are developing. We hope, through this approach,in Japan. Relative to revenue, the per-capita contribu-

Revenue fromoperations

Development ofhotelsproviding work experience across multiple fields, wein which all employees, including new recruits in their

FY2019(People)Knowledge, skills, human networks, etc.,
obtained in the development of residential properties

skills through on-the-job training. At the same time, byextend from within the Group to clients and businessWe aim to create an environment that spurs ourKnowledge, skills, human
networks, etc., obtained in thecorporate communications
department

employees acquire broad practical knowledge andAs of March 31, 2019, the Group had 9,439 employees,

FY2019(Millions of yen)

Development ofresidential properties

connecting various stakeholders. These networks

A Compact Organization and a Dynamic Workforce 

about 50%–70% of the levels at our major competitors

Corporate
communications

Medicha studio

MITSUBISHI ESTATE CO., LTD. Integrated Report 201953

CORPORATE GOVERNANCE

HUMAN RESOURCE DEVELOPMENT

Work Style Reforms Facilitated by Office Environments 
Mitsubishi Estate’s work style reforms not only promote

employees are not assigned to a particular desk,

the utilization of existing systems—such as enhancing

abolishing private offices for directors, devising internal

the paid leave system and introducing flextime—but also

flow lines using shared spaces and internal staircases,

focus on creating office environments that help realize

eliminating paper files, and establishing an employee

higher productivity. In particular, the relocation of thecafeteria that promotes health.

Company’s headquarters to the Otemachi Park Building

Within the Company, many employees have com-in January 2018 has triggered an acceleration of work

mented that the relocation of the headquarters has

style reforms unique to the Company.

resulted in greater interaction with other departments

We have adopted three development concepts for

Message from the Chairman of the Board

while the vitalization of communication has led to

the new headquarters: “Creating an environment

increased work efficiency. In a survey conducted on thewhere employees can freely choose where and when to

first anniversary of the relocation, the number ofwork,” “developing an office environment that fosters

employees participating voluntarily in external training

internal and external communication,” and “promoting

to improve their abilities increased about 10% com-

healthy management that enables employees topared with the previous year, and the number of hours

perform to the best of their abilities.” In line with theseduring which meeting rooms were in use declined

concepts, we have implemented such policies as

about 15% from a year before. In these ways, theadopting a group address system under whichrelocation is producing positive results.

Hirotaka Sugiyama
Chairman of the Board

Slogan to Accelerate Work Style Reforms

Mitsubishi Estate Co., Ltd.

“Borderless” and “Socializing” Work Style
1

Natural gatherings and connections among people

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

2Open and direct communication

5 Healthy living

3

Flexible working arrangements

OfficeMitsubishi Estate transitioned to a “Company with

provide higher value through ongoing dialogue with

Nominating Committee, etc.,” in 2016 and establishedcapital markets. Furthermore, we have been conduct-

three committees—the Nominating Committee, theing lively discussions on capital policy at Board ofAudit Committee, and the Remuneration Committee—

Directors’ meetings. In May 2019, we resolved to exe-

all of which are composed of a majority of outside

cute share buybacks up to a maximum of ¥100.0 billion.

directors. Since then, we have continuously imple-

We are also appropriately implementing the sale ofmented initiatives to reinforce our corporate governanceshares held for strategic purposes.

system, such as introducing remuneration systems forEngagement of a Diverse Workforce Term Management Plan. Although we are presently

System and a performance-based incentive plan (theholding discussions on new management strategies,“Phantom Stock Plan”), evaluating the effectiveness ofthe main goal of enhancing corporate value throughthe Board of Directors, and establishing theattractive urban development will not change. Guided“Mitsubishi Estate Co., Ltd., Corporate Governanceby the Company’s basic mission of contributing to the

Guidelines.” Since June 2019, following the example ofcreation of a truly meaningful society by building

When developing urban environments where a diverse

Ratio of Female Managers

the Remuneration Committee, the Nominating

attractive, environmentally friendly communities

range of people can live and work dynamically, it is(Mitsubishi Estate Group*1)

Committee now comprises entirely independent

where people can live, work, and relax with content-

important for the Company to maintain a diverse

outside directors, while the chairman of the Audit

ment, the Board of Directors is committed to meeting

workforce to enable it to incorporate a variety ofRatio for Fiscal 2019:		Committee is an independent outside director. In these

the expectations of shareholders and investors by

opinions and ideas. We have stipulated key perfor-(Long-term target of over 10% for fiscal 2031*2)

ways, we are pursuing initiatives designed to bolster

doing all it can to guide the Company in a way thatthe supervisory functions of the Board of Directors andtakes into account future changes in society and thesaid committees as well as promoting greater objectiv-

business environment.

mance indicators for the ratio of female managers andthe employment rate for persons with disabilities. We
are not only promoting initiatives aimed at meeting
those indicators but also making efforts to create work
environments where each and every employee is able
to utilize his or her abilities. Furthermore, at Mitsubishi
Estate in fiscal 2019, both the percentage of employees
returning to work after childcare leave and the retention rate a year after returning to work were 100%.

54

Fiscal 2020 is the final year of the current Medium-

directors, namely, the Restricted Stock Compensation

MITSUBISHI ESTATE CO., LTD. Integrated Report 20195.92%

(average for five companies)

Employment Rate for Persons with Disabilities(Mitsubishi Estate Group*1)

Ratio for Fiscal 2019:
		

2.22%

(average for five companies)(Long-term target of over 2.22% for fiscal 2031*2)*1	Mitsubishi Estate, Mitsubishi Estate Residence, Mitsubishi Jisho Property
Management, Mitsubishi Jisho Sekkei, and Mitsubishi Real Estate Services*2 Mitsubishi Estate’s own target

ity and transparency.
August 2019

In May 2019, the Board of Directors decided not torenew the Company’s countermeasure program
against possible hostile takeover attempts. This decision is an expression of our determination to have aneffectively functioning governance system that continues to lead the industry as well as to realize andChairman of the Board
Mitsubishi Estate Co., Ltd.

MITSUBISHI ESTATE CO., LTD. Integrated Report 201955

CORPORATE GOVERNANCE

Directors
As of June 27, 2019Name
Position
Appointment year
Number of shares held
(As reported in Fiscal 2019 Financial
Report, available only in Japanese)

Tsuyoshi Okamoto

Shin Ebihara

Outside Director

Outside Director

Born on September 23, 1947
Apr. 1970 Joined Tokyo Gas Co., Ltd.
Apr. 2010 Representative Director, President,
Tokyo Gas Co., Ltd.
Apr. 2014 Director, Chairman of the Board,
Tokyo Gas Co., Ltd.
Apr. 2018 Director & Executive Advisor, Tokyo Gas Co., Ltd.
Jul. 2018 Executive Advisor, Tokyo Gas Co., Ltd.
(Current position)
Jun. 2019 Director, Mitsubishi Estate Co., Ltd.
(Current position)

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

2019–shares

Hirotaka Sugiyama
Chairman of the Board
2007
54 thousand shares

2015–shares

Junichi Yoshida
Director

2016
56 thousand shares

Tetsuo Narukawa

Masaaki Shirakawa

Outside Director

Outside Director

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

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

2018–shares

Junichi Tanisawa
Director

2014
43 thousand shares

Tetsuji Arimori
Director

2018
37 thousand shares

Hiroshi Katayama
Director

Bunroku Naganuma
Director
2019
23 thousand shares

2011
74 thousand shares

1

Shin Nagase

2 Junichi Tanisawa

3 Jo Kato 4 Shin Ebihara 5 Tetsuji Arimori

6 Iwao Taka

2013
34 thousand shares

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

4

5

6

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

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

2015–shares

8

9

10

11

12

13

2016
–shares7

7 Toru Okusa

9 Hiroshi Katayama 10 Masaaki Shirakawa 11 Tsuyoshi Okamoto 12 Junichi Yoshida,

13 Hirotaka Sugiyama 14 Setsuko Egami 15 Tetsuo Narukawa

3

2

1

8 Bunroku Naganuma

Director

56

Outside Director

Outside Director(Back row, from left)(Front row, from left)

Toru Okusa

Setsuko Egami

Outside Director

Iwao TakaJo KatoDirector

Shin Nagase
2016–shares

2016
32 thousand shares

2016–shares

14

15

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

MITSUBISHI ESTATE CO., LTD. Integrated Report 201957

CORPORATE GOVERNANCE

Overview of Corporate Governance System

Various Measures Aimed at Reinforcing the Corporate Governance System

Basic Policy 
The Company aims to realize the enhancement of

In developing and promoting the corporate gover-corporate value through a harmonious balance between

nance system, to bring about greater clarity of roles

corporate growth and the interests of its various

and the strengthening of functions in both the supervi-

stakeholders by following its brand slogan,sion of management and the execution of business“A Love for People. A Love for the City,” based on its

while also fulfilling accountability to our shareholders

basic mission of “contributing to society through urban

and other stakeholders, the basic policy shall work todevelopment.” The Company shall position the devel-

ensure the transparency and objectivity of

opment and promotion of the corporate governancemanagement.

system as one of the most important management
issues in realizing this goal.

System Structure 
As a “Company with Nominating Committee, etc.,”

Composition of the Board of Directors

Mitsubishi Estate has established the Nominating
Committee, the Audit Committee, and the Remuneration

Internal directors whoare concurrently
serving as corporate
executive officers

Committee, which are positioned under the Board of
Directors and are membered by a majority of outside
directors. These committees help promote high standards
and ensure transparency of the decision-making process.

Non-executive,
independent,
outside directors

7

Board of Directors 

5

Reason for nomination

The Board of Directors decides the basic policy of theInternal directors
who are notcorporate executive officers

supervision of the execution of duties by directors and

1. Non-Renewal of Countermeasure Program against Possible Hostile Takeover Attempts
	We decided not to renew the countermeasure program against possible hostile takeover attempts in May 2019,
which was due to expire a month later. Going forward, we will enhance corporate value over the medium to longterm by improving dialogue with capital markets and implementing appropriate policies.
2. Changes to the Composition of the Committees	Since June 2019, following the example of the Remuneration Committee, the Nominating Committee now comprises entirely independent outside directors, while the chairman of the Audit Committee is an independent
outside director. These changes were made with the aim of strengthening management supervisory functions
and enhancing objectivity and transparency.
3.	Sale of Shares Held for Strategic Purposes (See Shares Held for Strategic Purposes on page 61.)	In fiscal 2019, we sold shares held for strategic purposes for the amount of about ¥12.2 billion. With the aim of
improving capital efficiency, we are moving ahead with the reduction of shares for which there is little meaning or
rationality to hold. We project the amount for the sale of such shares in fiscal 2020 will be ¥10.0 billion.

Outside Directors

Executive /Non-Executive

Company’s management, and it also carries out

We have established a policy of implementing a more strategic and flexible capital policy in order to realize theGroup’s ongoing growth, based on a recognition of the importance of striking a balance between capital efficiency
and financial soundness.
We have also determined the following measures aimed at reinforcing our corporate governance system.

Tsuyoshi Okamoto

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

Shin Ebihara

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

Tetsuo Narukawa

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

Masaaki Shirakawa

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

Shin Nagase

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

Setsuko Egami

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

Iwao Taka

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

3

corporate executive officers. As of June 27, 2019, theBoard of Directors consists of 15 directors, of whom
seven are outside directors. The role of chairman of
the Board of Directors is held by the chairman of theBoard of the Company, who does not concurrently
serve as a corporate executive officer.

Nominating Committee, Audit Committee, and Remuneration Committee
The membership of each committee is as follows.
Nominating Committee

Audit Committee

Remuneration Committee

Tsuyoshi Okamoto
Outside Director(Committee Chairman)

Tetsuo Narukawa
Outside Director(Committee Chairman)

Shin Ebihara
Outside Director(Committee Chairman)

Shin Ebihara

Outside Director

Jo KatoTsuyoshi Okamoto

Outside Director

Masaaki Shirakawa

Outside Director

Toru Okusa

Masaaki Shirakawa

Outside Director

Setsuko Egami

Outside Director

Shin Nagase

Outside Director

Setsuko Egami

Outside Director

Iwao Taka

Outside Director

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

58

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

MITSUBISHI ESTATE CO., LTD. Integrated Report 201959

CORPORATE GOVERNANCE

Overview of Activities in Fiscal 2019

Evaluation of the Effectiveness of the Board of Directors

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

The Company regularly conducts self-evaluations of each director with regard to the operation of the Board of Directors

Outside Directors

and the content of deliberation. The results of these evaluations shall be reported to the Board of Directors, and theBoard of Directors

Nominating Committee

Audit Committee

Remuneration Committee

Shin Ebihara

9/9

6/6

―

5/5

Shu Tomioka

9/9

―

15/15

―

areas follows.

Tetsuo Narukawa

7/7

6/6

―

3/3

1. Process of Evaluation 

Masaaki Shirakawa

9/9

6/6

―

5/5

Shin Nagase

9/9

―

15/15

―

operation, effectiveness, etc., of the Board of Directors and each of the Nominating, Audit, and Remuneration

Setsuko Egami

9/9

6/6

―

5/5

proposed corrective measures at Board of Directors’ meetings.

Iwao Taka

9/9

―

15/15

―

Note: As Tetsuo Narukawa was appointed as a director on June 28, 2018, the number of Board of Directors' meetings he was able to attend differs from that of other directors.

Nominating Committee
Duties

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

Major Activities

The Nominating Committee determined the details of the director nomination proposal put to theOrdinary General Meeting of Shareholders held in June 2019 based on standards established fornominating director candidates. In addition, reports and deliberations were conducted at meetingsof the Nominating Committee with regard to the nomination of corporate executive officers prior
to the resolution by the Board of Directors.

Number of Meetings

6

The process and results of the evaluation of the effectiveness of the Board of Directors conducted in fiscal 2019(1) Method of Evaluation
All directors conducted self-evaluations in the form of a response to a questionnaire relating to the composition,
Committees, and taking these results into consideration, they discussed the issues with each other and examined(2) Items of Evaluation
Composition of theBoard of Directors

Proportion of outside directors, number of members, and diversity

Operation of theBoard of Directors

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

Effectiveness of theBoard of Directors

Management plan, delegation of authority to corporate executive officers, risk management systems, dialogue withshareholders and investors, election and dismissal of key management personnel, successor training plan, remuneration
paid to officers, composition, operation, cooperation of each of the Nominating, Audit, and Remuneration committees, etc.

Others

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

2. Results of Evaluation and Future Initiatives (1) Main Items Improved Since the Previous Evaluation
As a result of examination and discussions at Board of Directors’ meetings, one point was identified.
• Initiatives were conducted on the selection and scope of topics, revision of reporting frequency, and other areas related to the reporting
status of the performance of duties by corporate executive officers in order to enhance deliberations at Board of Directors meetings.

(2) Main Issues and Future Initiatives Aimed at Further Improvements in Effectiveness

Audit Committee

As a result of examination and discussions at Board of Directors’ meetings, two points were identified.

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

Major Activities

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

Number of Meetings

Board of Directors analyzes and evaluates its effectiveness based on these self-evaluations and other information.

15

Remuneration Committee• As we prepare to formulate the next Management Plan commencing from fiscal 2021, the Board of Directors will make time for deliberations and examine matters for deliberation, with the aim of creating a Medium-Term Management Plan based on the Company’s visionand goals from a long-term perspective. In addition, the disclosure of information on the current business conditions and issues tooutside directors needs to be enhanced.
• With the aim of further improving discussions at Board of Directors’ meetings, explanatory meetings on discussions at Board of Directors’
meetings and on the Company’s business operations, as well as forums for the exchange of opinions centered on outside directors, are to
be held on a continuous basis.

Shares Held for Strategic Purposes
The Company acquires and holds shares for reasonson reductions going forward, are reported to the Board ofother than purely investment purposes if it deems such

Directors at least once a year, and we are proceeding withshareholdings to be useful in facilitating the Group’s

sales in an appropriate manner.
Furthermore, in the four years from fiscal 2016 to fiscal

business activities smoothly in cases such as whenseeking to maintain or reinforce medium- to long-term

2019, we conducted sales of shares held for strategictransactional relationships or in procuring funds on a

purposes to the value of approximately ¥31.5 billion.

stable basis. (Change in Disposal of Shares Held for Strategic Purposes

See Status of Shareholdings on page 77.)

In regard to the holding of listed shares as investment

Duties

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

Major Activities

The Remuneration Committee determined the amounts of monetary and stock compensation
to be issued to each director and corporate executive officer based on the policy related to suchcompensation.

poses, we examine the rationality of such holdings fromNumber of Meetings

5focusing on such aspects as the background of theshares for reasons other than purely investment purthe perspective of whether they are useful or not in

Billions of yen
20
17.9
15

facilitating the Group’s business activities smoothly,

12.2
10.0

10

acquisition, record of transactions, status of cooperativeand collaborative relationships, and level of dividend

5

payouts. The findings of these examinations, as well as
the number of reductions of such shares and the policy
60

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

1.4
0

0

FY2016FY2017FY2018FY2019FY2020(Plan)MITSUBISHI ESTATE CO., LTD. Integrated Report 201961

CORPORATE GOVERNANCE

Remuneration

Corporate Executive Officers, Executive Officers, and Group Executive Officers(As of June 27, 2019)

Total Remuneration Paid to Directors, Corporate Executive Officers, and Statutory Auditors in Fiscal 2019
Total remuneration(Millions of yen)

Category

Fixed remuneration(Millions of yen)

Performance-based
remuneration(Millions of yen)

RecipientsInternal directors

289

289

―

4

Corporate executive officers

1,142

568

573

14

Outside directors

107

107

―

8

Note: The above amounts include remuneration payments made to two directors, one of whom was an outside director, who retired from their positions as of the end of the119th Ordinary General Meeting of Shareholders held on June 28, 2018.

Board Policies and Procedures in Determining the Remuneration of Senior Management and Directors(i) Procedures for Deciding Remuneration Paid to Officers
The policy concerning decisions on the details of remuneration paid to directors and corporate executive officers of the Company and the details of
remuneration for each person shall be decided upon by a resolution at the Remuneration Committee, which comprises solely outside directors.

Junichi Yoshida

Junichi Tanisawa

Kenichi Iwata

Atsuo Kyono

Representative Corporate
Executive Officer
President & Chief Executive Officer

Representative Corporate
Executive Officer
Deputy President

Executive Vice President

Representative Corporate
Executive Officer
Executive Vice President

Tetsuji Arimori

Futoshi Chiba

Noboru Nishigai

Hiroshi Katayama

Representative Corporate
Executive Officer
Executive Vice President

Representative Corporate
Executive Officer
Executive Vice President

Representative Corporate
Executive Officer
Executive Vice President

Senior Executive Officer

Kenji Hosokane

Keiji Takano

Atsushi Nakajima

Yuji Fujioka

Senior Executive Officer

Senior Executive Officer

Senior Executive Officer

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

Composition of the Remuneration of Corporate Executive Officers

Executive Officers
Short-term incentive
remuneration

Basic remuneration
50%

Single-year, performancebased remuneration
25%

Fixed remuneration

Ikuo Ono
Toru Kimura

Medium- to long-term
incentive remuneration
Restricted stockcompensation
12.5%

Group Executive Officers

Phantom stock
12.5%

Performance-based remuneration

Overview of Performance-Based Remuneration

Bunroku Naganuma

Hidemi Waki

Yutaka Tajima

Senior Executive Officer

Group Executive Officer

Group Executive Officer

Tetsuo Yuasa

Hisashi Komada

Masaki YamagishiGroup Executive Officer

Group Executive Officer

Group Executive Officer

Single-year, performance-based remuneration• Form of remuneration: Cash•	Method of evaluating performance: Evaluation based on four financial performance indicators in the previous fiscal year (EBITDA, operating income,
ROA, and ROE)
Medium- to long-term performance-based remuneration (Restricted stock compensation)• Form of remuneration: Shares• Restricted stock period: Approximately three years
Medium- to long-term performance-based remuneration (Phantom stock)• Form of remuneration: Cash
• Performance evaluation period: Three years•	Method of evaluating performance: Evaluation based on the relative ranking of the Company’s total shareholder return and the rate of change incommon stock price among five peer companies (Nomura Real Estate Holdings, Inc., Tokyu Fudosan Holdings Corporation, Mitsui Fudosan Co., Ltd.,Tokyo Tatemono Co., Ltd., and Sumitomo Realty & Development Co., Ltd.)62

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

Hidemi Waki
Yutaka Tajima
Tetsuo Yuasa
Hisashi Komada
Masaki Yamagishi
Akinori Nakajo
Akihiko Watanabe
Masaharu Miyajima
Tetsuya Okusa
Yutaro Yotsuzuka
Nobuhiro Okumoto
Naoki Umeda
Ryozo Kawabata
Shinya Mizumura
Haruhiko Araki

MITSUBISHI ESTATE CO., LTD. Integrated Report 201963

CORPORATE GOVERNANCE

An Outside Director Discusses Mitsubishi Estate’s Governance
Expansion of Non-Financial Information Is the Key toGoing forward, changes to work styles and lifestyles

Enhancing Corporate Valuein urban areas will take place at a speed beyond our

In May 2019, after several rounds of discussions, theimagination. We are already proceeding with urban

Company decided not to renew its countermeasuredevelopment that anticipates those changes. We also

program against possible hostile takeover attempts thathope to take on challenges that look even further into thewas introduced in 2007. This decision was an expression

future, including research and development on advancedof our determination to further reinforce our corporate

scientific services as well as technological development.

governance system going forward as well as of our

Setsuko Egami
Outside Director

preparedness to meet the expectations of shareholders

Sustainable Growth Comes from the Relationshipby sustainably enhancing corporate value. The Company,

Capital of Groupwide Human Resources

possessing assets in the Marunouchi area, the center of

As a result of the Company’s business expansion, there

Japanese business, has a great responsibility to theare now 10 times more employees at Group companies

corporations that have offices there and to the Japanesethan there are at headquarters. Under the manage-

economy as a whole. There is currently a growing move-

ment plan of headquarters, Group company employees

ment in capital markets, centered mainly on government

play the biggest role in achieving business goals on thepension funds, to correct the previous trend of short-term

front lines. As we move forward, it will be more importantinvestment and encourage long-term investment inthan ever to design a personnel system that heightens

corporations that are able to fulfill their social responsi-

the motivation, sense of achievement, and sense ofbilities while realizing sustainable growth. There are calls

growth of employees throughout the entire Group.

for corporations that embrace such responsibilities toshare their visions with investors and carry out manage-

factors, have led to problems based on the act ofment with a focus on enhancing corporate value.

communication in various organizations, there is a

A Corporate Governance System with Improved

can freely voice opinions is consciously maintained,

Effectivenessprincipally by the chairman. In addition, in order toToday, as changes in investors’ evaluation criteria

need to remember the importance of empathy, inIn the four years since I was appointed an outsideensure that the transfer of authority to corporate

occur and the diversification of investors continues, aaddition to enhancing knowledge, technologies, anddirector in June 2015, I believe that the Company’s

executive officers does not create too large a distanceclimate is developing in which investment decisions arecapabilities. An open organizational culture that

corporate governance system has improved dramatically.

between directors and outside directors, we are

made by researching a given corporation’s non-financial

cultivates the ability to empathize will lead to the

Looking back to when I was appointed, discussions on

enhancing opportunities to make the status of busi-

information. The Company has been actively disseminat-

avoidance of unnecessary risks and stronger relation-

how to address the wide-ranging demand of capitalness affairs more visible through measures such as

ing information on its business operations in recent

ships. I believe that creating a strong organization bymarkets, such as those regarding the Corporate

holding explanatory meetings on business operations

years; however, we recognize that it is necessary tofostering the ability to empathize across the entire

Governance Code, were often conducted from a passive

and carrying out local inspections. I believe that thesefurther increase information disclosure, particularly ofGroup, with its shared commitment to urban develop-

stance. However, following the process for considering

measures are vital to heightening functions as a

non-financial information, with investors in mind.

ment, is an important issue for management.

the transition to a “Company with Nominating“Company with Nominating Committee, etc.,” and theCommittee, etc.,” improvements in the efforts ofeffectiveness of the monitoring system.

Throughout my career, I have been involved in the
Expectations of Business Model Innovation

design of personnel systems with a mission to help

management and the Board of Directors’ secretariat

On the other hand, the Company sometimes dwells

Amid the certain decline in the Japanese population, it will

women realize their full potential and promote theirgradually began to appear, as the balance shifted to aon past internal circumstances and matters more thanbe essential to carry out operations going forward with aparticipation while promoting the societal awarenessproactive stance on the question of how best to create

necessary while, unfortunately, inward-looking discus-

focus on not only existing businesses themselves but alsoof such systems. Additionally, in my work as an editora leading-edge corporate governance system thatsions that fail to take into account the views of society

services and other intangible aspects. The new businessesof a business magazine, I have learned about various

contributes to enhancing corporate value.

as a whole or of capital markets have not yet been

being launched by the Company possess the potential tohuman resource strategies and management perspec-completely eliminated. Management that always

spur next-generation business concepts and foster thetives by interviewing numerous company presidents as

authority to corporate executive officers on matterscarefully considers the direction in which a company

enlargement of existing businesses while leveraging ourwell as taking charge of innovation projects in several

related to business execution and the introduction of ashould proceed while carrying out open discussions on

outstanding assets, superior expertise, and technologicalindustries. I leverage the wide-ranging experience I

Restricted Stock Compensation System as well as of aa companywide basis is central to being a sustainableprowess. For example, we took up the audacious challenge

have cultivated during my career in carrying out my

new medium- to long-term performance-based incentive

corporate entity. As an outside director, I intend toof innovating the quality and methodology of the Company’s

duties as an outside director and member of theplan (the “Phantom Stock Plan”) for corporate executive

contribute to the creation of a leading-edge corporate

organizational structure and business practices, as wellCompany’s Nominating Committee and Remuneration

officers triggered a shift toward a more proactive stancegovernance system that enhances corporate value andas work styles, and workplace culture and communica-

Committee. Going forward, I will strive to help theregarding business execution by management.

to the development of a corporate culture that such ation with the design of our new headquarters. That being

Company pursue ongoing growth and corporate value

governance system realizes.

said, those new businesses themselves being developed

enhancement, including from the perspective ofmight be the buds of next-generation business models.

Groupwide business activities.

Moreover, the bold promotion of the transfer ofAt meetings of the Board of Directors, an atmosphere in which both directors and outside directors

64

In recent years, as changes in society, among other

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

65

RISK MANAGEMENTof the Board of Directors to take responsibility for

Mitsubishi Estate Group Risk Management rules andoverseeing risk management, and general managers of

has set up a risk management system to manage risks

each business group and general managers from Groupin all its business activities. Mitsubishi Estate has

departments have been designated as risk management

established the Risk Management & Complianceofficers. We promote risk management activities

Committee to oversee the Group’s risk management

through the Mitsubishi Estate Legal & Complianceand formed the Risk Management & ComplianceDepartment, which serves as the secretariat.

Risk Map

Risks that necessitate theimprovement of existing measures orintroduction of new measures

We have also established and implemented action

Subcommittee as a working-level consulting body
responsible for such matters as the collection of risk

guidelines, contact and initial response systems,

management-related information. The corporate officer

and business continuity planning for use in times of crisis.

Risk Impact

Moderate

Risks that are appropriately dealt
with by continuing existing measuresin charge of risk management is appointed by resolution

Status of Control

The Mitsubishi Estate Group has established theLarge

Candidates for risks needing
countermeasures in the future

Key risks requiring countermeasuresduring fiscal year

Ongoing risks requiring countermeasures(currently having impact)

Ongoing risks requiring countermeasures(large impact)

Risk Management Related to Investment Projects 

Risk Management and Compliance System

Among the various risks recognized by the Group, risks

the entire Group and monitors the progress of each(As of August 2019)

related to investment projects are based on thebusiness toward realizing this strategy, the Strategic

assessment of business viability by Companywide

Investment Committee deliberates and evaluates

research functions and under investment decision

profitability, the nature of risks and related

rules of the Strategic Investment Office. Prior to thecountermeasures, and other matters. At each phase,deliberation of important investment projects by therisk assessments are also conducted from legal andExecutive Committee, which is chaired by the president

financial aspects in order to grasp an overall picture ofand CEO and is responsible for strategic planning forthe risks.

Board of Directors
Appointment
Decision of Basic Policy
Supervision

Reporting

Risk Management & Compliance Committee

Mitsubishi
EstateVice-Chairman

President &Chief Executive
Officer

Mitsubishi Estate= Responsible for overseeing risk management= Responsible for overseeing compliance

Overall Management

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

Chairman

Corporate Officer in Charge of Risk Management & ComplianceDirections
through
Each Duty

Corporate Officer in Charge of
Risk Management & Compliance

Reporting

Mitsubishi Estate
Risk Management
Promotion Officers(Line and Staff Departments,
Others)Compliance Promotion
Officers

Strategic Investment Committee (General Managers)

Committee Members

Advisors

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

Risk Management
Promotion Personnel

Compliance Promotion
Personnel

Outside Experts

Assistance

Mitsubishi Estate

ReportCommand

Mitsubishi Estate Directors, Representatives from Main Group Companies

Group Company

In its deliberations, in addition to assessing theinvestment decision rules. The difference between theeconomic viability of the project using multiple

scenario set by the responsible business group in

indicators, the Strategic Investment Committee verifies

charge of the project and the downside scenario isthe appropriateness of various aspect of premises,

recognized as risk. The Strategic Investment

such as rents, unit selling prices, and construction

Committee holds discussions on the acceptable limits

costs. For risks, in particular, simulations of upsideof that risk.

and downside scenarios are incorporated into
Risk Management
OfficerCompliance Officer

Risk Management & Compliance Subcommittee

Risk Evaluation Process for Individual Projects
Scenarios anticipated by business units

Risk Management & Compliance-Related Deliberation and Reporting Bodies

Corporate Officer in Charge of
Risk Management & Compliance

Consultation

General Managers of Line and Staff
Departments for Business Groups

General Managers ofCorporate Group Departments

People Designated by Presidents ofMain Group Companies

Executive
Committee

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

General Manager of Internal Audit Office
General Manager of Mitsubishi Estate
Audit Committee OfficeBusiness Groups	Verification of individual
investment projects• Verification of consistency
with strategies of eachbusiness group• Economic viability verification

Strategic Investment Committee
Presenting scenarios anticipated bybusiness units with major projects

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

	Preparation of the responsible
business group’s anticipatedscenarios with importantinvestment projects andsubmission thereof to theStrategic Investment
Committee

Risk Management Activities
1

2

Risk Management Activities of Each IndividualBusiness Group and Group Company

Identification and Monitoring of Key Risks That Need
Particular Attention from the Group

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

To accurately grasp the risks facing the Group as a whole, and by
selecting and mapping key risks that require measures to be taken,
the risks that must be addressed and their level of priority arebrought to light. While monitoring risks throughout the year,
particularly key risks, support is provided as necessary.

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

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

Strategic Investment Office scenarios

Sharing visualized risks and points at issue for business viability

66

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

MITSUBISHI ESTATE CO., LTD. Integrated Report 201967

FINANCIAL SECTIONRISK MANAGEMENT

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

Japan’s Real Estate Market
Supply of New Large-Scale Office Buildings* in the 23 Wards of Tokyo
Million m2
2.0

Risks of
Information
Security

Risks of Corruption

In light of society’s growing concerns over the appropriate protection of personal informationand information management, the Mitsubishi Estate Group comprehensively revised its
rules related to information management in 2018 and updated its information management
systems to ensure scrupulous management. We are aiming to further improve information
management through continuous monitoring and supervision.
Moreover, in order to raise the IT security level of the entire Group, we have positioned
our DX (Digital Transformation) Promotion Department at the center of efforts to standardize
the Group’s IT systems and make it more secure. We are also enhancing collaboration
among DX Promotion Department personnel and between the department and external
security companies, thereby providing Groupwide support.
The prevention of corruption is an important issue for our businesses both in Japan andoverseas. To that end, we have established and announced the Mitsubishi Estate Group
Anti-Corruption Guidelines and developed a system to prevent corruption across theorganization. Under these guidelines, the Group has declared and put into practice several
specific corruption prevention initiatives while thoroughly preventing any acts of bribery or
acts that may be suspected as such. These initiatives include carrying out due diligence on
counterparties deemed to meet certain conditions, incorporating corruption prohibition
clauses into contracts, and establishing approval and reporting procedures for the provisionof entertainment, gifts, and donations. In addition, we are seeking to gain a greater
understanding of rules related to the prevention of corruption through training for directors
and are also constantly monitoring this position.

Risks of Natural
and Man-MadeDisasters, etc.

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

Risks of
Fluctuations in
Exchange Rates

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

Risks of
Fluctuations in theReal Estate Market

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

1.5

1.0

0.5

0
2014

2015

2016

2017

2018

2019

2020

* Buildings with a standard floor area of 10,000 m2 and above

2021
2022
2023
CY
(Estimate)
Source: Mori Building Co., Ltd.

In 2018, the supply of new large-scale office buildings inTokyo’s 23 wards by floor area increased 204.3% year on year,
to 1,410,000 m². Supply is expected to contract briefly in 2019,
but demand is projected to hold firm as companies look to
expand office space and gather together functions handled bydecentralized offices against a backdrop of strong corporate
earnings. Supply volume is expected to be at a high level once
again in 2020, but to be low in 2021 and 2022. The average forthe next five years (2019 to 2023) is expected to be on a parwith past performance levels.

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

25,00010

20,0008

15,000

6

10,000

4

5,000

2

In the office building market, growth in demand for offices led
to vacancy rates in the five central Tokyo metropolitan wards(Minato-ku, Chiyoda-ku, Chuo-ku, Shinjuku-ku, andShibuya-ku) declining to 1.78%, the lowest level since
December 1991. Average rents have also followed a steady
positive trend as demand ran ahead of supply amid a growing
sense of a shortage of vacancies.

0

0
3/10

3/11

Average rent

3/12

3/13

3/14

3/15

3/16

3/17

Vacancy rate (right scale) 

3/18

3/19

Source: Miki Shoji Co., Ltd.

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

60,00060

40,00040

20,00020

80,00080

0In the housing market, the supply of condominiums in theTokyo metropolitan area rose 3.4% year on year, to 37,132
units. Meanwhile, the average price of condominiums in theTokyo metropolitan area decreased 0.6% year on year, to¥58.71 million, despite high prices being maintained.

0
2009

2010

2011

2012

2013

2014

Sales of new condominiums in the Tokyo area


2015

2016

2017

2018

CY

Condominium prices (right scale)
Source: Real Estate Economic Institute Co., Ltd.

Expected Cap Rate by Type of Property in the Tokyo Area

Risks of Increases
in Interest Rates

The Group acquires funding for its operations by borrowing from financial institutions or
issuing corporate bonds. The Bank of Japan (BOJ) has implemented a policy of quantitativeand qualitative monetary easing in response to the credit crunch in financial markets andthe slowdown in the global economy. Should interest rates rise, however, because of achange in the BOJ’s policy or a deterioration in the demand–supply balance for Japanese
government bonds (JGBs) caused by growth in the issuance of JGBs, it may negatively
affect the performance, financial position, or other aspects of the Group’s business.
The Group hedges interest rate risk on a certain portion of its variable interest ratefinancing through interest rate swaps to convert its interest rate payments into fixed
payments. In the future, the Group plans to manage its interest rate risk by procuring funds
based on a consideration of its fixed and variable interest rate borrowings and its outstanding
corporate bond balances.

%

7.0

Economy Hotel for Lodging in Tokyo
6.0

Multiple-Tenant-Type Warehouse
Property in Tokyo (Koto District)

5.0 Residential Property for Standard

Studio in Southern Tokyo

4.0

3.0

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

0
2010

2011

2012

2013

2014

2015

2016

2017

2018

Although the real estate market remained brisk due to suchfactors as the Bank of Japan’s ongoing policy of monetaryeasing, an excessive decline in investment returns has led toconcerns in some quarters that the real estate market may
be overheating. The expected return (cap rate) was
unchanged from the previous year for many classes of realestate and in many areas, with the cap rate for A-grade officebuildings in the Marunouchi and Otemachi areas standing at
3.5% as of April 2019.

2019

As of April 1 each year

* Covers properties within five minutes’ walk from the nearest station and with floor areas of
at least 50,000 m2
Source: Japan Real Estate Institute68

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69

FINANCIAL SECTION

Eleven-Year Summary of Selected Financial Data (Consolidated)
Financial Results (Millions of yen)
Revenue from operations
Operating income
Ordinary income
Profit attributable to owners of parent
Financial Position (Millions of yen)
Total assets
Total equity*1
Interest-bearing debt
Capital expenditures
Depreciation and amortization
Cash Flows (Millions of yen)
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Cash and cash equivalents at the end of year
Per Share Amounts (Yen)
Earnings
Cash dividends
Principal Financial Indicators
EBITDA*2 (Millions of yen)
ROA*3
Interest coverage ratio*4 (Times)
ROE
Payout ratio
Stock Information
Stock price*5 (Yen)
Number of shares issued and outstanding (Thousands of shares)

5,000

Mitsubishi Estate’s Stock
Price Changes on theTokyo Stock Exchange

3/20093/20103/20113/20123/20133/20143/20153/20163/20173/20183/2019¥  942,626¥1,013,415¥  988,447¥1,013,069¥  927,157¥1,075,285¥1,110,259¥1,009,408¥1,125,405¥1,194,049¥1,263,283

138,567

148,972

158,258

146,299

118,349

161,271

156,332

166,199

192,495

213,047

229,178

108,624

117,381130,830

120,665

92,381

139,638

133,113

144,851

169,851

190,506

206,587

45,423

11,90064,21956,51245,50764,29773,33883,426102,681

120,443

134,608

4,429,070

4,355,065

4,245,209

4,387,015

4,711,521

4,765,368

4,901,526

5,311,840

5,484,115

5,801,450

5,774,193

1,148,494

1,183,156

1,202,270

1,256,791

1,239,547

1,329,057

1,495,838

1,509,680

1,592,777

1,698,348

1,770,643

1,834,195

1,762,111

1,639,050

1,716,890

2,085,417

1,973,042

1,929,355

2,291,038

2,396,994

2,481,675

2,319,597

201,088

114,085

76,332

282,171

208,135

159,677

177,331

275,316

275,372

289,570

285,089

60,36473,92670,62867,46573,36474,80572,696

74,24575,97477,54580,33645,824

212,668

259,263203,243

122,286

336,489

200,078

135,821

168,527

293,338

345,954(214,500)(112,639)(67,223)(272,009)(217,992)(133,537)(46,568)(231,003)(327,292)(286,841)(271,083)

141,055(106,852)(140,269)

57,18927,150(177,514)(189,109)309,237(4,921)

37,203(192,473)

184,552

177,825

229,062

215,771

191,837

224,739

198,489

412,392

243,341

286,859

179,308¥32.90¥ 8.58¥46.27¥40.72¥32.79¥46.34¥52.85¥60.13¥74.00¥86.78¥96.97

16.00

12.00

12.00

12.00

12.00

12.00

14.00

16.00

20.00

26.00

30.00

¥209,522¥230,730¥237,109¥222,885¥200,587¥246,332¥239,934¥252,034¥279,718¥302,424¥320,641

3.2%

3.4%

3.7%

3.4%

2.6%

3.4%

3.2%

3.3%

3.6%

3.8%

4.0%

4.7

5.2

6.6

6.5

5.0

7.5

7.7

8.5

8.7

9.5

10.1

3.8%

1.0%

5.4%

4.6%

3.6%

5.0%

5.2%

5.6%

6.6%

7.3%

7.8%

48.6%

139.9%

25.9%

29.5%

36.6%

25.9%

26.5%

26.6%

27.0%

30.0%

30.9%

¥1,102¥1,530¥1,407¥1,476¥2,596¥2,446¥2,787¥2,090.5¥2,030¥1,798.5¥2,005.5

1,382,518

1,390,397

1,390,397

1,390,397

1,390,397

1,390,397

1,390,397

1,390,397

1,390,685

1,390,908

1,391,038

Yen
4,000

3,000

2,000

1,000

0
3/20083/20093/20103/20113/20123/20133/20143/20153/20163/20173/20183/2019Notes:*1 Total equity is calculated by deducting non-controlling interests and stock acquisition rights from total net assets.
*2 EBITDA is calculated as the sum total of operating income, interest and dividend income, equity in earnings of unconsolidated subsidiaries and affiliates, depreciation and amortization, and goodwill.
*3 ROA (Operating income / Total assets) is calculated based on the average total assets from the beginning to the end of the period.
*4 The interest coverage ratio (ICR) is calculated by dividing the sum total of operating income, interest and dividend income, and equity in earnings of unconsolidated subsidiaries and affiliates by thesum total of interest expenses and commercial paper interest.
*5 As of the last trading day in March70

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

MITSUBISHI ESTATE CO., LTD. Integrated Report 201971

FINANCIAL SECTION

Financial Review



Revenue from Operations / Operating Income In fiscal 2019, the fiscal year ended March 31, 2019, consolidated
revenue from operations amounted to ¥1,263,283 million, an
increase of ¥69,233 million, or 5.8%, year on year. Consolidated
operating income increased ¥16,131 million, or 7.6%, from theprevious fiscal year, to ¥229,178 million. The results for eachbusiness segment are as follows.
In the Office Building Business segment, revenue from operations and operating income both increased on the contributions of
the Otemachi Park Building, which was completed in January 2017,and other factors. As of March 31, 2019, the nationwide vacancy
rate (all purposes) stood at 1.80%, while the vacancy rate for the
Marunouchi area was 2.19%. As a result, revenue from operationsin this segment rose ¥23,533 million year on year, to ¥529,695
million, and operating income increased ¥448 million,to ¥147,691 million.
In the Lifestyle Property Business segment, revenue fromoperations increased ¥8,261 million year on year, to ¥106,182
million, and operating income rose ¥4,480 million, to ¥32,560
million, thanks to the booking of revenue and income on the saleof properties.
In the Residential Business segment, revenue and income bothdecreased in the domestic residential condominiums business. On
the other hand, factors including a year-on-year increase in thenumber of rental apartment sales resulted in an overall rise inrevenue from operations and operating income. As a result,segment revenue from operations increased ¥9,807 million year
on year, to ¥420,405 million, and operating income increased¥6,567 million, to ¥30,428 million.
In the International Business segment, revenue decreased
following a decline in revenue from property sales and a fall in
rental revenue from rental buildings in the United States that areundergoing renovation work. However, operating income rose
overall due to an increase in income resulting from the Hybrid
Investment Model and other factors. Accordingly, segment
revenue from operations decreased ¥5,080 million year on year, to¥81,844 million, but operating income increased ¥2,779 million, to¥26,927 million.

Revenue from Operations

Operating Income /Operating Income Ratio

Trillions of yen

Billions of yen

1.4

%

250

25

200

20

150

15

In the Investment Management Business segment, revenuerose owing partly to property sales. As a result, revenue fromoperations in this segment jumped ¥26,922 million year on year, to¥49,588 million, and operating income increased ¥4,634 million, to¥9,231 million.
In the Hotel & Airport Business segment, we made progress instrengthening the management structure of each individual hotel
under the Royal Park Hotels brand managed by Royal Park Hotels
and Resorts, which oversees business activities in the segment,
and in adding new hotels with a primary focus on accommodation.
We opened The Royal Park Hotel Kyoto Shijo in April 2018 and The
Royal Park Hotel Hiroshima Riverside in October of the same year.
However, a decrease in property sales in the Hotel Development
Business compared with the previous fiscal year resulted insegment revenue from operations increasing ¥3,133 million,to ¥44,171 million, while operating income declined ¥764 million, to¥2,371 million.
In the Architectural Design & Engineering Business segment,
revenue from Mitsubishi Jisho Sekkei Inc.’s architectural designand engineering services rose supported by the booking of revenue
for services related to the Marunouchi Nijubashi Building(Chiyoda-ku, Tokyo). In addition, the average amount received per
project for architectural design and engineering services and theaverage amount of revenue accrued per project from interior
design and construction work both increased. As a result, segment
revenue from operations increased ¥3,058 million year on year, to¥24,671 million, and operating income increased ¥297 million, to¥2,021 million.
In the Real Estate Services Business segment, the number ofbrokerage transactions declined but average commissions pertransaction rose. Consequently, segment revenue from operations
increased ¥8,001 million year on year, to ¥33,586 million, andoperating income rose ¥1,085 million, to ¥2,603 million.
In the Other segment, revenue from operations fell ¥431 million
year on year, to ¥8,106 million, while operating loss of¥196 million was recorded.

Revenue from Operations

1,263,283

1,194,049

69,233

Office Building Business

529,695

506,161

23,533

106,182

97,9208,261

420,405
81,844

410,598
86,9259,807(5,080)49,58822,66526,922

44,171

41,0383,133

24,671

21,613

3,058

33,58625,584

8,001

8,106
(34,969)
229,178
147,691

8,538(26,996)
213,047
147,243(431)(7,973)
16,131448

32,56028,0794,480

30,42826,92723,86024,147

6,567
2,779

9,231

4,596

4,634

2,371

3,136

(764)

2,021

1,724

297

2,603

1,518

1,085

(196)
(24,459)

1,784(23,043)(1,981)(1,416)

Lifestyle Property
Business
Residential Business
International Business
Investment Management
Business
Hotel & Airport BusinessArchitectural Design &Engineering Business
Real Estate Services
Business
Other
Eliminations
Operating Income
Office Building Business
Lifestyle Property
Business
Residential Business
International Business
Investment Management
Business
Hotel & Airport BusinessArchitectural Design &Engineering Business
Real Estate Services
Business
Other
Eliminations or Corporate

Profit Attributable to Ownersof Parent / ROE

Billions of yen

Billions of yen

400

Other Income (Expenses) Non-operating revenue increased ¥1,944 million year on year, to¥12,391 million. Other expenses rose ¥1,944 million, to¥34,983 million.
Total extraordinary income declined ¥6,549 million year on year,to ¥8,170 million, despite the gain on sales of investment securities
and the gain on negative goodwill.
Extraordinary loss declined ¥9,950 million year on year, to¥3,818 million, due to the decreased loss related to the disposal of
fixed assets and the reduced impairment loss.

Profit Attributable to Owners of Parent 
Income before income taxes and minority interests increased¥19,482 million year on year, to ¥210,939 million. Corporate tax, etc.,
increased ¥5,250 million, to ¥58,958 million. As a result, profit
attributable to owners of parent increased ¥14,165 million, or 11.8%,
year on year, to ¥134,608 million. Earnings per share amounted to¥96.97.

Note: Earnings for fiscal 2018 have been reclassified to reflect the segment changes that
occurred in fiscal 2019.

Comparison of Fiscal 2019 and Fiscal 2018 Revenue from Operations
Millions of yen

1,263,283
1,194,049
Office Building
Business

Lifestyle
Property
Business

Residential International
Investment
Business Management
Business
Business(5,080)9,807

26,922

8,261

Hotel & Architectural
Design &AirportBusiness Engineering
Business

3,133

3,058

Real Estate
Services
Business

Other

(431)

Eliminations(7,973)8,001

FY2018FY2019%15

150

YoY Change

Comparison of Fiscal 2019 and Fiscal 2018 Operating Income
Millions of yen

1.2
1.0

300

213,047

200
0.6

100

10
5

50

0.4
50

0.2
0

5

0
2015 2016 2017 2018 201902015 2016 2017 2018 2019

Operating income
Operating income ratio (right scale)

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019229,178

10

100

0.8

72

FY201823,533Operating Income / EBITDA

Millions of yen

FY2019

Office Building
Business

448

100

0

0
2015 2016 2017 2018 2019

Operating income

EBITDA

Lifestyle
Property
Business

Investment
International Management
Business
Residential
Business
Business
2,779

6,567

4,634

Hotel & Architectural
AirportDesign &Business Engineering
Business(764)

Real Estate
Services
Business

1,085

Other

(1,981)Eliminations
or Corporate(1,416)

297

4,480

0
2015 2016 2017 2018 2019

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

FY2018FY2019MITSUBISHI ESTATE CO., LTD. Integrated Report 201973

FINANCIAL SECTION

Analysis of Financial Position (2) Consolidated Balance Sheets

These and other cash inflows were adjusted to reflect a decline ininventories, corporate tax payable, lease deposits received, andother items.

(1) Consolidated Cash Flows

On a consolidated basis, cash and cash equivalents at the end of
the fiscal year amounted to ¥179,308 million, a decrease of ¥107,551
million compared with the previous fiscal year-end. That decrease
was the result of a rise in expenditures stemming from the repayment of short-term and long-term borrowings, despite a rise in
cash flows from operating activities due to an increase in income
before income taxes and minority interests and a decrease ininventories and other factors.

(Cash Flows from Investing Activities)
Net cash used in investing activities totaled ¥271,083 million, down
¥15,757 million from the previous fiscal year. The net cash wasused primarily for purchases of property and equipment.
(Cash Flows from Financing Activities)
Net cash used in financing activities was ¥192,473 million, aturnaround of ¥229,677 million compared with net cash provided byfinancing activities of ¥37,203 million in the previous fiscal year.
This result can be attributed mainly to the repayment of long-termborrowings and the redemption of corporate bonds.

(Cash Flows from Operating Activities)
Net cash provided by operating activities was ¥345,954 million,up ¥52,616 million year on year. Income before income taxes andminority interests amounted to ¥210,939 million, while depreciation
and amortization—a non-cash item—totaled ¥80,336 million.

Total assets stood at ¥5,774,193 million on March 31, 2019, down
¥27,256 million from a year earlier, principally as a result of theoperating, investing, and financing activities previously identified
and related changes in assets and liabilities.
Total liabilities decreased ¥105,273 million, to ¥3,817,088 million.
The balance of interest-bearing debt as of March 31, 2019, stood at¥2,319,597 million, a decrease of ¥162,078 million compared withthe year-end balance in fiscal 2018. Deducting cash and cash
equivalents, the balance of net interest-bearing debt as of March
31, 2019, was ¥2,140,288 million, a decrease of ¥54,527 million year
on year.

Billions of yen

%

3,000

120

2,000

Comparison of Fiscal 2019 and Fiscal 2018 Consolidated Cash Flows(9,124)

Increase inequityinvestments

80,336
210,939

Increase ininventories

961

FY201880
60

Bank loans

40
20

0

(53,817)0
2012

160,510Decrease in cash andcash equivalents
resulting from
Effect of exchange
exclusion ofrate on cash andsubsidiaries
cash equivalents from consolidation(4,618)(285,089) Other

Purchases ofproperty andequipment

Newlyacquiredfunds(229,938)

Repayment(70,836)
Cashdividends
Other
paid

Net cash used ininvesting activities(271,083)

Straight bonds

Bank loans

179,308

13,903(1,796)(2,055)

2013

2014

2015

2016

2017

2018

2019

636.2

747.2

701.5

685.2

653

612.7

603.8

—

—

—

—

250

250

250

250

1,072.3

1,292.9

1,261.9

1,208.8

1,381.2

1,428.5

1,523

1,406
100

Subordinated bonds

Increase in cash
and cashequivalents fromnewly consolidated
subsidiary(52,209)

Net cash provided byoperating activities
345,954

100

Fixed ratio (right scale)

Straight bonds

Income taxes,
etc.

Income before
income taxes andminority interests

Subordinated loans

500

13,871 4,752

Adjustment for
extraordinary
income or loss

286,859

1,000

Proceeds fromsales of investment
securities

Depreciation
andamortization

Subordinated bonds

1,500

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

Other

CP

Long-term ratio (right scale)

Lease liabilities

Millions of yen(15,678)

Note: From the first quarter of fiscal 2019 the Partial Amendments to Accounting Standard forTax Effect Accounting announced on February 16, 2018, have been applied. Thus, figures on
the consolidated balance sheets as of the end of March 2018 have also been revised
accordingly.

Interest-Bearing Debt

2,500

132,337

Total net assets increased ¥78,017 million year on year, to¥1,957,105 million. The growth in net assets can be attributed toincreases in such items as retained earnings and non-controllinginterests.

Subordinated loans

—

—

—

—

—

100

100

CP

—

35.0

—

28.0

—

—

—

—

Lease liabilities

8.3

10.2

9.5

7.2

6.8

5.6

4.7

4.5

Fixed ratio (right scale)

61.8

53.1

54.0

60.1

64.1

69.7

73.2

76.2

Long-term ratio (right scale)

95.0

93.7

96.1

93.4

95.1

96.4

93.6

95.4

FY2019Net cash provided byfinancing activities(192,473)

558.9

Years ended March 31

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

Cash Flows

Total Assets / ROA (Operating
Income / Total Assets)

Billions of yen

Trillions of yen%

Trillions of yen

%

400

6.0

6

2.0

50

5.0

5

1.6

40

4.0

4
1.2

30

0.8

20

300

Total Equity / Total Equity Ratio

200
100
0
–100

3.0

3

2.0

2

1.0

1

–200
–300
–400

0
2015

2016

Cash flows from operating activities
Cash flows from financing activities

74

2017

2018

2019

Cash flows from investing activities

MITSUBISHI ESTATE CO., LTD. Integrated Report 201902015 2016 2017 2018 2019

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

3.0

10

2.5

8

Bonds / Average interest(right scale)

2.0

6

Total / Average interest(right scale)

1.5

4Bank loans / Average interest(right scale)

1.0

2
0

0.5

Duration of bonds

0
2012

0.4

10

0

0
2015 2016 2017 2018 2019

Total equity
Total equity ratio (right scale)Years ended March 31

2013

2014

2015

2016

2017

2018

2019

Duration of bonds

7.71

7.52

6.82

6.31

5.94

6.19

7.20

6.72

Bonds / Average interest (right scale)

1.72

1.54

1.55

1.52

1.41

1.38

1.32

1.24

Bank loans / Average interest (right scale)

0.87

0.72

0.70

0.62

0.61

0.66

0.75

0.71

Total / Average interest (right scale)

1.27

1.05

1.07

0.96

0.96

0.95

0.97

0.92
Years ended March 31

MITSUBISHI ESTATE CO., LTD. Integrated Report 201975

FINANCIAL SECTION

Matters Related to Rental Properties
Mitsubishi Estate and some of its consolidated subsidiaries own
office buildings and retail facilities in Tokyo and other major cities
in Japan as well as overseas, with the aim of obtaining rental
revenue from these buildings and facilities. Because certain
leased office buildings among these are used by the Company orsome of its consolidated subsidiaries, the Company has classified
such buildings as rental properties containing self-use space.
The following table shows the year-end amounts, changes inthese amounts during the period under review, and the fair valuesof investment and rental properties and other real estate that
includes portions used as investment and rental properties.


Fiscal Year Ended
March 31, 2019
(April 1, 2018, to
March 31, 2019)

The following table shows the profit and loss from rental
properties and other real estate that includes portions used as
investment and rental properties.


Fiscal Year Ended
March 31, 2019
(April 1, 2018, to
March 31, 2019)(April 1, 2017, to
March 31, 2018)

Fiscal Year Ended
March 31, 2018

Rental revenue

448,676

439,592

Rental costs

283,816

275,749

Difference

164,860

163,843(7,917)(4,745)

Other income (loss)

Number ofstocksTotal amount bookedon balance sheet(¥ million)

Unlisted Shares

88

9,500

Shares Other Than Unlisted Shares

66

229,301

Information on the number of shares for each company andamounts shown on the balance sheet for specific investment
shares and deemed holdings of equity shares are as follows.
Specific Investment Shares

Rental Properties Containing Self-Use Space
Rental revenue

Stocks held for purposes other than pure investment, the numberof shares, and their total value as of March 31, 2019, recorded on
the balance sheet are as follows.

(April 1, 2017, to
March 31, 2018)

Rental Properties

Millions of yen

Fiscal Year Ended
March 31, 2018

Millions of yen

Status of Shareholdings 40,83021,419Amountbooked on
Purposebalance sheet of holding(¥ million)
sharesRental Properties

Rental costs

30,825

16,872Company

Amounts recorded on the consolidated balance sheets

Difference

10,005

4,546

Mitsubishi Corporation

13,088,457

40,233

1*

(406)

(362)

Mitsubishi UFJ Financial Group, Inc.

32,325,842

17,7792* Balance as of the beginningof the period

3,480,147 Increase (decrease) during
the period(71,408) Balance as of the end of
the period

3,408,738

Market value as of the end of
the period
Unrealized gain

6,953,534
3,544,796(164,790)
3,480,147
6,768,625
3,288,478

Rental Properties Containing Self-Use Space
Amounts recorded on the consolidated balance sheets Balance as of the beginningof the period

480,436 Increase (decrease) during
the period

153,547

Other income (loss)

3,644,937

183,523
296,913 Balance as of the end of theperiod633,983

480,436

Market value as of the end of
the period

987,600

614,790

Unrealized gain

353,616

134,354

Notes:
1. The amounts included on the consolidated balance sheets presented in the table above are
equal to the total acquisition prices for applicable properties or real estate less the aggregate
amounts of depreciation and impairment loss for these properties or real estate.
2. Fair values as of the end of each consolidated fiscal year are as follows:(1) The fair values of domestic properties and real estate have been calculated by Mitsubishi
Estate, based mainly on the Japanese Real Estate Appraisal Standards.
(2) The fair values of overseas properties and real estate have been calculated mostly by
local appraisers.

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

Number ofsharesAGC Inc.

4,540,606

17,617

1*

Japan Airport Terminal Co., Ltd.

3,111,400

14,545

1*

Taisei Corporation

2,426,690

12,4733*

Mitsubishi Logistics Corporation

3,665,554

11,326

4*

Balance of Interest-Bearing Debt

Earnings per Share

Mitsubishi Heavy Industries, Ltd.

2,346,997

10,791

1*

Trillions of yen

Times

Yen

10

4,058,738

10,725

1*

100

Kirin Holdings Company, Limited
Central Japan Railway Company

367,900

9,458

3*

East Japan Railway Company

857,300

9,155

3*

HEIWA REAL ESTATE CO., LTD.

4,274,100

9,108

5*

Mitsubishi Electric Corporation

5,577,294

7,933

1*

NIKON CORPORATION

3,510,000

5,479

4*

Mitsubishi Materials Corporation

1,739,700

5,083

1*

TOYOTA MOTOR CORPORATION

598,462

3,882

1*

TOHO CO., LTD.

794,100

3,529

3*

Shin-Etsu Chemical Co., Ltd.

308,2122,860

1*Mitsubishi Chemical Holdings
Corporation

3,528,800

2,750

1*

2.5

net

net hghbri

2.0

8

80

1.5

6

60

1.0

4

0.5

2

0

0

40

20

0

2015 2016 2017 2018 2019

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

2015 2016 2017 2018 2019

Unrealized Gain on Rental
Properties

Obayashi Corporation

2,404,961

2,679

3*

Trillions of yen

SHIMIZU CORPORATION

2,738,650

2,634

3*

4.0

Odakyu Electric Railway Co., Ltd.

901,000

2,417

3*

Nippon Suisan Kaisha, Ltd.
3.0

2.0

2015 2016 2017 2018 20191*

3,760,000

Mitsubishi Research Institute, Inc.

598,500

2,001

4*1,275,900

1,881

5*

939,500

1,837

6*

THE HACHIJUNI BANK, LTD.

3,441,500

1,579

7*

Fukuoka Financial Group, Inc.

621,600

1,526

7*

RENAISSANCE INCORPORATED

0

2,357

Mitsubishi UFJ Lease & Finance
Company Limited

Seino Holdings Co., Ltd.

1.0

2,789,900

2,120

1*

Chiba Bank, Ltd.

1,852,000

1,113

7*

T&D Holdings, Inc.

850,500989

7*

JFE Holdings, Inc.

445,300

836

1*

TOKAI CARBON CO., LTD.

588,250

812

1*

THE SHIZUOKA BANK, LTD.

886,750747

7*SHIMADZU CORPORATION

233,476

747

1*

MITSUI GAS CHEMICAL COMPANY,
INC.

431,405681

1*2,340,000662

7*

NOHMI BOSAI LTD.

345,000

624

3*

KUBOTA Corporation

359,000

574

4*

NIPPON EXPRESS CO., LTD.

89,483551

4*Matsuya Co., Ltd.

545,300547

3*

1,509,000

531

7*

131,140522

3*1,186,500

506

7*

SHINAGAWA REFRACTORIES CO., LTD.

138,150

433

1*

The Chugoku Bank, Limited

343,000

356

7*

P.S. Mitsubishi Construction Co., Ltd.

496,000

328

1*

Kodensha Co., Ltd.

58,500279

3*Nippon Yusen Kabushiki Kaisha

143,421232

1*

Mitsubishi Steel Mfg. Co., Ltd.

112,472

172

4*

GS Yuasa Corporation

73,670159

1*Tokai Tokyo Financial Holdings, Inc.

380,300

152

7*

Gooddays Holdings Inc.

28,500118

5*Kyushu Financial Group, Inc.

256,410

115

7*

The 77 Bank, Ltd.

70,687109

7*NANTO BANK, LTD.

50,440104

7*Mitsubishi Kakoki Kaisha, Ltd.

66,586

101

4*

Mebuki Financial Group, Inc.

THE HYAKUGO BANK, LTD.
Tokyo Kaikan Co., Ltd.
Concordia Financial Group, Ltd.

1* To contribute to raising corporate value by maintaining and strengthening good relationships withtenants, principally in the Office Building Business
2* To contribute to fund procurement and raising corporate value by maintaining and strengthening
good relationships, principally in the Office Building Business
3* To contribute to raising corporate value by maintaining and strengthening collaborative relationships,
principally in the Office Building Business
4* To contribute to raising corporate value by maintaining and strengthening good relationships inbusinesses across the entire Group
5* To contribute to raising corporate value through business partnerships and joint businesses
6* To contribute to raising corporate value by maintaining and strengthening collaborative relationships,
principally in the Residential Business
7* Principally to contribute to stable fund procurement

Deemed Holdings of Equity Securities
Number ofsharesCompany

Amountbooked on
Purposebalance sheet of holding(¥ million)
sharesTokio Marine Holdings, Inc.

6,929,500

37,1558*

Mitsubishi Electric Corporation

10,656,000

15,1588*

Mitsubishi UFJ Financial Group, Inc.

4,306,400

2,368

8*

MITSUBISHI MOTORS CORPORATION

700,000411

8*

8* To maintain authority to exercise voting rights
Note: With regard to the largest stocks in terms of the amounts recorded on the balance sheet,specific investment shares and deemed holdings of equity securities for investment
purposes are not included in aggregate totals.

Years ended March 31

76

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

MITSUBISHI ESTATE CO., LTD. Integrated Report 201977

FINANCIAL SECTION

Consolidated Balance Sheets
Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
March 31, 2019 and 20182019

Millions of yen

Thousands of
U.S. dollars (Note 2)

2018

2019

AssetsLiabilities and net assets

Current assets:

Current liabilities:

Cash on hand and in banks (Notes 13 and 15)¥    176,814¥    287,153$   1,593,068

Notes and accounts receivable–trade (Note 13)

62,60344,670564,044

Marketable securities (Notes 13 and 14)

6,767

8,219

60,977

Allowance for doubtful receivables

(218)

(224)

(1,968)Inventories (Note 3)

361,455434,638

3,256,645

Equity investments (Notes 13 and 14)

387,385

365,933

3,490,272

Other current assets
Total current assets

78,061

77,299703,323

1,072,869

1,217,690

9,666,362

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

18,351

18,140165,342

Investment securities (Notes 13 and 14)

240,826

255,290

2,169,807

Asset for retirement benefits (Note 6)

23,93520,280215,657

Deferred income taxes (Note 7)

20,766

22,953

187,100

Other investments (Notes 4 and 13)

214,230

190,981

1,930,177

518,110507,646

4,668,085

Total investments

Property and equipment (Note 5):Land
Buildings and structures
Machinery and equipment and otherConstruction in progress
Less accumulated depreciation
Property and equipment, net

2,063,202

18,972,860

2018

2019

¥   372,992$ 3,533,847

57,967

61,169522,274

Accrued income taxes (Note 7)

19,62027,675

176,773

Advances and deposits

139,293

117,570

1,255,005

Accrued expenses and other current liabilities

79,84085,684

719,346

688,942665,091

6,207,248

Long-term debt (Notes 5 and 13)

1,922,783

2,103,893

17,323,936

Lease deposits received (Note 13)

440,058

414,3903,964,849

Total current liabilities
Long-term liabilities:

Liability for retirement benefits (Note 6)

26,573

26,847

239,419

Deferred income taxes (Note 7)

497,699

487,986

4,484,183

Negative goodwill

92,423

95,992

832,720

Other non-current liabilities

148,607

128,159

1,338,922

Total long-term liabilities

3,128,145

3,257,270

28,184,031

Total liabilities

3,817,088

3,922,362

34,391,279

			 Issued – 1,391,038,170 shares in 2019 and 1,390,908,105 shares in 2018

142,023

141,898

1,279,603

		Capital surplus

162,498

161,819

1,464,079

		Retained earnings

858,581763,277

7,735,663(5,278)(5,294)(47,556)

1,157,824

1,061,700

10,431,789

115,452

121,787

1,040,207

(64)

369

(584)

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

Total shareholders’ equity
Accumulated other comprehensive income:

676,572

678,420

6,095,797

2,711,109

2,538,917

24,426,610

		 Unrealized holding gain on securities

143,884

135,004

1,296,369

		 Deferred gain (loss) on hedging instruments

80,674142,127

726,860

		 Land revaluation reserve

526,623526,623

4,744,782

5,718,038

5,557,672

51,518,498

		 Foreign currency translation adjustments(30,144)(12,227)(271,596)(1,629,953)(1,575,800)(14,685,589)

		 Retirement benefits liability adjustments (Note 6)

952

95

8,579

4,088,084

3,981,871

36,832,908

Total accumulated other comprehensive income

612,819

636,648

5,521,390

302

326

2,721

186,159

180,412

1,677,264

Non-controlling interests

Total assets

2019¥   392,221

Stock acquisition rights
Intangible

Thousands of
U.S. dollars (Note 2)

Notes and accounts payable–trade (Note 13)

		 Less treasury stock, at cost

2,105,797

Land in trust

Short-term borrowings and current portion of long-term debt
(Notes 5 and 13)

Millions of yen

95,12894,241

857,089¥ 5,774,193¥ 5,801,450$ 52,024,445

Contingent liabilities (Note 11)
Total net assets

1,957,105

1,879,088

17,633,166

Total liabilities and net assets¥5,774,193¥5,801,450$52,024,445

See accompanying notes to consolidated financial statements.

78

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MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

79

FINANCIAL SECTION

Consolidated Statements of Income

Consolidated Statements of Changes in Net Assets

Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2019 and 2018

Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2019 and 2018

Millions of yen

Revenue from operations
Cost of revenue from operations (Note 3)

Thousands of
U.S. dollars (Note 2)

2019

2018

2019

¥1,263,283¥1,194,049$11,381,956(940,976)(890,237)(8,478,030)

Selling, general and administrative expenses(93,128)(90,765)(839,067)

Operating income

229,178

213,047

2,064,858

Other income (expenses):
Interest and dividend income
Interest expenses

7,581

5,849

68,306(23,503)(23,121)(211,758)

263

419

2,372

(2,580)(4,738)(23,249)(18,238)(21,590)(164,329)

210,939

191,457

1,900,529

Equity in earnings of unconsolidated subsidiaries and affiliates
Other, net (Note 12)
Profit before income taxes
Income taxes (Note 7):
Current(46,441)(57,334)(418,426)

Deferred(12,517)

3,626(112,778)

Profit(58,958)(53,707)(531,205)

151,981

137,749

1,369,323

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

(17,372)(17,305)(156,521)¥   134,608¥   120,443$ 1,212,801

Millions of yen

Commonstock

CapitalsurplusRetainedearnings

Treasury
stock

Total
shareholders’equityAccumulated othercomprehensive income
Unrealized
Deferred gain
holding(loss) on
gain (loss)
hedging
on securities
instruments¥141,659¥161,477¥674,259¥(5,489)¥   971,906¥109,644¥   73239

239

12,142
12,142
121,787

296
296
369

(6,334)(6,334)¥115,452

(434)
(434)
¥ (64)

Shareholders’ equity

Balance at April 1, 2017
Changes in the year:
Issuance of new shares
Cash dividends paid
Profit attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Land revaluation reserve (Note 1-h)Changes in the scope of consolidationChanges in equity related to transactions with
non-controlling shareholders
Net change in items other than those inshareholders’ equity
Total of changes in the year
Balance at April 1, 2018
Changes in the year:
Issuance of new shares
Cash dividends paid
Profit attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Land revaluation reserve (Note 1-h)Changes in the scope of consolidationChanges in equity related to transactions with
non-controlling shareholders
	Net change in items other than those inshareholders’ equity
Total of changes in the year
Balance at March 31, 2019(31,920)
120,443
0

(15)
509

(26)
221

103
239
141,898

342
161,819

124

124

478
(31,920)
120,443
(26)
205
509
103

89,017763,277

194(5,294)(37,477)
134,608(8)(1,818)

(18)
34

553

89,793
1,061,700
249(37,477)
134,608(18)
25(1,818)553

124¥142,023

678¥162,498

95,304¥858,581

16¥(5,278)Land
revaluation
reserve

Accumulated other comprehensive income
Foreign
Retirement
Total
currency benefits liability
accumulatedtranslation
adjustments
other compreadjustments(Note 6) hensive income¥527,128¥(13,363)

96,123¥1,157,824

See accompanying notes to consolidated financial statements.

Millions of yen

Consolidated Statements of Comprehensive Income
Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2019 and 2018
Millions of yen

Thousands of
U.S. dollars (Note 2)

2019

2018

2019

¥151,981¥137,749$1,369,323

Unrealized holding gain (loss) on securities(6,337)

12,144(57,103)

Deferred gain (loss) on hedging instruments

(384)

365

(3,462)—

4—

ProfitOther comprehensive income (Note 21):Land revaluation reserve
Foreign currency translation adjustments(17,407)95(156,834)

Retirement benefits liability adjustments

839

2,744

7,563

Share of other comprehensive income of companies
accounted for by the equity method

(913)

355

(8,226)

Total other comprehensive income (loss)(24,202)15,711(218,062)¥127,778¥153,461$1,151,260

Shareholders of Mitsubishi Estate Co., Ltd.

¥110,779¥136,731$   998,105

Non-controlling interests¥ 16,998¥ 16,730$   153,155

Comprehensive income (Note 21)
Total comprehensive income (loss) attributable to:

See accompanying notes to consolidated financial statements.

Balance at April 1, 2017
Changes in the year:
Issuance of new shares
Cash dividends paid
Profit attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Land revaluation reserve (Note 1-h)Changes in the scope of consolidationChanges in equity related to transactions with
non-controlling shareholders
	Net change in items other than those inshareholders’ equity
Total of changes in the year
Balance at April 1, 2018
Changes in the year:
Issuance of new shares
Cash dividends paid
Profit attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Land revaluation reserve (Note 1-h)Changes in the scope of consolidationChanges in equity related to transactions with
non-controlling shareholders
	Net change in items other than those inshareholders’ equity
Total of changes in the year
Balance at March 31, 2019¥(2,612)¥620,870

Stockacquisitionrights

Noncontrollinginterests

Total
net assets¥ 529¥174,154¥1,767,460
478(31,920)
120,443
(26)
205
509
—
103

(505)
(505)
526,623

1,135
1,135
(12,227)

2,708
2,708
95

15,777
15,777
636,648

(202)
(202)
326

6,258
6,258
180,412

21,833
111,627
1,879,088
249(37,477)
134,608(18)
25—(1,818)553——¥526,623(17,916)(17,916)¥(30,144)

856
856¥    952(23,829)(23,829)¥612,819

(24)
(24)
¥ 302

5,746
5,746
¥186,159(18,106)
78,017¥1,957,105

See accompanying notes to consolidated financial statements.

80

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MITSUBISHI ESTATE CO., LTD. Integrated Report 201981

FINANCIAL SECTION

Consolidated Statements of Changes in Net Assets (continued)

Consolidated Statements of Cash Flows

Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2019 and 2018

Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2019 and 2018
Millions of yen

Thousands of
U.S. dollars (Note 2)

2019

2018

2019

¥ 210,939
80,336
5,551(6,072)
561
—
—
—
(263)
(1,170)(3,227)(7,581)
23,503(16,174)
132,337(9,124)(7,379)25,599(12,144)415,690
7,688(23,606)(53,817)345,954¥ 191,457
77,545(1,378)(9)675(1,161)
5,508(1,513)(419)(49)(1,461)(5,849)23,121(2,340)86,614(53,837)
7,119
16,66915,574356,266
6,148(22,830)(46,244)
293,338$ 1,900,529
723,81350,019(54,713)
5,060
—
—
—
(2,372)(10,550)(29,082)(68,306)
211,758(145,726)
1,192,340(82,210)(66,484)
230,644(109,419)
3,745,297
69,271(212,693)(484,883)
3,116,991

10,258(3,236)
4,732(283,307)
13,871(8,258)18,981(12,491)
13,523(286,506)
5,277(17,240)

92,427(29,159)
42,635(2,552,552)
124,983(74,411)

16,738

3,916

150,808(9,319)(1,580)(10,980)(271,083)(7,154)—(5,147)(286,841)(83,970)(14,240)(98,934)(2,442,414)(73,021)
139,325(163,776)
21,185(66,162)

66,723
180,713(158,155)
75,715(85,075)(657,912)
1,255,299(1,475,596)
190,875(596,112)(502)(37,761)(11,759)(192,473)(1,796)(119,398)
286,859
13,903(2,055)¥ 179,308(80)(31,913)(10,724)
37,203(183)
43,517
243,341——¥ 286,859(4,523)(340,228)(105,951)(1,734,149)(16,189)(1,075,761)
2,584,555
125,267(18,523)$ 1,615,538

Thousands of U.S.dollars (Note 2)

Shareholders’ equity
Commonstock

Balance at April 1, 2017
$1,276,323
Changes in the year:
2,155
Issuance of new shares
Cash dividends paid
Profit attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Land revaluation reserve (Note 1-h)Changes in the scope of consolidationChanges in equity related to transactions with
non-controlling shareholders
	Net change in items other than those inshareholders’ equity
Total of changes in the year
2,155
Balance at April 1, 2018
1,278,479
Changes in the year:
1,123
Issuance of new shares
Cash dividends paid
Profit attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Land revaluation reserve (Note 1-h)Changes in the scope of consolidationChanges in equity related to transactions with
non-controlling shareholders
	Net change in items other than those inshareholders’ equity
Total of changes in the year
1,123
Balance at March 31, 2019$1,279,603

CapitalsurplusRetainedearnings$1,454,881$6,074,960

Treasurystock$(49,458) $ 8,756,707

2,153(287,598)
1,085,176
(2)

(141)
4,593

(238)
1,991

935
3,086
1,457,967$ 987,874$   665

109,405
109,405
1,097,279

2,668
2,668
3,333

(57,072)(57,072)$1,040,207(3,917)(3,917)$   (584)

4,308(287,598)
1,085,176
(238)
1,847
4,593
935

802,030
6,876,991

1,752(47,705)

809,024
9,565,732

(162)
311

2,247
(337,669)
1,212,801
(162)
232

1,123
(337,669)
1,212,801(78)(16,381)(16,381)

4,987
6,111
$1,464,079

Total
shareholders’equityAccumulated othercomprehensive income
Unrealized
Deferred gain
holding(loss) on
gain (loss)
hedging
on securities
instruments

4,987
858,672$7,735,663

149
866,057$(47,556) $10,431,789

Thousands of U.S.dollars (Note 2)Landrevaluation
reserve

Balance at April 1, 2017
$4,749,333
Changes in the year:
Issuance of new shares
Cash dividends paid
Profit attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Land revaluation reserve (Note 1-h)Changes in the scope of consolidationChanges in equity related to transactions with
non-controlling shareholders
	Net change in items other than those in(4,550)shareholders’ equity
Total of changes in the year
(4,550)
Balance at April 1, 2018
4,744,782
Changes in the year:
Issuance of new shares
Cash dividends paid
Profit attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Land revaluation reserve (Note 1-h)Changes in the scope of consolidationChanges in equity related to transactions with
non-controlling shareholders
	Net change in items other than those in—shareholders’ equity
Total of changes in the year—
Balance at March 31, 2019
$4,744,782

Accumulated other comprehensive income
Foreign
Retirement
Total
currency benefits liability
accumulatedtranslation
adjustments
other compreadjustments(Note 6) hensive income$(120,400)$(23,540)$5,593,931

Stockacquisitionrights$ 4,767

Noncontrollinginterests

Total
net assets$1,569,098 $15,924,504
4,308(287,598)
1,085,176
(238)
1,847
4,593
—
935

10,230
10,230(110,170)

24,401
24,401
860

142,154
142,154
5,736,086(1,828)(1,828)2,939

56,38956,3891,625,487

196,716
1,005,741
16,930,245
2,247(337,669)
1,212,801
(162)
232
—
(16,381)
4,987(161,426)(161,426)$(271,596)

7,718
7,718
$   8,579(214,696)(214,696)$5,521,390

(217)
(217)
$ 2,72151,777(163,137)
51,777
702,920$1,677,264 $17,633,166

Cash flows from operating activities
Profit before income taxes
Depreciation and amortization(Gain) loss on sales or disposal of property and equipment(Gain) loss on sales of securities
Valuation loss on equity investments
Gain on sales of shares of affiliated companies
Impairment loss
Gain on exchange from business combination
Equity in net income of affiliates
Increase (decrease) in allowances
Increase (decrease) in liability for retirement benefits
Interest and dividend income
Interest expense(Increase) decrease in notes and accounts receivable(Increase) decrease in inventories(Increase) decrease in equity investments
Increase (decrease) in notes and accounts payable
Increase (decrease) in lease deposits received
Other
		Subtotal
Interest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities
Proceeds from sales of marketable securities
Purchases of marketable securities
Proceeds from sales of property and equipment
Purchases of property and equipment
Proceeds from sales of investment securities
Purchases of investment securities
	Proceeds from sales of investments in subsidiaries
resulting in change in scope of consolidation
	Purchase of investments in subsidiaries
resulting in change in scope of consolidation (Note 15)
Payments for merger
Other
Net cash used in investing activities
Cash flows from financing activities
Net increase (decrease) in short-term borrowings
Increase in long-term borrowings
Repayment of long-term borrowings
Proceeds from issuance of corporate bonds
Repayment of corporate bonds	Purchase of investments in subsidiaries that do not
result in change in scope of consolidation
Cash dividends paid
Other
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Increase in cash and cash equivalents arising from newly consolidated subsidiaries
Cash and cash equivalents of subsidiaries excluded from consolidation
Cash and cash equivalents at end of year (Note 15)
See accompanying notes to consolidated financial statements.

See accompanying notes to consolidated financial statements.

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FINANCIAL SECTION

Notes to Consolidated Financial Statements
Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2019 and 2018

1

Significant Accounting Policies

a. Basis of preparation
The accompanying consolidated financial statements of Mitsubishi
Estate Co., Ltd. (the “Company”) and consolidated subsidiaries areprepared on the basis of accounting principles generally accepted inJapan, which are different in certain respects as to the application anddisclosure requirements of International Financial ReportingStandards, and are compiled from the consolidated financial statements prepared by the Company as required by the Financial
Instruments and Exchange Act of Japan.
The notes to the consolidated financial statements include information which may not be required under accounting principles generally
accepted in Japan but is presented herein as additional information.
As permitted by the Financial Instruments and Exchange Act ofJapan, amounts of less than one million yen have been rounded off. As
a result, the totals shown in the accompanying consolidated financial
statements (both in yen and U.S. dollars) do not necessarily agree withthe sums of the individual amounts.
Certain amounts in the prior year’s financial statements have been
reclassified to conform to the current year’s presentation.
b. Principles of consolidation
The accompanying consolidated financial statements include theaccounts of the Company and its consolidated subsidiaries that it
controls directly or indirectly. Companies over which the Company
exercises significant influence in terms of their operating and financial
policies have been included in the consolidated financial statements onan equity basis.
All significant intercompany balances and transactions have been
eliminated in consolidation.
c. Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain
estimates and assumptions that affect the amounts reported in thefinancial statements and accompanying notes. The actual results could
differ from those estimates.
d. Foreign currency translation
Current and non-current monetary accounts denominated in foreign
currencies are translated into yen at the current rates.
The revenue and expense accounts of the foreign consolidated
subsidiaries are translated using the average rate during the year.
Except for shareholders’ equity, the balance sheet accounts are alsotranslated into yen at the rates of exchange in effect at the balance
sheet date. The components of shareholders’ equity are translated attheir historical exchange rates.
e. Cash equivalents
The Company and its consolidated subsidiaries consider all highly
liquid investments that are readily convertible into cash and have an
original maturity of three months or less to be cash equivalents.
Reconciliation between cash in the balance sheets and cash equivalents
at March 31, 2019 and 2018 is presented in Note 15.
f. Marketable securities and investment securities
Securities other than those of subsidiaries and affiliates are classified
into three categories: trading, held-to-maturity or other securities.
Trading securities are carried at fair value and held-to-maturity
securities are carried at amortized cost. Marketable securities classified
as other securities are carried at fair value with any changes in

84

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

unrealized holding gain or loss, net of the applicable income taxes,
included directly in shareholders’ equity. Non-marketable securities
classified as other securities are carried at cost. Cost of securities soldis determined by the moving average method.
g. Inventories
Inventories are mainly stated at cost, determined by the identified cost
method. Net book value of inventories in the consolidated balance
sheets is written down when their net realizable values decline.
h. Property and equipment, depreciation and impairment
Property and equipment, except for land as discussed below, is statedat cost less accumulated depreciation. Depreciation of property, plantand equipment is calculated principally by the declining-balancemethod based on the estimated useful lives and the residual value
determined by the Company, except for certain buildings of theCompany and domestic consolidated subsidiaries acquired on or after
April 1, 1998 and facilities attached to buildings and other non-building
structures acquired on or after April 1, 2016, which are depreciated by
the straight-line method. Property and equipment of foreign subsidiaries
on which depreciation is calculated by the straight-line method at rates
determined based on the estimated useful lives of the respective
assets. The Company and its consolidated subsidiaries have capitalized
the costs incurred for significant renewals and additions; however,costs for maintenance and repairs are charged to income.
As of March 31, 2002, the Company revalued its land at fair value,
pursuant to Article 2 of the “Enforcement Ordinance for the Law
Concerning Revaluation Reserve for Land” and its amendments.
The related unrealized gain, net of applicable income taxes, has beenrecorded as “Land revaluation reserve” in net assets.
The Company and its consolidated subsidiaries review their property
and equipment (including land) for impairment whenever events orchanges in its business circumstances indicate that the carrying
amount of the assets may not be fully recoverable. They perform cash
flow analyses to determine if impairment exists. If impairment isdetermined to exist, any related loss on impairment is calculated
based on the cash flow analyses.
The useful lives of property and equipment are summarized as follows:	   Buildings and structures    2 to 75 years
i. Intangible
Intangible primarily consist of goodwill and land use rights. Goodwill isstated on the basis of cost and is being amortized over a period of 5
years or an estimated economical period on a straight-line basis. A
loss is recognized if the fair value falls below the carrying amount.
Land use rights are stated on a cost basis.
j. Retirement benefits
Accrued retirement benefits and prepaid pension cost for employees
have been recorded mainly at the amount calculated based on theretirement benefit obligation and the fair value of the pension plan
assets as of the balance sheet date.
The retirement benefit obligation for employees is attributed to eachperiod by the benefit formula method.
Actuarial gain or loss is amortized in the year following the year inwhich the gain or loss is recognized primarily by the straight-line
method over periods (mainly 1 year through 15 years), which areshorter than the average remaining years of service of employees.
Certain foreign consolidated subsidiaries have adopted the corridor
approach for the amortization of actuarial gain and loss.

Prior service cost is being amortized as incurred by the straight-line
method over periods (mainly 1 year through 10 years), which areshorter than the average remaining years of service of the employees.
k. Income taxes
Deferred tax assets and liabilities are determined based on thefinancial statements and the tax bases of assets and liabilities, using
the enacted tax rates in effect for the year in which the temporary
differences are expected to reverse. Deferred tax assets are also
recognized for the estimated future tax effects attributable to operating
loss carry forwards. Valuation allowances are established to reducedeferred tax assets if it is more likely than not that the some portion or
all of the deferred tax assets will not be realized.
l. Derivative financial instruments
The Company and certain of its consolidated subsidiaries utilize
derivative financial instruments for the purpose of hedging their
exposure to adverse fluctuations and changes in interest rates (interest
rate swaps) and foreign exchange rates (currency swaps), but do notenter into such transactions for speculative or trading purposes.
Derivative financial instruments are carried at fair value with any
changes in unrealized gain or loss charged or credited to operations,
except for those which meet the criteria for deferral hedge accounting
under which unrealized gain or loss is deferred as an asset or liability.
m. Revenue recognition
The consolidated statements of income reflect revenue from operationsin the following manner:(a)	Revenue from the leasing of office space is recognized as rent
accrued over the leasing period.
(b)	Revenue from sales of condominiums, residential houses and land
is recognized when the units are delivered and accepted by thecustomers. Revenue from consignment commissions for residential
sales earned by the real estate services business segment isrecognized at the time of contract conclusion for services provided
up to the conclusion and at the time of ownership transfer forservices provided up to the transfer.
(c)	Revenue from real estate brokerage is recognized when an underlying lease agreement goes into force or the underlying units are delivered.
(d) 	Revenue of construction contracts, of which the percentage ofcompletion can be reliably estimated, is recognized by the percentageof-completion method. The percentage-of-completion method is
calculated at the cost incurred by the end of the consolidated fiscal
year as a percentage of estimated total cost. The completedcontract method continues to be applied for other contracts forwhich the percentage of completion cannot be reliably estimated.
(e) 	Revenue from finance lease transactions and related costs arerecognized upon receipt of lease payments.
(f) Other operating revenue is recognized on an accrual basis.

2n. Appropriation of retained earnings
Under the Companies Act of Japan, the appropriation of retained
earnings with respect to a given financial year is made by resolution of
the shareholders at a general meeting held subsequent to the close ofsuch financial year. The accounts for that year do not, therefore, reflect
such appropriations. See Note 8 for more information.
o. Accounting standards issued but not yet effective
Accounting Standard and Implementation Guidance on Revenue
Recognition
On March 30, 2018, the ASBJ issued “Accounting Standard for Revenue
Recognition” (ASBJ Statement No. 29) and “Implementation Guidance on
Accounting Standard for Revenue Recognition” (ASBJ Guidance No. 30).
(1) Overview
	This is a comprehensive accounting standard for revenue recognition.
Specifically, the accounting standard establishes the following
five-step model that will apply to revenue from customers:
1. Identify the contract(s) with a customer
2. Identify the performance obligations in the contract
3. Determine the transaction price
4. Allocate the transaction price to the performance obligations in
the contract
5. Recognize revenue when (or as) the entity satisfies a performanceobligation(2) Scheduled date of adoption
	The Company expects to adopt the accounting standard andimplementation guidance from the beginning of the fiscal year
ending March 31, 2022.
(3)	Impact of the adoption of accounting standard and implementation
guidance	The Company is currently evaluating the effect of the adoptionof this accounting standard and implementation guidance on its
consolidated financial statements.
p. Change in presentation method
Application of “Partial Amendments to Accounting Standard for Tax
Effect Accounting” and relevant Guidances
The Group has applied the “Partial Amendments to AccountingStandard for Tax Effect Accounting” (ASBJ Statement No. 28, February
16, 2018) and relevant Guidances effective from the beginning of the
fiscal year ended March 31, 2019. Accordingly, deferred tax assets arepresented under “investments and other assets” and deferred tax
liabilities are presented under “long-term liabilities.”
As a result, a decrease of ¥11,351 million in deferred tax assets
under current assets and an increase of ¥9,112 million in deferred tax
assets under investments and other assets were recognized on the
consolidated balance sheet as of March 31, 2018. Additionally, deferred
tax liabilities under accrued expenses and other current liabilities
decreased by ¥393 million and deferred tax liabilities under long-term
liabilities decreased by ¥1,845 million.
Deferred tax assets and deferred tax liabilities of the same taxable
entity are offset, which resulted in a decrease of ¥2,239 million in total
assets in comparison to the amount before applying the amendments.

U.S. Dollar Amounts

Translation of yen amounts into U.S. dollar amounts is included solely forconvenience, as a matter of arithmetic computation only, at the rate of¥110.99 = U.S.$1.00, the approximate rate of exchange prevailing on

March 31, 2019. The inclusion of such amounts is not intended to imply
that yen amounts have been or could be readily converted, realized or
settled in U.S. dollars at the above or any other rate.

MITSUBISHI ESTATE CO., LTD. Integrated Report 201985

FINANCIAL SECTION

3

Inventories

Millions of yen

2019

Inventories at March 31, 2019 and 2018 were as follows:

1.262% unsecured bonds due 2021
Millions of yen

Thousands of U.S. dollars

2019

2018

2019

Real estate for sale

¥ 84,104¥ 95,391$   757,763

Land and housing projects in progress

268,152

327,2132,416,008

996

1,267

8,978

Other

8,201

10,76673,894

Total¥361,455¥434,638$3,256,645

Land held for development

Write-downs of inventories as a result of a decrease in profitability for the years ended March 31, 2019 and 2018 were ¥3,223 million ($29,042 thousand)and ¥2,950 million, respectively, and recognized in cost of revenue from operations.

4

Other Investments

Other investments at March 31, 2019 and 2018 were as follows:

Lease deposits
Long-term prepaid expenses and other
Total

5

Millions of yen

Thousands of U.S. dollars

2019

2018

2019

¥114,713¥108,097$1,033,547

99,51682,883896,629¥214,230¥190,981$1,930,177

Short-Term Borrowings and Long-Term Debt

At March 31, 2019 and 2018, short-term borrowings and the current portion of long-term debt consisted of the following:
Millions of yen

Thousands of U.S. dollars

2019

2018

2019

Loans, principally from banks¥ 86,156¥159,090$   776,253

Current portion of long-term debt

306,065

213,901

2,757,594

Total¥392,221¥372,992$3,533,847

The weighted-average interest rates per annum on short-term borrowings outstanding at March 31, 2019 and 2018 were 0.63% and 0.76%,
respectively. Short-term borrowings are principally unsecured.
At March 31, 2019 and 2018, long-term debt consisted of the following:
Millions of yen

Thousands of U.S. dollars

2019

2018

2019

1.65% unsecured bonds due 2018—¥  10,000—

2.005% unsecured bonds due 2018—

10,000—0.811% unsecured bonds due 2018—

10,000—3% unsecured bonds due 2018—

10,000

—1.84% unsecured bonds due 2018—

15,000

—1.72% unsecured bonds due 2018—

10,000—0.631% unsecured bonds due 2019¥  10,000

10,000$     90,098

1.87% unsecured bonds due 201915,00015,000135,147

1.62% unsecured bonds due 201910,00010,00090,0980.571% unsecured bonds due 201910,00010,00090,098

1.53% unsecured bonds due 201910,00010,00090,0981.975% unsecured bonds due 201910,00010,00090,0981.805% unsecured bonds due 201910,00010,00090,098

2.5% unsecured bonds due 2020

10,00010,00090,0981.165% unsecured bonds due 2020

10,00010,00015,00015,000135,147

0.54% unsecured bonds due 2021

15,00015,000135,147

86

MITSUBISHI ESTATE CO., LTD. Integrated Report 201915,000¥15,0002019$

135,147

1.103% unsecured bonds due 2021

20,00020,000180,196

1.095% unsecured bonds due 2021

10,00010,00090,0981.178% unsecured bonds due 2022

20,00020,000180,196

1.087% unsecured bonds due 2022

20,00020,000180,1961.026% unsecured bonds due 2022

30,00030,000270,294

2.42% unsecured bonds due 2022

10,00010,00090,0980.929% unsecured bonds due 2022

10,00010,00090,098

1.5% unsecured bonds due 2022

10,00010,00090,0982.075% unsecured bonds due 2023

10,00010,00090,098

0.09% unsecured bonds due 2023

20,000—180,1960.643% unsecured bonds due 2024

20,00020,000180,196

2.28% unsecured bonds due 2024

10,00010,00090,0981.067% unsecured bonds due 2024

10,00010,00090,098

0.19% unsecured bonds due 2025

10,00010,00090,0980.175% unsecured bonds due 2025

10,00010,00090,098

0.27% unsecured bonds due 2026

10,00010,00090,0982.305% unsecured bonds due 2027

10,00010,00090,098

0.24% unsecured bonds due 2027

10,00010,00090,0982.385% unsecured bonds due 2027

10,00010,00090,098

2.52% unsecured bonds due 2027

15,00015,000135,1472.425% unsecured bonds due 2027

10,00010,00090,0982.555% unsecured bonds due 2028

10,00010,00090,098

2.9% unsecured bonds due 2032

10,00010,00090,0982.615% unsecured bonds due 2032

10,00010,00090,0982.04% unsecured bonds due 2032

20,00020,000180,196

1.72% unsecured bonds due 2033

10,00010,00090,0980.859% unsecured bonds due 2036

10,00010,00090,0980.736% unsecured bonds due 2037

10,00010,00090,0980.703% unsecured bonds due 2037

10,00010,00090,0980.789% unsecured bonds due 2056

15,00015,000135,147

1.402% unsecured bonds due 2057

15,00015,000135,147

1.313% unsecured bonds due 2058

10,00010,00090,098

0.61% unsecured bonds inherited from DAINIPPON ENTERPRISE INC. due 2018

—

1,162

—

0.39% unsecured bonds inherited from DAINIPPON ENTERPRISE INC. due 2020

1,550

1,550

13,9650.102% unsecured bonds under Euro MTN program due 2025

1,111

1,111

10,013

0.16% unsecured bonds under Euro MTN program due 2029

1,255

—

11,311

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

75,00075,000675,736

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

75,00075,000675,736

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

70,00070,000630,687

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

30,00030,000270,294

Loans from banks and insurance companies:
Secured136,770

155,177

1,232,278

1,283,161

1,308,793

11,561,056

2,228,849

2,317,795

20,081,531

Unsecured

90,0980.577% unsecured bonds due 2020¥

Thousands of U.S. dollars

2018Less current portion(306,065)(213,901)(2,757,594)¥1,922,783¥2,103,893$17,323,936

MITSUBISHI ESTATE CO., LTD. Integrated Report 201987

FINANCIAL SECTION

The aggregate annual maturities of long-term debt subsequent to March 31, 2019 are summarized as follows:

6
Millions of yen

Thousands of U.S. dollars

2020¥   306,065$ 2,757,594

2021

208,455

1,878,146

2022

185,469

1,671,045

2023

153,507

1,383,076

2024

217,164

1,956,611

1,158,186

10,435,056

Year ending March 31,

2025 and thereafter
Total¥2,228,849$20,081,531

The assets pledged as collateral for short-term borrowings of ¥1,827 million ($16,464 thousand), long-term debt of ¥136,770 million ($1,232,278
thousand) and other current liabilities of ¥5,106 million ($46,490 thousand) at March 31, 2019 were as follows:
Millions of yen

Thousands of U.S. dollars

Buildings and structures¥208,427$1,877,890

Machinery and equipment

1,157

10,433

Land

210,172

Land in trust
Other property and equipment
Total

Retirement Benefit Plans

The Company and most of its domestic consolidated subsidiaries have either funded or unfunded defined benefit plans, defined contribution plans andlump-sum payment plans in the form of a defined benefit plan. The Company has adopted a retirement benefit trust for the lump-sum payment planand defined benefit plan. Rockefeller Group, Inc., a foreign consolidated subsidiary of the Company, has adopted defined benefit plans.
The simplified method, which assumes the retirement benefit obligation to be equal to the benefits payable if all eligible employees voluntarily
terminated their employment at the fiscal year end, has been adopted in accounting for defined benefit plans for some consolidated subsidiaries
and the Company’s executive officers.
The changes in the retirement benefit obligation during the years ended March 31, 2019 and 2018 are as follows:
Millions of yen

Thousands of U.S. dollars

2019

2018

2019

¥139,360¥137,489$1,255,611

Service cost

5,361

5,412

48,307

Interest cost

849

858

7,656

Actuarial gain and loss

(802)

3,361

(7,229)Retirement benefits paid

Retirement benefit obligation at the beginning of the year

(6,570)(5,365)(59,201)

Prior service cost

221

(771)

1,993

1,893,617

Translation adjustments

(380)

(570)

(3,424)

128,591

1,158,590

Other

522

(1,054)

4,711

2

21

¥138,562¥139,360$1,248,423¥548,352$4,940,553
Millions of yen

Thousands of U.S. dollars

Retirement benefit obligation at the end of the year

The changes in plan assets during the years ended March 31, 2019 and 2018 are as follows:
The following borrowings are non-recourse loans at March 31, 2019 and 2018, which are secured by collaterals as the sole source of recovery.
Millions of yen

Thousands of U.S. dollars

2019

2018

2019

Long-term borrowings¥24,529¥34,249$221,004

Expected return on plan assets

Total¥24,529¥34,249$221,004

Actuarial gain and loss

The assets pledged as collateral for the above non-recourse loans at March 31, 2019 and 2018 were as follows:
Millions of yen

Thousands of U.S. dollars

2019

2018

2019

¥25,900¥43,632$233,361

17,561

13,857

158,226

Construction in progress

—

7,465

—

Other property and equipment

—

2,921

—

¥43,462¥67,877$391,587

Buildings and structures
Land

Total

Plan assets at the beginning of the year

2019

2018

2019

¥132,508¥124,645$1,193,873

3,085

2,908

27,800

(677)

3,387

(6,099)Contributions by the Company

5,953

6,650

53,637Retirement benefits paid

(5,000)(3,693)(45,052)

Translation adjustments

(260)

(379)

(2,346)25(1,011)

226¥135,633¥132,508$1,222,037

OtherPlan assets at the end of the year

The following table sets forth the funded status of the plans and the amounts recognized in the consolidated balance sheets as of March 31,
2019 and 2018 for the Company’s and the consolidated subsidiaries’ defined benefit plans:Millions of yen

Thousands of U.S. dollars

2019

2018

2019

Funded retirement benefit obligation¥ 119,159¥ 121,741$ 1,073,602

Plan assets at fair value(135,633)(132,508)(1,222,037)(16,474)(10,766)(148,435)

19,403

17,618

174,821

Unfunded retirement benefit obligation
Net liability for retirement benefits in the balance sheet

2,928

6,852

26,386

Liability for retirement benefits

26,573

26,847

239,419

Asset for retirement benefits(23,935)(20,280)(215,657)

291

285

2,625

¥   2,928¥   6,852$    26,386

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

88

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MITSUBISHI ESTATE CO., LTD. Integrated Report 201989

FINANCIAL SECTION

The components of retirement benefit expense for the years ended March 31, 2019 and 2018 are as follows:

7
Millions of yen

Thousands of U.S. dollars

2019

2018

2019

Service cost

¥ 5,361¥ 5,412$ 48,307

Interest cost

849

858

7,656

Expected return on plan assets(3,085)(2,908)(27,800)

Amortization of actuarial loss

1,312

3,174

11,829Amortization of prior service cost

(106)

(267)

(956)

Other
Retirement benefit expenses

149

178

1,350

¥ 4,482¥ 6,447$ 40,387(*) Retirement benefit expenses for consolidated subsidiaries adopting the simplified method, which assumes the retirement benefit obligation to be equal to the benefits payable
if all eligible employees voluntarily terminated their employment at the fiscal year end, are included in “Service cost.”

The components of retirement benefits liability adjustments included in other comprehensive income (before tax effect) for the years ended
March 31, 2019 and 2018 are as follows:
Millions of yen

Thousands of U.S. dollars

2019

2018

2019

Prior service cost

¥ (336)¥   493$ (3,033)

Actuarial gain and loss

1,554

3,371

14,008

Total¥1,218¥3,864$10,974

The components of retirement benefits liability adjustments included in accumulated other comprehensive income (before tax effect) as ofMarch 31, 2019 and 2018 are as follows:
Millions of yen

Thousands of U.S. dollars

2018

2019

Unrecognized prior service cost

¥ (54)¥   277$ (491)

Unrecognized actuarial gain and loss

280

(1,270)

2,523

¥225

¥   (992)$2,031

The fair values of plan assets, by major category, as a percentage of total plan assets as of March 31, 2019 and 2018 are as follows:
Bonds
StocksGeneral accounts

The effective tax rates reflected in the consolidated statements of income for the years ended March 31, 2019 and 2018 differ from the effective
statutory tax rates for the following reasons:Statutory tax rate

2019

2018

30.62%

30.86%

Increase (decrease) in income taxes resulting from:Different tax rates applied(0.35)

1.63

Expenses not deductible for income tax purposes

0.21

0.22

Revenues deductible for income tax purposes(0.11)(0.46)

Change in valuation allowance(0.59)(0.94)

Undistributed earnings of affiliates

0.28

0.30

Equity income(0.28)(0.32)

Gain on negative goodwill(0.31)—

Effect of enacted changes in tax laws and rates on Japanese tax(0.04)(2.12)

Other(1.48)(1.09)

27.95%

28.05%

Effective tax rate
The significant components of deferred tax assets and liabilities as of March 31, 2019 and 2018 were as follows:

Millions of yen

Thousands of U.S. dollars

2019

2018

2019

¥   1,974¥   2,474$    17,787

11,521

11,274

103,807

Deferred tax assets:

2019

Total

Income Taxes

2019

2018

14%

14%

54%

55%

10%

10%

Other

22%

21%

Total

100%

100%

(*) Approximately 44% and 44% of total plan assets were held in the retirement benefit trust as of March 31, 2019 and 2018, respectively.

The expected return on plan assets has been estimated based on the anticipated allocation to each asset class and the expected long-term
returns on assets held in each category.
The assumptions used in accounting for the above plans were as follows:
2019

2018

Discount rates

0.0 ~ 4.04%

0.0 ~ 3.66%

Expected rates of return on plan assets

1.0 ~ 6.50%

1.0 ~ 6.75%

Rates of salary increase

0.4 ~ 4.0%

0.4 ~ 4.0%

Net operating loss carry forwards
Liability for retirement benefits
Valuation loss on inventories

4,075

7,248

36,719Unrealized loss on property and equipment

66,68568,180600,827

Unrealized loss on property and equipment by consolidation

10,644

10,807

95,909Loss on valuation of investment securities

2,626

2,695

23,665

Loss on valuation of equity investments

548

2,743

4,943

Land revaluation reserve

23,90323,903

215,370

Accrued bonuses

3,324

2,892

29,956

Other
Total gross deferred tax assets

63,993

66,174

576,570

189,299

198,396

1,705,557

Valuation allowance(79,125)(79,840)(712,909)

Total deferred tax assets

110,173

118,555

992,647

Deferred tax liabilities:
Reserves under Special Taxation Measures Law(60,693)(60,552)(546,840)

Land revaluation reserve(266,314)(265,679)(2,399,446)

Unrealized gain on property and equipment by consolidation(110,019)(109,050)(991,252)

Unrealized gain on property and equipment(64,134)(64,134)(577,839)

Unrealized gain on securities(49,113)(51,396)(442,507)

Other(36,831)(32,774)(331,843)

Total deferred tax liabilities(587,107)(583,588)(5,289,730)

Net deferred tax liabilities¥(476,933)¥(465,032)$(4,297,082)

The required contribution to defined contribution plans by the Company and its consolidated subsidiaries for the years ended March 31, 2019 and2018 are ¥500 million ($4,509 thousand) and ¥4,140 million, respectively.

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FINANCIAL SECTION

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

9

Future minimum lease payments subsequent to March 31, 2019 on noncancelable operating leases are summarized as follows:

Shareholders’ Equity
to ¥162,498 million ($1,464,079 thousand), and the legal reserveamounted to ¥21,663 million ($195,186 thousand) at March 31, 2019.
Such distributions can be made at any time by resolution of theshareholders or by the Board of Directors if certain conditions are met,
but neither the capital reserve nor the legal reserve is available for
distributions.

Millions of yen

Thousands of U.S. dollars

2020¥  7,718
230,545¥238,263$   69,538
2,077,171$2,146,710

2021 and thereafter
Total

The Company and its consolidated subsidiaries lease office buildings and commercial properties and earn income on these leases. Future
minimum lease income subsequent to March 31, 2019 from noncancelable operating leases is summarized as follows:Year ending March 31,

Amounts per Share

2020
Yen

U.S. dollars

2019

2018

2019

Basic

¥96.97¥86.78$0.87

Diluted

96.96

86.76

0.87

30.00

26.00

0.27

Yen

U.S. dollars

2019

2018

2019

¥1,275.54¥1,223.58$11.49Year ended March 31,

Year ending March 31,

2021 and thereafter
Total

Millions of yen

Thousands of U.S. dollars¥   312,193
1,349,862¥1,662,055$ 2,812,803
12,162,023$14,974,826

Millions of yen

Thousands of U.S. dollars¥61,0889¥61,097$550,397
83$550,481

Millions of yen

Thousands of U.S. dollars¥12,344$111,224

Net income:Cash dividends applicable to the year

As of March 31,

Net assets
Basic net income per share was computed based on the net income
available for distribution to shareholders of common stock and theweighted average number of shares of common stock outstanding
during the year, and diluted net income per share was computed basedon the net income available for distribution to the shareholders and theweighted average number of shares of common stock outstanding
during each year after giving effect to the dilutive potential of shares ofcommon stock to be issued upon the exercise of warrants and stock
subscription rights.

Amounts per share of net assets are computed based on net assets
available for distribution to the shareholders and the number of sharesof common stock outstanding at the year end.
Cash dividends per share represent the cash dividends proposed by
the Board of Directors as applicable to the respective years together
with the interim cash dividends paid.

11 Contingent Liabilities

At March 31, 2019, the Company and its consolidated subsidiaries had the following contingent liabilities:(1) Guarantee of loans

Guarantees of house purchasers’ loans from banks
Other
Total
(2) Guarantee for business undertakings

Business undertaking guarantees

Rockefeller Group International Inc. and Mitsubishi Estate Asia Pte. Ltd. provide business undertaking guarantees for property development
projects in proportion to their share.
Mitsubishi Estate Asia Pte. Ltd. and MEA Commercial Holdings Pte. Ltd. provide business undertaking guarantees for property development
projects. The amount exceeding the proportion of their share is collateralized or guaranteed by the joint venture.

10 Leases

LessorInvestments in leases included in other current assets on the consolidated balance sheets as of March 31, 2019 and 2018 consisted of the following:
Millions of yen

Thousands of U.S. dollars

2019

2018

2019

Gross lease receivables¥ 8,068¥13,596$ 72,699

Unearned interest income(3,476)(6,493)(31,326)

Investments in leases¥ 4,592¥ 7,101$ 41,373

12 Other Income (Expenses)

The components of “Other, net” in “Other income (expenses)” for the years ended March 31, 2019 and 2018 were as follows:

Gain on sales of shares of affiliated companies
Gain on sales of fixed assets
Gain on negative goodwill
Gain on sales of investment securities

Maturities of lease investment assets for finance leases that are not deemed to transfer ownership of the leased property to the lessee asof March 31, 2019 are as follows:Year ending March 31,

2020
2021
2022
2023
2024
2025 and thereafter
Total

Millions of yen

Thousands of U.S. dollars¥   279
279
279
279
279
6,673
¥8,068$ 2,514
2,514
2,514
2,514
2,514
60,129$72,699

Gain on exchange from business combination
Loss on disposal of fixed assets
Loss related to retirement of fixed assets
Impairment loss(*1)
Other, net(*1) Impairment loss
The Company recorded consolidated impairment losses for the following asset groups for theyear ended March 31, 2019:
Disclosure for the year ended March 31, 2019 is omitted due to immateriality.
The Company recorded consolidated impairment losses for the following asset groups for theyear ended March 31, 2018:
Major Application
Leased assets, etc.
(total 18 groups)

Category

Location

Land, Buildings, etc.

Arizona, U.S.A., etc.

Millions of yen

Thousands of U.S. dollars

2019

2018

2019

—
—
¥ 2,097
6,072—(5,761)(3,818)—(1,171)¥(2,580)¥ 1,161
12,044——
1,513(5,746)(8,259)(5,508)56¥ (4,738)——$ 18,901
54,713—(51,910)(34,400)—(10,553)$(23,249)

groups, consisting of those for which the market prices fell considerably compared with the bookvalues due to the decline of land prices and those for which profitability decreased considerably
due to fallen rent levels or deteriorated market conditions, etc., were reduced to the respective
collectible amounts and such reductions were recorded as impairment losses in the amount of¥5,508 million.
The breakdown of such impairment losses was ¥2,463 million in land and ¥3,045 million inbuildings and structures.
The collectible amounts of asset groups are measured using net sale value or use value, andthe net sale value is principally expressed as an appraised value by a real estate appraiser.
Future cash flows mainly discounted at a rate of 5% are used to compute the use value.

Asset grouping for the Company and its consolidated subsidiaries (collectively, the “Group”) was
made based on a minimum unit that generates cash flows, which is substantially independent
from cash flows of other assets or asset groups. Company condominiums are regarded asshared assets. As a result, for the year ended March 31, 2018, the book values of 18 asset

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FINANCIAL SECTION

13 Financial Instruments

Overview(1) Policy for financial instruments
In consideration of plans for capital investment, the Group raises funds
mainly through bank borrowings and bond issues. In terms of fundmanagement, the Group makes every effort to avoid market risks byemphasizing liquidity and shortening the fund management period.
The Group uses derivatives for the purpose of hedging exposure tointerest rates, reducing interest expenses, and hedging the risk offluctuations in foreign exchange rates and does not enter into derivatives for speculative purposes.
(2) Types of financial instruments and related risk
Trade receivables – notes and accounts receivable – are exposed tocredit risk in relation to customers. Trade receivables denominated inforeign currencies, which arise from overseas operation, are exposed
to foreign currency exchange risk.
Marketable securities and investment securities are exposed tomarket risk. Those securities are composed of mainly held-to-maturity
debt securities and the shares of common stock of other companies
with which the Group has business relationships.
Equity investments are composed of mainly preferred equity
investments in special purpose companies under the Law concerning
Liquidation of Assets, investments in real estate investment trusts andinvestments in silent partnerships for special purpose companies.
They are exposed to credit risks of issuers, risks of fluctuations ininterest rates and market prices, respectively.
Lease and guarantee deposits for leased assets are exposed tocredit risks of customers.
Substantially all trade payables – accounts and notes payable – havepayment due dates within one year. Some of them denominated inforeign currencies are exposed to foreign currency exchange risk.
Borrowings and bonds are taken out principally for the purpose of
making capital investments and the repayment dates of the long-term
debt extend up to 57 years from the balance sheet date. Certain
long-term debt with variable interest rates is exposed to interest rate
fluctuation risk. However, to reduce such risk for long-term debt
bearing interest at variable rates, the Group utilizes derivative transactions (interest rate swaps) as hedging instruments.
Derivative transactions include interest rate swaps, currency swaps
and forward foreign exchange contracts. The Group also enters into
interest rate swap transactions to fix interest expense for long-term
debt bearing interest at variable rates and to reduce interest rate
fluctuation risk. Some of the consolidated subsidiaries enter into
interest swap and currency swap transactions in accordance with thesame policies and purposes adopted by the Company.

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

Estimated Fair Value of Financial Instruments
Carrying value of financial instruments on the consolidated balance sheet as of March 31, 2019 and unrealized gains (losses) are shown in thefollowing table. The following table does not include financial instruments for which it is extremely difficult to determine the fair value.
(Please refer to Note B below).
Millions of yen

Thousands of U.S. dollars

2019
Carrying
Value

1) Cash on hand and in banks2) Notes and accounts receivable–trade
		 Allowance for doubtful receivables (*1)

Estimated
Fair Value

Estimated
Fair Value

Difference— $ 1,593,068 $ 1,593,068—

Difference¥  176,814 ¥   176,814
62,603564,044(218)
62,384

Carrying
Value(1,968)62,384

—

5,700

5,718

¥    17230,844

230,844

—

60

974

913

13,80113,801—

562,075

562,075—

51,35751,519$    161

2,079,871

2,079,871

—

549

8,783

8,233

124,352

124,352—$  8,395

3) Securities and investment securities
		 (i) Held-to-maturity debt securities
		 (ii) Other securities
		 (iii) Investments in subsidiaries and affiliates
4) Equity investments
Total assets¥  489,607 ¥   490,539¥   931 $ 4,411,275 $ 4,419,671

1) Notes and accounts payable–trade¥   57,967 ¥   57,967— $   522,274 $   522,274—

2) Short-term borrowings

86,15686,156—776,253776,253—

3) Current portion of long-term borrowings

231,065

231,065—

2,081,857

2,081,857—

4) Current portion of long-term bonds

75,00075,000—675,736

675,736—5) Long-term bonds

733,916

772,387¥38,470

6,612,459

6,959,072$346,613

6) Long-term borrowings

1,188,866

1,217,104

28,237

10,711,476

10,965,895

254,419

Total liabilities¥2,372,972 ¥2,439,681¥66,708 $21,380,058 $21,981,091$601,032

Millions of yen

2018
Carrying
Value

1) Cash on hand and in banks2) Notes and accounts receivable–trade
		 Allowance for doubtful receivables(*1)

Estimated
Fair Value

Difference¥  287,153 ¥  287,153—

44,670(224)
44,44544,445

—

7,240

7,245

¥    5

248,092

248,092

—

60

1,444

1,383

11,534

11,534—

Total assets¥  598,527 ¥  599,915¥ 1,3881) Notes and accounts payable–trade¥   61,169 ¥   61,169—

3) Securities and investment securities
		 (i) Held-to-maturity debt securities
		 (ii) Other securities
		 (iii) Investments in subsidiaries and affiliates
4) Equity investments2) Short-term borrowings

159,090

159,090—

3) Current portion of long-term borrowings

147,739

147,739—

4) Current portion of long-term bonds

66,162

66,162—5) Long-term bonds

787,661825,636¥37,974

6) Long-term borrowings

1,316,232

1,335,031

18,798

Total liabilities¥2,538,055 ¥2,594,828¥56,773(*1) The value of notes and account receivable-trade is shown at net value, after deducting allowance for doubtful accounts.

94

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

MITSUBISHI ESTATE CO., LTD. Integrated Report 201995

FINANCIAL SECTION

Note A: Methods to determine the estimated fair value of financial instruments and othermatters related to securities and derivative transactions
AssetsCash on hand and in banks
			Since these items are settled in a short period of time, their carrying value approximatesfair value.
Notes and accounts receivable – trade			Since these items are settled in a short period of time, their carrying value approximatesfair value.
Marketable securities and investment securities			The fair value of stocks is based on quoted market prices. The fair value of debt securities ismainly based on prices provided by the financial institutions making markets in thesesecurities. For information on securities classified by holding purpose, please refer to Note
14. “Marketable Securities and Investment Securities.”
Equity investments
			 The fair value of equity investments is based on quoted market prices.
Liabilities
Notes and accounts payable – trade			Since these items are settled in a short period of time, their carrying value approximatesfair value.
Short-term borrowings
			Since these items are settled in a short period of time, their carrying value approximatesfair value.
Current portion of long-term borrowings
			Since these items are settled in a short period of time, their carrying value approximatesfair value.
Current portion of bonds
			Since these items are settled in a short period of time, their carrying value approximatesfair value.
Bonds
			 The fair value of bonds is based on the quoted market price.
Long-term borrowings
			Since variable interest rates of certain long-term borrowings are determined based on
current interest rates in a short period of time, their carrying value approximates fair value.
The fair value of long-term borrowings with fixed interest rates is based on the present
value of the total of principal and interest discounted by the interest rates to be applied if
similar new borrowings were entered into.
Derivatives transactions
			 Please refer to Note 16. “Derivatives and Hedging Activities.”

Millions of yen

Thousands of
U.S. dollars

14 Marketable Securities and Investment Securities

2019(i) Unlisted stocks (*1)

¥ 28,689$   258,483(ii) Equity investments (*2)

373,583

3,365,920(iii) Lease and guarantee deposit receivables (*3)

114,713

1,033,547(iv) Lease and guarantee deposit payables (*4)

440,058

3,964,849

Marketable and investment securities classified as other securities at March 31, 2019 and 2018 are summarized as follows:(i) Unlisted stocks (*1)

¥ 25,605(ii) Equity investments (*2)

354,399(iii) Lease and guarantee deposit receivables (*3)

108,097(iv) Lease and guarantee deposit payables (*4)

414,390(*1) Because no quoted market price is available and it is extremely difficult to determine the fairvalue, unlisted stocks are not included in the above table.
(*2) Because it is extremely difficult to determine the fair value for equity investments which are
not listed and have no quoted market price, they are not included in the above table.
(*3) Because no quoted market price for lease and guarantee deposit receivables for rental properties
is available and calculation of the actual period of duration from lease initiation to evacuation isdifficult, it is extremely difficult to estimate a reasonable amount of cash flow and therefore they
are not included in the above table.
(*4) Because no quoted market price for lease and guarantee deposit payables for rental properties
is available and calculation of the actual period of duration from lease initiation to evacuation isdifficult, it is extremely difficult to estimate a reasonable amount of cash flow, and therefore
they are not included in the above table.

Thousands of U.S. dollars

Unrealized
Gain (Loss)

2019

Millions of yen

2018

Millions of yen

Cost

Fair Value

Unrealized
Gain (Loss)¥63,722
6,976
70,698¥221,237
13,803
235,040¥157,514
6,827
164,342$574,130 $1,993,310 $1,419,179
62,852
124,365
61,512636,983 2,117,675 1,480,692

9,417
25
—
1,154
10,597¥81,295

8,559
25
—
1,020
9,605
¥244,646

(857)
—
—
(133)
(991)
¥163,350

84,85077,123(7,726)
229
229
—
—
—
—
10,398
9,195(1,203)
95,47886,548(8,930)$732,461 $2,204,224 $1,471,762

Cost

Fair Value

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

Millions of yen

2018
Cost

Fair Value

Unrealized
Gain (Loss)¥74,928
6,491
81,420¥242,285
11,535
253,820¥167,357
5,043
172,400

2,375
—
—
3,751
6,126
¥87,546

2,186
—
—
3,619
5,805
¥259,626

(188)
—
—
(132)
(321)
¥172,079

Securities whose fair value exceeds their cost:
Equity securities
Other
		Subtotal

Note B: Financial instruments for which it is extremely difficult to determine the fair value
Note C: Redemption schedule for receivables and marketable securities with maturities
Millions of yen

As of March 31, 2019
Cash on hand and in banks
Notes and accounts receivable–tradeMarketable securities and investment securities:
Held-to-maturity debt securities
National and local government bonds
Corporate bonds
Other
Other marketable securities with maturities:
National and local government bonds
Other
Total

Thousands of U.S. dollars

Due in One
Year or Less

Due after One
Year through FiveYears

Due after Five
Years through Ten
Years

Due after
Ten Years

Due in One
Year or Less

Due after One
Year through FiveYears

Due after Five
Years through Ten
Years

Due after
Ten Years¥176,814
62,603

—
—

—
—

—
—

$1,593,068
564,044

—
—

—
—

—
—

215
2,200
2,896

¥247
—
—

¥105
—
—

¥25
—
—

1,937
19,821
26,095$2,233——$  946
—
—

$225
—
—

—
1,013
¥245,742

25
91
¥364

—
301
¥406

—
—
¥25

—
9,127
$2,214,094

225
823$3,282—
2,712$3,658——$225

Due in One
Year or Less

Due after One
Year through FiveYears

Due after Five
Years through Ten
Years

Cash on hand and in banks
Notes and accounts receivable–tradeMarketable securities and investment securities:
Held-to-maturity debt securities
National and local government bonds
Corporate bonds
Other
Other marketable securities with maturities:
National and local government bonds
Other
Total

Due after
Ten Years¥287,153
44,670

—
—

—
—

—
—

—
4,500
—

¥   294
2,200
—

¥125
—
—

—
—
—

—
3,623
¥339,947—
32¥2,526

—
338
¥463

—
—
—

Due in One
Year or Less

Due after One
Year throughTwo Years

Due after Two
Years throughThree Years¥ 75,000
231,065¥306,065¥ 51,550
156,905¥208,455¥ 65,000
120,469¥185,469

Due after One
Due in One
Year throughYear or Less
Two Years

Due after Two
Years throughThree Years

Due afterThree Years Due after Four
through Four Years throughYears
Five Years¥ 90,000
63,507¥153,507¥ 20,000
197,164¥217,164

Corporate bonds
Long-term borrowings
Total

96

¥ 66,162
147,739¥213,901¥ 75,000
241,163¥316,163¥ 51,550
158,854¥210,404

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

Due afterThree Years Due after Four
through Four Years throughYears
Five Years¥ 65,000
110,001¥175,001¥ 90,000
66,702¥156,702

		Subtotal
Total

Proceeds from sales of securities classified as other securities totaled ¥12,364 million ($111,400 thousand) and ¥14 million for the years ended
March 31, 2019 and 2018, respectively. Gross realized gains were ¥6,072 million ($54,713 thousand) and ¥8 million for the years ended March 31,
2019 and 2018, respectively.
The Company and its consolidated subsidiaries recognized ¥195 million ($1,765 thousand) and ¥675 million of impairment loss on investment
securities for the years ended March 31, 2019 and 2018, respectively.

Millions of yen

Thousands of U.S. dollars

Amortized Cost

Fair Value

Unrealized
Gain (Loss)

Amortized Cost

Fair Value

Unrealized
Gain (Loss)¥   603—603¥   621
—
621

¥18
—
18

$ 5,438—
5,438$ 5,602
—
5,602

$163
—
163

—
2,200
2,896
5,096
¥5,700

—
2,199
2,896
5,096
¥5,718

—
(0)
—
(0)
¥17

—
19,82326,09545,919$51,357—
19,821
26,09545,916$51,519

—
(2)
—
(2)
$161

Debt securities whose fair value exceeds their cost:
Government bonds
Corporate bonds
Thousands of U.S. dollars

Due after
Five Years

Due in One
Year or Less

Due after One
Year throughTwo Years

Due after Two
Years throughThree Years¥   507,366
650,820¥1,158,186$   675,736
2,081,857$2,757,594$   464,456
1,413,690$1,878,146$   585,638
1,085,407$1,671,045

Millions of yen

As of March 31,
2018

Corporate bonds

2019

Millions of yen

Corporate bonds
Long-term borrowings
Total

Government bonds

Marketable debt securities classified as held-to-maturity securities at March 31, 2019 and 2018 are summarized as follows:

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

As of March 31,
2019

Equity securities

Other

Millions of yen

As of March 31, 2018

Securities whose cost exceeds their fair value:

Due afterThree Years Due after Four
through Four Years throughYears
Five Years$   810,883
572,192$1,383,076$   180,196
1,776,414$1,956,611

Due after
Five Years$ 4,571,284
5,863,771$10,435,056

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

Due after
Five Years¥   506,111
739,510¥1,245,622

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

97

FINANCIAL SECTION

16 Derivatives and Hedging Activities

Millions of yen

2018
Amortized Cost

Fair Value

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

¥   440
2,504
2,945

¥10
0
11

—
4,207
98
4,306
¥7,240

—
4,201
98
4,300
¥7,245

—
(6)
—
(6)
¥ 5

(1) Currency related transactions
Millions of yen

Thousands of U.S. dollars

2019

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

Class of transactions

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

Subject to hedge accounting

Currency swap contracts by
Corporate bonds andallocation method
Payment in JPY and receipt in USD Long-term borrowings
Payment in JPY and receipt in EUR
Total

Marketable securities with maturities of three months or less
Cash and cash equivalents

Class of transactions

Subject to hedge accounting

Currency swap contracts by
Corporate bonds andallocation method
Long-term borrowings
Payment in JPY and receipt in USD
Total
Millions of yen

Thousands of U.S. dollars

2019

2018

2019

¥176,814(1,002)
3,496¥179,308¥287,153(392)
98¥286,859$1,593,068(9,031)
31,501$1,615,538

A breakdown of assets and liabilities at the start of consolidation of Marunouchi Hotel, CO., LTD., a new subsidiary resulting from the acquisitionof shares, along with details regarding the share acquisition cost and related payments are presented below.

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

Millions of yen

Thousands of U.S. dollars

2019

2018

2019

¥ 1,049
8,995(551)(3,920)(1,285)(2,097)2,189(1,380)487(881)¥   414

—
—
—
—
—
—
—
—
—
—
—

$   9,459
81,045(4,972)(35,322)(11,585)(18,901)
19,723(12,436)
4,392(7,942)$   3,736

Fixed assets
Goodwill
Current liabilities
Fixed liabilities
Non-controlling interests
Acquisition cost
Cash and cash equivalents of subsidiary
Payments for acquisition

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

Fair Value

¥(15)
¥(15)

$141,624$141,624$141,624$141,624$(137)$(137)

Notional
AmountDue after
One Year

Fair Value¥14,463¥14,463¥14,463¥14,463¥(666)¥(666)

Calculation method of fair value is based on the data obtained from financial institutions.
(2) Interest related transactions
Millions of yen

Thousands of U.S. dollars

2019Class of transactions

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

Subject to hedge
accounting

Long-term borrowings
Long-term borrowings

Notional
AmountDue after
One Year

Fair Value¥ 70,703 ¥ 70,551¥86

249,366 171,785¥320,069 ¥242,336

Notional
AmountDue after
One Year

Fair Value$   637,025 $   635,656$777(*) 2,246,742 1,547,753¥86 $2,883,768 $2,183,409

(*)
$777

Millions of yen

2018Class of transactions

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

Subject to hedge
accounting

Long-term borrowings
Long-term borrowings

Notional
AmountDue after
One Year

Fair Value¥ 68,614 ¥ 68,614¥679

264,628 248,954¥333,242 ¥317,568

(*)
¥679

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

(3) Interest and currency related transaction

Millions of yen

Thousands of U.S. dollars

2019

2018

2019

¥ 3,473
10,945
1,104(7,084)
(873)
(202)
7,363
(2,372)¥ 4,990

—
—
—
—
—
—
—
—
—

$ 31,292
98,619
9,947(63,827)(7,868)(1,820)66,343(21,380)$ 44,963

The value of assets and liabilities for other companies that were newly consolidated as result of the acquisition of shares is immaterial, and has
therefore been omitted.
Disclosure for the year ended March 31, 2018 is omitted due to immateriality.

98¥15,718¥15,718

Due after
One Year(*) The estimated fair value of interest rate swap contracts is included in the estimated fair value of long-term borrowings since amounts in such derivative contracts accounted for by the short-cut
method are handled together with long-term borrowings (including current portion of long-term borrowings) that are subject to hedge accounting.

A breakdown of assets and liabilities at the start of consolidation of Urban Life Co., Ltd., a new subsidiary resulting from the acquisition ofshares, along with details regarding the share acquisition cost and related payments are presented below.

Current assets¥15,718¥15,718

Fair Value

Notional
Amount2018

The following table represents a reconciliation of cash and cash equivalents as of March 31, 2019 and 2018:

Time deposits with maturities of more than three months

Due after
One Year

Millions of yen

15 Supplemental Cash Flow Information

Cash on hand and in banks

Notional
AmountMillions of yen

Thousands of U.S. dollars

2019Class of transactions

Interest rate and currency swap
contracts by short-cut method andallocation methodPayment in JPY and receipt in USD
Fixed rate payment and floating rate receipt
Total

Subject to hedge
accounting

Notional
AmountDue after
One Year

Fair Value

Notional
AmountDue after
One Year

Fair Value¥49,400¥49,400¥49,400¥49,400¥(4,893) $445,088¥(4,893) $445,088$445,088$445,088$(44,089)$(44,089)

Long-term borrowings

Millions of yen

2018Class of transactions

Interest rate and currency swap
contracts by short-cut method andallocation methodPayment in JPY and receipt in USD
Fixed rate payment and floating rate receipt
Total

Subject to hedge
accounting

Notional
AmountDue after
One Year

Fair Value¥49,400¥49,400¥49,400¥49,400¥(6,940)¥(6,940)

Long-term borrowings

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

MITSUBISHI ESTATE CO., LTD. Integrated Report 201999

FINANCIAL SECTION

17 Segment Information(5) Investment Management Business; (6) Hotel and Airport Business;(7) Architectural Design and Engineering Business; (8) Real Estate
Services Business; and (9) Other businesses.
Due to partial changes in the organization of the Company, theCompany changed the segment classification from the year ended March
31, 2019. The hotel development business, which had been included in
the lifestyle property business segment until the previous fiscal year,
the hotel operation business, which had been included in the hotelbusiness segment until the previous fiscal year, and the resort hotel
development business, airport operation business, etc., which had
been under evaluation as potential new businesses, were transferred
into the newly established Hotel and Airport Business segment.
Segment information for the year ended March 31, 2018 has been
restated to reflect these changes.

The reportable segments of the Group are components for which
discrete financial information is available and whose operating results
are regularly reviewed by the Board of Directors and other committees
to make decisions about resource allocation and to assess performance.
Business performances are aggregated according to business areasthat consist of multiple business groups and defined as organizational
units having common business objectives and management responsibilities within the Group, and such aggregated business areas aredisclosed as reportable segments.
The Company and its consolidated subsidiaries are primarily engaged
in the real estate business. Their business segments are classified interms of the nature of each operation or service and consist of thefollowing segments: (1) Office Building Business; (2) Lifestyle Property
Business; (3) Residential Business; (4) International Business;

The reportable segment information of the Company and its consolidated subsidiaries for the years ended March 31, 2019 and 2018 aresummarized as follows:
Millions of yen

2 019
Reportable segments

OfficeBuilding
BusinessRevenue, operating
income and assets byreportable segment
Revenue from:
External customers

Lifestyle
Property
Business

Investment
Residential International Management
Business
Business
Business

Architectural
Hotel and Design and
Airport Engineering
Business
Business

Real Estate
Services
Business

Subtotal

Other

2018
Reportable segments

Impairment loss

OfficeBuilding
Business

Lifestyle
Property
Business—¥1,972

Investment
Residential International Management
Business
Business
Business¥186¥2,273¥941

Architectural
Hotel and Design and
Airport Engineering
Business
Business¥13—

Real Estate
ServiceBusiness

Subtotal

Other—¥5,388¥120

Eliminations
Total or Corporate Consolidated¥5,508—¥5,508The following tables present the amortization and balance of goodwill as of and for the years ended March 31, 2019 and 2018 by reportablesegment:
Millions of yen

2019
Reportable segmentsAmortization of
goodwill
Balance of goodwillAmortization ofnegative goodwill
Balance of negative
goodwill

Investment
Residential International Management
Business
Business
Business

Architectural
Hotel and Design and
Airport Engineering
Business
Business

OfficeBuilding
Business

Lifestyle
Property
Business

Real Estate
Services
Business

Subtotal

Other¥   409—¥    69—¥  303¥4,834¥ 64¥208¥1,983¥9,180————¥  451¥5,570¥  3,282¥ 19,794——¥  3,282¥ 19,794——¥  3,282¥ 19,794

—

—

—

—

—

—

—

—

—

—

—

—

—

¥99,466¥12,751

—

—

—

—

—

—

¥112,217—¥112,217—¥112,217

Eliminations
Total or Corporate Consolidated

Thousands of U.S. dollars

2019
Reportable segments¥104,209¥418,967¥ 80,874¥47,701¥41,763¥16,969¥32,428¥1,262,055¥ 1,228¥1,263,283—¥1,263,283

10,553

1,973

1,438

969

1,886

2,408

7,702

1,158

28,091

6,878

34,969¥ (34,969)—

Total revenue

529,695

106,182

420,405

81,844

49,58844,171

24,67133,586

1,290,146

8,106

1,298,252(34,969)

1,263,283

Segment income (loss)

147,691

32,56030,42826,927

9,231

2,371

2,021

2,603

253,835(196)

253,638(24,459)

229,178

Segment assets¥3,551,450¥520,707¥665,788¥692,325¥68,977¥71,175¥27,992¥28,739¥5,627,156¥13,408¥5,640,565¥133,628¥5,774,193

Other items
Depreciation andamortization

50,283

14,303

3,432

5,587

2,987

2,054

253

499

79,401

53

79,455880

80,336¥   117,167¥ 37,480¥ 41,568¥ 76,412¥11,346¥14,464¥   573¥ 1,051¥  300,065¥   762¥  300,827¥ 11,497¥  312,324

Capital expenditures

Millions of yen

Eliminations
Total or Corporate Consolidated¥   519,141

Intersegment ortransfers

Impairment losses of the Company and its consolidated subsidiaries on fixed assets by reportable segments for the years ended March 31, 2019and 2018 are summarized as follows:
Disclosure for the year ended March 31, 2019 is omitted due to immateriality.

Amortization of
goodwill
Balance of goodwillAmortization ofnegative goodwill
Balance of negative
goodwill

Investment
Residential International Management
Business
Business
Business

Architectural
Hotel and Design and
Airport Engineering
Business
Business

OfficeBuilding
Business

Lifestyle
Property
Business

Real Estate
Services
Business

SubtotalOther$  3,689—$    627—$ 2,734$43,561$  583$1,879$17,867$82,714————$ 4,069$50,186$   29,571$   178,341——$   29,571$   178,341——$   29,571$   178,341

—

—

—

—

—

—

—

—

—

—

—

—

—

$896,174$114,886

—

—

—

—

—

—

$1,011,061—$1,011,061—$1,011,061

Eliminations
Total or Corporate Consolidated

Millions of yen

2018

Thousands of U.S. dollars

2 019

Reportable segments

Reportable segments

OfficeBuilding
BusinessRevenue, operating
income and assets byreportable segment
Revenue from:
External customers

Lifestyle
Property
Business

Investment
Residential International Management
Business
Business
Business

Architectural
Hotel and Design and
Airport Engineering
Business
Business

Real Estate
Services
Business

Subtotal$ 4,677,368$  938,905$3,774,822$   728,666$429,782$376,279$152,890

95,088

17,778

12,958

8,739

16,997

21,69869,39810,436

253,095

61,973315,068

Total revenue

4,772,457

956,683

3,787,780

737,405446,779

397,977

222,289

302,611

11,623,985

73,039

11,697,025

Segment income (loss)

1,330,676

293,361

274,153242,607

83,17021,37018,21323,4542,287,008(1,770)2,285,237$31,997,931$4,691,483$5,998,633$6,237,725$621,474$641,282$252,204Intersegment ortransfers

Segment assets
Other items
Depreciation andamortization
Capital expenditures

453,048

128,871

30,92250,346

26,91718,5082,282$ 1,055,655$  337,696$  374,520$   688,463$102,234$130,324$  5,166$292,175 $11,370,890

Other

Eliminations
Total or Corporate Consolidated$258,939 $50,699,675

4,497

715,395$  9,472 $ 2,703,534$ 11,066 $11,381,956$120,805 $50,820,480

484

715,880$  6,870 $ 2,710,404— $11,381,956$ (315,068)—(220,378)

2,064,858$1,203,965 $52,024,445

7,933

723,813$  103,587 $ 2,813,991

2 018
Reportable segmentsRevenue, operating
income and assets byreportable segment
Revenue from:
External customers
Intersegment ortransfers
Total revenue
Segment income (loss)
Segment assets
Other items
Depreciation andamortization
Capital expenditures

Lifestyle
Property
Business

Investment
Residential International Management
Business
Business
Business

Architectural
Hotel and Design and
Airport Engineering
Business
Business¥  497,909¥ 95,799¥408,032¥40,579¥ 87,311¥ 21,963¥13,900

Real Estate
Services
Business

Subtotal

Other¥25,038¥1,190,534¥ 3,515

Lifestyle
Property
Business¥   409—¥    69—

Investment
Residential International Management
Business
Business
Business¥3,030¥4,034¥ 60¥268¥ 1,990¥11,442

Architectural
Hotel and Design and
Airport Engineering
Business
Business————

Real Estate
Services
Business

Subtotal

Other

—
—

¥  5,561¥ 15,745——

Eliminations
Total or Corporate Consolidated¥  5,561¥ 15,745——¥  5,561¥ 15,745

—

—

—

—

—

—

—

—

—

—

—

—

—

¥99,056¥12,681

—

—

—

—

—

—

¥111,738—¥111,738—¥111,738(315,068) 11,381,956

Millions of yen

OfficeBuilding
BusinessAmortization of
goodwill
Balance of goodwillAmortization ofnegative goodwill
Balance of negative
goodwill

OfficeBuilding
Business

Eliminations
Total or Corporate Consolidated¥1,194,049—¥1,194,049

8,252

2,121

2,566

(386)

702

458

7,712

546

21,972

5,023

26,996¥ (26,996)—

506,161

97,920410,598

86,92522,66541,03821,61325,584

1,212,507

8,538

1,221,046(26,996)

1,194,049

147,243

28,07923,86024,147

4,596

3,136

1,724

1,518

234,306

1,784

236,091(23,043)

213,047¥3,518,735¥503,496¥626,596¥697,478¥111,974¥43,834¥27,048¥22,427¥5,551,591¥12,993¥5,564,585¥236,864¥5,801,450

48,17013,569

2,906

6,687

3,837

1,584

122

347

77,22449

77,273271

77,545¥  127,877¥ 31,951¥ 24,085¥ 90,423¥ 13,691¥11,528¥   481¥   320¥  300,360¥   451¥  300,812¥  4,021¥  304,833

Gain on Negative Goodwill
Disclosure for the year ended March 31, 2019 is omitted due to immateriality.
Products and Service Information
Refer to reportable segment information.
Geographic Area Information
Geographic area information has been omitted since revenue from external customers in Japan and property and equipment located in Japanaccounted for more than 90% of revenue from operations on the consolidated statements of income and property and equipment on the
consolidated balance sheets, respectively.
Major Customer Information
The Company does not have any major customers whose share of revenue from operations accounted for more than 10% of revenue from operations shown on the consolidated statements of income. Accordingly, major customer information has been omitted.

The “Partial Amendments to Accounting Standard for Tax Effect Accounting” (ASBJ Statement No. 28, February 16, 2018) and relevant guidances
have been applied from the year ended March 31, 2019, and segment information for the year ended March 31, 2018 reflects retrospective application of these accounting standards.

100

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019101

FINANCIAL SECTION

18

Rental Properties

19

The Company and some of its consolidated subsidiaries own office buildings for lease, commercial facilities for lease and others in Tokyo and otherareas including overseas countries (the United States and the United Kingdom, etc.) for the purpose of obtaining revenue from leases.
Some office buildings for lease in Japan are regarded as real estate including space used as rental properties since they are used by theCompany and some of its consolidated subsidiaries.
The carrying value on the consolidated balance sheet as of March 31, 2019 and the fair value of these rental properties and real estate including
space used as rental properties are as follows:
Millions of yen

Thousands of U.S. dollars

2019
Carrying value

Rental properties
Real estate including spaceused as rental properties

Fair value

As ofApril 1, 2018

As of
As of
Net Change March 31, 2019 March 31, 2019

¥3,480,147¥ (71,408) ¥3,408,738

480,436

153,547

633,983

Carrying value

Fair value

As ofApril 1, 2018

As of
As of
Net Change March 31, 2019 March 31, 2019

¥6,953,534 $31,355,503$ (643,377) $30,712,126 $62,650,095

987,600

4,328,649

1,383,431

5,712,081

8,898,101

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

2018
Carrying value
As ofApril 1, 2017

Rental properties¥3,644,937

Real estate including spaceused as rental properties

183,523

Fair value

296,913

480,436(1) Asset retirement obligations presented in the consolidatedbalance sheets

Asset retirement obligations include obligations of restoration related
to leasehold and rental contracts.
2. Calculation method for asset retirement obligations

Asset retirement obligations are calculated based on the remaining
contract years as an expected use period with a discount rate between
0.0% and 2.3%.
3. Changes in asset retirement obligations during the years ended March
31, 2019 and 2018 are as follows:
Millions of yen

Thousands of
U.S. dollars

2019

2018

2019

Balance at the beginningof the year

¥3,355¥2,936$30,231

Increase due to the acquisitionof property and equipment

2,814

58

25,356

Adjustments due to the elapseof time

66

62

596

Decrease due to the fulfillmentof asset retirement obligations

(48)

(43)

(439)

Balance at the end of the year

¥6,768,6251)	Obligation to remove asbestos that is used for some properties andequipments in a particular way required by the Ordinance on
Preventing Asbestos Hazards
	For such properties, the Company has an obligation to remove
asbestos at demolition of buildings. However, no demolition has
taken place in the past other than those related to redevelopment orother projects involving many other business associates. It istherefore difficult to reasonably estimate the timing to fulfill suchobligation based on the physical useful life of the assets caused byaging and it is impossible to estimate the timing without specificbusiness plans. Although the Company has been voluntarily conducting asbestos removal work when that is feasible due to such as
termination of tenancy, it is impractical to make a reasonableestimation of progress of such voluntary removal work based on theactual record of the tenancy termination and of the remaining
amount of asbestos at demolition. Moreover, it is difficult to distinguish costs of asbestos removal from total costs of demolition.
Although the Company made the best estimation taking into
account all the evidence available as of March 31, 2019, theseobligations are excluded from recognition of asset retirement
obligations since the probability of obligations in terms of scope andamount was not reasonably estimated.

1. Outline of asset retirement obligations

Other

As of
As of
Net Change March 31, 2018 March 31, 2018¥(164,790) ¥3,480,147

Asset Retirement Obligations

(328)

341

(2,955)¥5,859¥3,355$52,7892)	Obligation of restoration based on some real estate rental
agreements
	For some commercial facilities, the Company has an obligationof restoration at the termination of leasehold rental agreements.
However, the timing to fulfill the obligation is uncertain since it ispractically possible to continue to use those facilities by re-signing
contracts and some contracts set forth a special provision to reduce
the possibility to fulfill the obligation. Furthermore, given its
business strategies and the current business environment, theCompany intends to continue its operation and not to fulfill theobligation. Although the Company made the best estimation taking
into account all the evidence available as of March 31, 2019, theseobligations are excluded from recognition of asset retirement
obligations since the probability of the obligations in terms of scope
and amount could not be reasonably estimated.

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

614,790

1. The carrying value represents the acquisition cost less accumulated depreciation and accumulated impairment loss.
2. The fair value is based on the following:(1) The fair value of real estate in Japan is calculated by the Company based mainly on the Real Estate Appraisal Standards.
(2) The fair value of real estate in overseas countries is appraised principally by local real estate appraisers.
The income or loss from rental properties and real estate including space used as rental properties for the years ended March 31, 2019 and 2018
are as follows:
2019

Rental properties
Real estateincluding spaceused as rental
properties

Lease
income(*)

Lease cost

Lease
income(loss), net¥448,676¥283,816¥164,860

Lease
income(*)

Lease cost

Lease
income(loss), net¥(7,917) ¥439,592¥275,749¥163,843

Other, net

Millions of yen

Thousands of U.S. dollars

2018

2019
Lease
income(loss), net

Other, net¥(4,745) $4,042,497 $2,557,134 $1,485,363$(71,335)

Other, net

Leaseincome(*)

Lease cost

20 Related Party Transactions

The Company has related party transactions with key management personnel of the Company and major individual shareholders.
The corresponding balances as of March 31, 2019 and 2018 and the amounts of these transactions for the years then ended are summarized as follows:
Millions of yen

Thousands of U.S. dollars

Transaction
amountAccount

Balanceoutstandingat year end—

Advances anddeposits

$207

2019
40,83030,825

10,005(406)

21,41916,872

4,546

(362)

367,874

277,729

90,144(3,665)Type(*) Lease income excludes that from real estate including space used as rental properties that was used by the Company and some of its consolidated subsidiaries for leasing service and operating
management.
Director

Name

Occupation

Representative
Executive
Junichi
Officer of theTanisawa
Company

Ownership
ratio
of votingsharesRelationshipwiththe related
party

Nature oftransaction

Transaction
amountAccount

Balanceoutstandingat year end

Contract for
construction of
housing and
0.00%
other

Constructionof housing—

Advances anddeposits¥23

1. Balance outstanding at year end includes consumption tax.
2. Transaction terms are determined in consideration with market prices, the same as general transactions.
Millions of yen

2018

102

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

Type

Name

Occupation

Ownership
ratio
of votingshares————Relationshipwiththe related
party

Nature oftransaction

Transaction
amountAccount

Balanceoutstandingat year end

—

—

—

—

—

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019103

FINANCIAL SECTION

21 Other Comprehensive Income

22

The following table presents reclassification and tax effects allocated to each component of other comprehensive income for the years ended
March 31, 2019 and 2018:

1. Acquisitions
Consolidation of Marunouchi Hotel, CO., LTD.

Millions of yen

Thousands of U.S. dollars

2019

2018

2019

¥ (2,748)¥17,604$ (24,765)

Unrealized holding gain (loss) on securities:
Amount arising during the year
Reclassification adjustments for gains and losses included in net income(6,001)—(54,069)

Amount before tax effects(8,749)17,604(78,834)

Tax effects

2,412(5,459)21,731

Unrealized holding gain (loss) on securities(6,337)

12,144(57,103)

Amount arising during the year

(181)

528

(1,637)

Reclassification adjustments for gains and losses included in net income

(398)

(6)

(3,588)Amount before tax effects

(579)

521

(5,225)

Tax effects

195

(155)

1,762

Deferred gain (loss) on hedging instruments

(384)

365

(3,462)—

4—

Amount arising during the year

(17,484)

310(157,534)

Amount before tax effects(17,484)

310(157,534)

77

(214)

700

(17,407)95(156,834)

11

958

101

Reclassification adjustments for gains and losses included in net income

1,206

2,906

10,872

Amount before tax effects

1,218

3,864

10,974

Tax effects(378)(1,119)(3,411)Retirement benefits liability adjustments

839

2,744

7,563

(913)

355

(8,226)¥(24,202)¥15,711$(218,062)

Deferred gain (loss) on hedging instruments:

Land revaluation reserve:
Tax effects
Foreign currency translation adjustments:

Tax effects
Foreign currency translation adjustments
Retirement benefits liability adjustments:
Amount arising during the year

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

Business Combinations
Consolidation of Urban Life Co., Ltd.

(1) Outline of business combinationi. Name and business of acquired entity
		 Name:Marunouchi Hotel, CO., LTD.
		 Business: Management of Marunouchi Hotelii. Objective of acquisition		To pursue further growth of the hotel business and improvementof the added value in the Marunouchi area through strengthening collaboration by purchasing the common stocks through atender offer of Marunouchi Hotel, CO., LTD., which was an equity
method affiliate of the Company.
iii. Date of acquisition
		 April 27, 2018
iv. Legal form of acquisition
		 Purchase of common stocks
v. Name of acquired entity subsequent to acquisition
		 Marunouchi Hotel, CO., LTD.
vi. Change in voting rights ratio
		 Before the acquisition:
31.38%
		 After the acquisition:
76.93%
vii. Determination of acquirer		As a result of the purchase of the common stocks, the Company
obtained the substantial control of Marunouchi Hotel, CO., LTD.
(2)	Period for which operating results of acquiree were included inconsolidated financial statements of the Company
From April 1, 2018 to March 31, 2019(3) Consideration transferred for the acquisition
Fair value of common stocks already held
before the acquisition dateCash on hand and in banks
Acquisition cost

Millions of yen

Thousands of
U.S. dollars¥  892
1,296¥2,189$ 8,044
11,678$19,723(1) Outline of business combinationi. Name and business of acquired entity
		 Name:
Urban Life Co., Ltd.
		 Business:	Planning of mid-to-high-rise apartments, buildings,
and stores, development, sales, and leasing ofbuildings, renting of stores, and management ofparking lots, etc.
ii. Objective of acquisition
		The purchase of the common stocks of the acquiree through atender offer is expected to early establish and strengthen
housing value chain for satisfying clients over their lifetimes in
responding to diversifying needs such as remodeling, secondhand house distribution, etc. in the Kansai area.
iii. Date of acquisition
		 September 10, 2018
iv. Legal form of acquisition
		 Purchase of common stocks
v. Name of acquired entity subsequent to acquisition
		 Urban Life Co., Ltd.
vi. Change in voting rights ratio
		 Before the acquisition:0%		 After the acquisition:
96.89%
vii. Determination of acquirer		As a result of the purchase of the common stocks, the Company
obtained the substantial control of Urban Life Co., Ltd.
(2)	Period for which operating results of acquiree were included inconsolidated financial statements of the Company
	As the deemed acquisition date is set to September 30, 2018,business results from October 1, 2018 to March 31, 2019 are
included into a consolidated statement of income in current
consolidated fiscal year.
(3) Consideration transferred for the acquisition(4) Major acquisition related cost
Omitted due to immateriality

Cash on hand and in banks
Acquisition cost(5)	Loss on step acquisitions due to difference between acquisition cost
and total amount of acquisition cost for each transaction duringacquisition ¥487 million ($4,392 thousand)(4) Major acquisition related cost
Omitted due to immateriality(6) Amount of negative goodwill recorded and its cause
i. Amount: ¥2,097 million ($18,901 thousand)ii.	Cause: The consideration transferred was less than the fairvalue of the net assets acquired.
(7) Assets acquired and liabilities assumed at the acquisition dateCurrent assets
Fixed assets
Total assets

Current liabilities
Fixed liabilities
Total liabilities

Millions of yen

Thousands of
U.S. dollars¥ 1,049
8,995¥10,045$ 9,459
81,045$90,505

Millions of yen

Thousands of
U.S. dollars¥   551
3,920¥4,472$ 4,972
35,322$40,294

Millions of yen

Thousands of
U.S. dollars¥7,363¥7,363$66,343$66,343(5) Amount of goodwill recorded and its cause
i. Amount: ¥1,104 million ($9,947 thousand)ii.	Cause: The consideration transferred was more than the fairvalue of the net assets acquired.
iii.	Amortization method and period: Straight line method
for 10 years(6) Assets acquired and liabilities assumed at the acquisition dateCurrent assets
Fixed assets
Total assets

Current liabilities
Fixed liabilities
Total liabilities

Millions of yen

Thousands of
U.S. dollars¥ 3,473
10,945¥14,418$ 31,292
98,619$129,911

Millions of yen

Thousands of
U.S. dollars¥7,084873¥7,957$63,827
7,868$71,695(7)	Pro forma impact on consolidated statement of income assuming
the business combination was completed at the beginning of the
fiscal year
Omitted due to immateriality. The pro forma impact was not
subject to audit certification.

104

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MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

105

FINANCIAL SECTION

23

Significant Subsequent Events

Independent Auditor’s Report

Purchase of treasury stock
The Company resolved at the meeting of its Board of Directors held on
May 14, 2019 on matters regarding the purchase of treasury stock,based on the provisions of Article 156 of the Companies Act, as appliedby replacing the relevant terms pursuant to the provisions of Article
165, paragraph 3 of the same Act, as follows:(1) Reason for purchase of treasury stock
To increase capital efficiency and shareholder return(2) Details of matters regarding the purchasei. Type of shares subject to purchase
		Common stockii. Total number of shares to be purchased		65,000,000 shares (maximum) (4.68% of total issued shares
excluding treasury stock)iii. Total amount for share purchase		 ¥100,000 million (maximum)
iv. Purchase period
		 May 15, 2019 to March 31, 2020
v. Method of purchase		 Open-market purchase on the Tokyo Stock Exchange(3) Status of the purchase (up to May 31, 2019 (trade date basis))i. Type of purchased shares
		Common stockii. Total number of purchased shares		3,093,400 sharesiii. Total amount for share purchase		¥6,407 million
iv. Method of purchase		 Open-market purchase on the Tokyo Stock Exchange

106

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MITSUBISHI ESTATE CO., LTD. Integrated Report 2019107

CORPORATE DATA

Principal Mitsubishi Estate Group Companies
Consolidated subsidiary

Affiliate accounted for by the equity method

Office Building Business

Share ofvotingrights (%)

Address

Phone

Business activities

Mitsubishi Jisho Property
Management Co., Ltd.

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

Comprehensive building
operation and management

100.0

Hokuryo City Service Co., Ltd.

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

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

Yuden Building Kanri Co., Ltd.

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

Operation and management of the
Yurakucho Denki Building

Nan Shan Plaza Property Management
Co., Ltd.

100-7, Songren Road, Xinyi District, Taipei,
11073, Taiwan+886-2-2723-8009 Property management of Nanshan Plaza

Phone

Business activities

MEC Eco LIFE Co., Ltd.

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

Investigations, analyses, research, and proposals
regarding ecological lifestyles

100.0

100.0

Mitsubishi Jisho House Net Co., Ltd.

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

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

100.0

62.5

URBAN LIFE Co., Ltd.

6-26, Motoyamaminamimachi, 8-chome,
Higashinada-ku, Kobe, Hyogo Prefecture 658-0015+81-78-452-0668

Purchase, brokerage, and leasing management ofbuildings and land

100.0

70.0

URBAN LIFE JUUTAKUHANBAI Co., Ltd. 6-26, Motoyamaminamimachi, 8-chome,
Higashinada-ku, Kobe, Hyogo Prefecture 658-0015+81-78-414-6211

Purchase, brokerage, and leasing management ofbuildings and land

100.0

Ryoei Life Service Co., Ltd.

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

Operation and management of commercial nursing
homes

100.0

Rockefeller Group, Inc.

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

+1-212-282-2000

Real estate operations

100.0

Mitsubishi Estate New York Inc.

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

+1-212-698-2200

Real estate operations in the United States

100.0

Mitsubishi Estate London Limited

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

+44-20-7292-3180 Real estate operations in Europe

100.0

Mitsubishi Estate Asia Pte. Ltd.

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

Real estate operations in Asia

100.0

Mitsubishi Estate (Shanghai) Ltd.*

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

+86-21-6340-4000 Real estate business in China

100.0

Mitsubishi Estate Taiwan Ltd.*

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

100.0

OthersBuilding Management Business(Outside the scope of consolidation)

Building Leasing Business
Sunshine City Corporation

World Import Mart Building, Sunshine City, 1-1,
+81-3-3989-3321
Higashi-Ikebukuro 3-chome, Toshima-ku, Tokyo 170-8630

Management of Sunshine City andother buildings

63.2

Tokyo Kotsu Kaikan Co., Ltd.

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

Management of Tokyo Kotsu Kaikan andother buildings

50.0

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

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

54.9

Parking BusinessTokyo Garage Co., Ltd.

Share ofvotingrights (%)

Address

District Heating and Cooling Business

International Business

Marunouchi Heat Supply Co., Ltd.

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

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

64.2

Ikebukuro District Heating
and Cooling Co., Ltd.

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

Cooling and heating supply businessin the Higashi-Ikebukuro district

68.0

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

OAP Tower, 8-30, Tenmabashi 1-chome, Kita-ku, Osaka,
Osaka Prefecture 530-6004+81-6-6881-5170

Cooling and heating supply businessin the Osaka OAP district

35.0

Mitsubishi Jisho Investment Advisors, Inc. Marunouchi North Exit Building, 6-5, Marunouchi
1-chome, Chiyoda-ku, Tokyo 100-0005+81-3-3218-0031

Specialist real estate investment management services(real estate investment advisory and other services)

100.0

Minato Mirai 21 D.H.C. Co., Ltd.

1-45, Sakuragicho 1-chome, Naka-ku, Yokohama,
Kanagawa Prefecture 231-0062+81-45-221-0321

Cooling and heating supply businessin the Yokohama Minato Mirai district

29.6

Japan Real Estate AssetManagement Co., Ltd.

Otemachi Park Building, 1-1, Otemachi 1-chome,
Chiyoda-ku, Tokyo 100-0004+81-3-3211-7921

Investment corporation asset management

90.0

TA Realty LLC

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

+1-617-476-2700

Investment management business in the United States

70.0

Shin Kokusai Building, 4-1, Marunouchi 3-chome,
Chiyoda-ku, Tokyo 100-0005+81-3-3214-4881

Dark fiber leasing and data center housingbusinesses in the Marunouchi and Otemachi
districts

51.0

Europa Capital LLP

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

+44 - 20-7881-6800 Investment management business in Europe

85.0

Pan Asia Realty Advisors (Singapore)
Pte. Ltd.

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

Investment management business in Asia andOceania

77.8

Mitsubishi Jisho RetailManagement Co., Ltd.

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

Operation and management ofcommercial facilities

100.0

Royal Park Hotels and Resorts Co., Ltd.

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

Comprehensive supervision and managementof hotel business

100.0

Mitsubishi Estate·Simon Co., Ltd.

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

Development and operation of
PREMIUM OUTLETS® malls

60.0

Yokohama Royal Park Hotel Co., Ltd.

+81-45-221-1111

Operation of Yokohama Royal Park Hotel

100.0

Yokohama Sky Building Co., Ltd.

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

Leasing of the Sky Building andother properties

54.4

Yokohama Landmark Tower, 2-1-3, Minato Mirai
2-chome, Nishi-ku, Yokohama, Kanagawa Prefecture220-8173

Tohoku Royal Park Hotel Co., Ltd.

Operation of Sendai Royal Park Hotel

100.0

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

Leasing and operating management oflogistics and office buildings

58.2

2-1, Teraoka 6-chome, Izumi-ku, Sendai,
Miyagi Prefecture 981-3204+81-22-377-1111

Tokyo Ryutsu Center Inc.

Royal Park Hotel Co., Ltd.

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

Management and operation of Royal Park Hotel

55.7

Marunouchi Hotel Co., Ltd.

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

Management and operation of the Marunouchi Hotel

76.9

Takamatsu Airport Co., Ltd.*1312-7, Oka, Konan-cho, Takamatsu, Kagawa
Prefecture 761-1401+81-87-814-3657

Management and operation of Takamatsu Airport

73.1

Shimojishima Airport Management
Co., Ltd.*

1727, Irabusawada, Miyakojima, Okinawa Prefecture +81-980-78-6365
906-0507

Construction and management of the Miyako
Shimojishima Airport Terminal

69.0

Mt. Fuji Shizuoka Airport Co., Ltd.*3336-4, Sakaguchi, Makinohara, Shizuoka Prefecture +81-548-29-2000
421-0411

Management and operation of Mt. Fuji Shizuoka Airport

50.0

Investment Management Business

OthersMarunouchi Direct Access Limited

Lifestyle Property Business

Hotel & Airport BusinessResidential BusinessResidential Development and Sales Business
Mitsubishi Estate Residence Co., Ltd.

* Outside the scope of consolidation

Otemachi Financial City Grand Cube 9-2,
Otemachi 1-chome, Chiyoda-ku, Tokyo 100-8189+81-3-6281-8000

Real estate development, sales, leasing,and management

100.0

Mitsubishi Estate Home Co., Ltd.

Kokusai-Shin-Akasaka Building Higashi-kan,
14-27, Akasaka 2-chome, Minato-ku, Tokyo 107-0052+81-3-6887-8200

Design and construction of single-unit homes
and housing complexes, renovation of homes
and retail shops

100.0

Mitsubishi Estate Housing
Components Co., Ltd.

228-4, Shinminato, Mihama-ku, Chiba,
Chiba Prefecture 261-0002+81-43-242-9031

Manufacture, processing,and sale of construction materials

91.7

Prime Truss Co., Ltd.

15-12, Kiba 2-chome, Koto-ku, Tokyo 135-0042+81-3-3643-3310

Manufacture and sale of housing
construction materials

20.0

Custom-Built Housing* Outside the scope of consolidation

Residence Management Business
Mitsubishi Jisho Community
Holdings Co., Ltd.

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

Business management and operations related
to the condominium management business

71.5

Mitsubishi Jisho Community Co., Ltd.

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

Overall condominium and building management, renovations, and related businesses

100.0

Izumi Park Town Service Co., Ltd.

7-2, Takamori, Izumi-ku, Sendai,
Miyagi Prefecture 981-3203+81-22-378-0022

Comprehensive managementof Izumi Park Town

100.0

MEC Urban Resort Tohoku Co., Ltd.

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

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

100.0

Higashinihon Kaihatsu Co., Ltd.

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

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

100.0

Sakura Golf Development Co., Ltd.

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

Management of Asakura Golf Club

49.0

Architectural Design & Engineering Business
Mitsubishi Jisho Sekkei Inc.

Marunouchi 2-chome Building, 5-1, Marunouchi
2-chome, Chiyoda-ku, Tokyo 100-0005+81-3-3287-5555

Construction and civil engineering
design administration

100.0

MEC Design International Corporation

Inui Building Kachidoki, 13-1, Kachidoki 1-chome,
Chuo-ku, Tokyo 104-0054+81-3-6704-0100

Interior design administration and construction,
manufacture, and sale of furniture and household items

100.0

Mitsubishi Real Estate Services Co., Ltd.

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

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

100.0

Parking Management Organization, Ltd.

Shibuya Park Building, 6-6, Shibuya 3-chome,
Shibuya-ku, Tokyo 150-0002+81-3-3406-2477

Parking management

100.0

MEC Human Resources, Inc.

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

Human resource-related services

100.0

MEC Information Development Co., Ltd.

Marunouchi North Exit Building, 6-5, Marunouchi
1-chome, Chiyoda-ku, Tokyo 100-0005+81-3-3214-9300

Development and management of
information systems and software

100.0

Keiyo Tochi Kaihatsu Co., Ltd.

Shin-Tokyo Building, 3-1, Marunouchi 3-chome,
Chiyoda-ku, Tokyo 100-0005+81-3-3212-0555

Real estate leasing

66.7

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019109

Real Estate Services Business

OthersRecreational Facilities

Note: Percentage of voting rights held is as of March 31, 2019.

108

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

CORPORATE DATA

Corporate History

Organization

History

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

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

Major properties

1923

Marunouchi Building completed in front of Tokyo Station.

Area Brand Management Department

Shin-Marunouchi Building completed.
Strategic Planning Committee

1986

Hiroshima Branch (renamed Chushikoku Branch in November 2017) andKyushu Branch established.

1989

Participation in the City of London’s Paternoster Square Project announced.
Capital investment in Rockefeller Group, Inc., initiated.

1990

The first phase of the Izumi Park Town Project launched.

Corporate Data

1993

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

2004

Marunouchi Oazo opened.

2005

Tokyo Building opened.

2007

Shin-Marunouchi Building opened.
The Peninsula Tokyo opened.

2008
2009

Marunouchi Park Building and Mitsubishi Ichigokan completed.

2010

Mitsubishi Ichigokan Museum opened.

xTECH Leasing and Promotion Department

Global Marketing and Promotion Office
Relocation Management Office
Master Lease Planning and Management OfficeWorkplace Solutions OfficeLifestyle Property Business Group
Lifestyle Property Business Planning Department
Retail Property Improvements Management Office

Mitsubishi Estate Building Management and Mitsubishi Estate
Property Management integrated.

2014

Singapore CapitaGreen completed.

2015

Dai Nagoya Building completed.
Otemon Tower • JX Building completed.
OTEMACHI FINANCIAL CITY GRAND CUBE completed.

2017

Otemachi Park Building completed.

2018

Marunouchi Nijubashi Building completed.

Residential Business Group
Residential Business Planning Department

Sustainability Committee
Sustainability Subcommittee

Residential Value Chain Management OfficeInternational Business GroupInternational Business Planning Department

Investment Management Group

Airport Business Department

Audit Committee Office

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

2013

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

(Leasing)
Office Leasing and Tenant Relations Department

Hotel & Airport Business Group2011

Mitsubishi Estate (Shanghai) Ltd. established.

110

Urban Planning Office
Area Management Promotion OfficeHotel Business Department

Remuneration Committee

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

Audit Committee

2003

2016

Urban Development Promotion Department

Investment Management Business Department

Nominating Committee

Marunouchi Building opened.

Head Office relocated to Otemachi Park Building.

Internal Audit Office

GOTEMBA PREMIUM OUTLETS® opened.

2002

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

Yurakucho Development Planning Office

Logistics Facilities Development Department

Osaka Amenity Park (OAP) completed.

2001

TA Realty LLC acquired.

Marunouchi Development Department
Tokiwabashi Development Department

Strategic Investment Committee

Yokohama Landmark Tower completed. Yokohama Royal Park Hotel opened.

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

2012

Toyosu Development Office
Ikebukuro Development Office

Retail Property Leasing Department

Mitsubishi Jisho Investment Advisors, Inc., established.

Mitsubishi Jisho Residence Co., Ltd., established.

Office Building Development Department 1
Office Building Development Department 2

Retail Property Development Department

1998
2000

Asset Management Committee(Development)
Strategic Development Office

Retail Property Management Department

1995
1996

President & Chief Executive Officer

MEC UK Limited established.
Yokohama Office established (reorganized as Yokohama Branch in April 2000).

Executive Committee

Chairman of the Board

1984

Hokkaido Building completed.

1973

Open Innovation Promotion Office

Museum Management Office

Board of Directors

1983

Building Safety Management Office
Building Renewal Management Office

1959

Mitsubishi Estate Home Co., Ltd., established.

Group Companies Management Office

Office Building Management Department

1953

Nagoya Dai-Ichi Hotel opened (Hotel Business launched).

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

(Asset Management)
Office Building Planning Department

1937

1972

Collaborative Partner Development Office

Office Building Group
Completed Mitsubishi Ichigokan, offering the first Western-style officearchitecture in Marunouchi.

1969

Began first stage of Marunouchi redevelopment.

Business Development, Consulting & Solutions Department 3

1894

1962

Building Renovation Consulting & Solutions OfficeBusiness Development, Consulting & Solutions Department 1
Business Development, Consulting & Solutions Department 2

1893

Akasaka Park House offered for sale in lots, marking the launch of
the Condominium Business.
Mitsubishi Estate New York Inc. established. Began expansion of businessoverseas.
Mitsubishi Real Estate Services Co., Ltd., established.
Branches established in Sapporo (renamed Hokkaido Branch in November2017), Sendai (renamed Tohoku Branch in July 1989), Nagoya (renamed
Chubu Branch in April 2018), and Osaka (renamed Kansai Branch in April2016). Strengthened business in major Japanese cities.

Reconstruction of Marunouchi Building announced.

As of April 1, 2019

1890

1952
Mitsubishi Estate’s shares listed on the Tokyo Stock Exchange andthe Osaka Securities Exchange.
Marunouchi Remodeling Plan formulated. Met demand for offices in the yearsof high economic growth.

Business Development, Consulting & Solutions Group
Business Development, Consulting & Solutions Planning Department

Corporate Group
Corporate Planning Department

Corporate Planning Department Affiliated Group OfficeSustainable Management and Promotion Department

Strategic Investment Office

DX Promotion Department
Finance & Accounting Department
Corporate Communications Department

Risk Management & Compliance
Committee

Investor Relations Office
Rugby World Cup 2019
Project Promotion Office

Human Resources Department

Human Resources Compliance & Diversity Promotion Office

Risk Management & Compliance

General Affairs Department

Secretary Office

Subcommittee

Legal & Compliance Department

Facility Management OfficeBusiness Creation Department
Hokkaido Branch
Tohoku Branch
Yokohama Branch

Minato Mirai 21 Office

Chubu Branch
Kansai Branch

GRAND FRONT OSAKA Office

Chushikoku Branch

Umekita Development Office

Kyushu Branch

IMS Development Office

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019111

CORPORATE DATA

Corporate Information

About Our Website

As of March 31, 2019

Stock Information

Company Name
Mitsubishi Estate Co., Ltd.

Stock Details
Number of authorized shares: 1,980,000,000 shares
Number of shares issued and outstanding: 1,391,038,170
 (130,065 increase in number of shares from the previous fiscal year-end)
Number of shareholders: 	62,298(Decrease of 5,583 shareholders comparedwith the end of the previous fiscal year)

6.37%

38.02%

http://www.mec.co.jp/index_e.html

Number of Employees (Excluding temporary staff)
Non-consolidated: 899
Consolidated: 9,439

Financial instruments
business operators

URL
http://www.mec.co.jp/index_e.html

1.69%
Operating and othercompanies

Head Office
Otemachi Park Building, 1-1, Otemachi 1-chome, Chiyoda-ku,
Tokyo 100-8133
Phone: +81-3-3287-5100

11.06%

Number ofshares held(Thousands of shares)

Shareholding
percentage(%)

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

109,963

7.92

Japan Trustee Services Bank, Ltd.
(Trust account)

67,146

4.83

Meiji Yasuda Life Insurance Company

46,882

3.37

JP MORGAN CHASE BANK 380055

45,357

3.26

Japan Trustee Services Bank, Ltd. (Trust account 5)

27,1381.95

SSBTC CLIENT OMNIBUS ACCOUNT

23,629

1.70

STATE STREET BANK WEST CLIENT- TREATY 505234

22,604

1.62

MUFJ Bank, Ltd.

22,267

1.60

Japan Trustee Services Bank, Ltd. (Trust account 7)

21,564

1.55

Tokio Marine & Nichido Fire Insurance Co., Ltd.

20,3001.46

Note: The investment ratio is calculated after deducting the shares of treasury stock from the issued
shares of the Company.

112

Mitsubishi Estate Group Corporate Website

Business Activities
Development, leasing, and management of officebuildings, retail, and other facilities

Sale and brokerage of real estate and related
consulting services

Financial institutions

Major Shareholders¥142,023 million

Management of leisure and other facilities

0.00%

42.86%

Paid-in Capital

Development and sale of land for housing, research, andother facility use

Government and local public authorities

Foreign individuals
and companies

May 7, 1937

Development of real estate for investment purposes andasset management

Shareholder Composition (Percentage of shares held)

Individuals and other

Date of Establishment

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019

Hokkaido Branch
Hokkaido Building, 4-1, Kita 2-jou Nishi, Chuo-ku,
Sapporo, Hokkaido 060-0002
Phone: +81-11-221-6101
Tohoku Branch
Sendai Park Building, 6-1, Kokubun-cho 3-chome, Aoba-ku,
Sendai, Miyagi Prefecture 980-0803
Phone: +81-22-261-1361
Yokohama Branch
Yokohama Landmark Tower, 2-1, Minato Mirai 2-chome,
Nishi-ku, Yokohama, Kanagawa Prefecture 220-8115
Phone: +81-45-224-2211
Chubu Branch
Nagoya Hirokoji Building, 3-1, Sakae 2-chome, Naka-ku,
Nagoya, Aichi Prefecture 460-0008
Phone: +81-52-218-7755

Sustainability Information

IR Information

http://www.mec.co.jp/e/csr/index.html

http://www.mec.co.jp/e/investor/index.html

Our website contains sustainability-related
information on the entire Group and CSR reportsthat summarize initiatives based on important
CSR themes.

In addition to financial information,
the site contains various IR explanatory materials
and an Asset Book.

Note: From Fiscal 2020, we plan to change the name of our CSR Reportto Sustainability Report.

Kansai Branch
OAP Tower, 8-30, Tenmabashi 1-chome, Kita-ku,
Osaka, Osaka Prefecture 530-6009
Phone: +81-6-6881-5160
Chushikoku Branch
Hiroshima Park Building, 7-5, Otemachi 3-chome, Naka-ku,
Hiroshima, Hiroshima Prefecture 730-0051
Phone: +81-82-245-1241
Kyushu Branch
Tenjin Twin Building, 6-8, Tenjin 1-chome, Chuo-ku,
Fukuoka, Fukuoka Prefecture 810-0001
Phone: +81-92-731-2211

MITSUBISHI ESTATE CO., LTD. Integrated Report 2019113

Otemachi Park Building, 1-1, Otemachi 1-chome, Chiyoda-ku, Tokyo 100-8133, Japan
http://www.mec.co.jp/index_e.html

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