Otemachi Building, 6-1, Otemachi 1-chome, Chiyoda-ku, Tokyo 100-8133, Japan
http://www.mec.co.jp/index_e.html

Inspiring Interaction
A N N U A L R E P O RT 2 0 1 4
Fiscal Year Ended March 31, 2014

Can a building alone create new value?
Can people alone bring about change?
Even without places to meet and socialize?
Marunouchi—Japan’s representative international business center stretchingout in front of Tokyo Station.
Having functioned as Japan’s economic center for more than a century,
the Marunouchi district has always changed with the times, with the additionof high-performance, high-functionality buildings. Even today, the district
continues to evolve as a business center in which crowds of people go backand forth on their business.

Nowhere to have lunch,or even do some shopping on the way home.



MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2014

1

Marunouchi Naka Dori Avenue,
the lively main street of the
Marunouchi district, has
something for everyone.
Besides those in business suits,
people from all walks of life canenjoy the trees and greenery
lining the street, the wide
walkways for pedestrians, andthe shops, museums, and otherfacilities. Unconfined to being
a business district, Marunouchi
is transforming into a bustlingand colorful town.

So we add parks and benches where people can rest and relax.
Restaurants and cafés for dining and entertaining.
And great stores that offer unique shopping experiences.

2

MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2014

3

And we don’t stop there.
We create spaces that encourage people to network and interact.
To turn ideas into businesses.
To create new value.

In our development of the Marunouchi district,
we are aiming to create the world’s most“interaction-inspiring” neighborhood. Besides
building the core infrastructure, such asbuildings and sidewalks, we have added
environmental and organizational infrastructure
to help generate innovation by people andbusinesses in the district. And our efforts to
support the business development of foreigncompanies not yet in the Japanese market aswell as Japanese small and mid-sized venture
enterprises aiming to expand internationally andpromote the district to them go far beyond thedefinition of a traditional developer.
Marunouchi has undergone dramatic changes
over the past 10 years. The transformation of this
district reflects our commitment to endless urban
development in the pursuit of a vision of the future.
Our focus on long-term development
continues—in Marunouchi and around the world.

Marunouchi has changed a great deal in just the past 10 years.
And it will continue to evolve in the years ahead,as we continue to focus on long-term development.
In Marunouchi. And around the world.

4

MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2014

5

CONTENT S

8

About
the Mitsubishi Estate Group

10

Real Estate Market
in Japan

11

Financial Highlights

12

22 C A S E 1 Marunouchi Redevelopment Project
26 C A S E 2 Building Business
28 C A S E 3 Retail & Logistics Property Group
30 C A S E 4 Residential Business
32 C A S E 5 International Business

26

38

Corporate
Governance
38 Message fromthe Chairman of the Board
40 Directors and Statutory Auditors
41 Executive Officers

Risk Management

Achieving Sustainable Growth and Increasing
Corporate Value from a Long-Term Perspective
through Urban Development That Creates New Value

The Mitsubishi Estate Group’s
Business Model

Financial Highlights
by Segment

42

To Our Stakeholders

20

37

44

78

44 Eleven-Year Summary of Selected Financial Data
46 Financial Review
50 Consolidated Balance Sheets
52 Consolidated Statements of Income
52 Consolidated Statements of Comprehensive Income
53 Consolidated Statements of Changes in Net Assets
55 Consolidated Statements of Cash Flows
56 Notes to Consolidated Financial Statements
77 Independent Auditor’s Report78	Principal Mitsubishi EstateGroup Companies
80 Corporate History
81 Organization
82 Corporate Information

Financial Section

34

Summary of Management& Services Business Group

Corporate Data

36
30

Business Development,
Consulting &Solutions Group

Asset Book
http://www.mec.co.jp/e/investor/irlibrary/annual/index.html

Caution Concerning Forward-Looking Statements

22

28

32

CSR Report
http://www.mec.co.jp/e/csr/report/index.html

6

MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2014

This annual report contains forward-looking statements
concerning Mitsubishi Estate Co., Ltd., and its future
strategies and earnings outlook, including forecasts,
planning, and decisions based on information available
as of this writing. As with any forecast, plan, or decision,
forward-looking statements are inherently susceptible
to potential risks, uncertainties, and assumptions. The
Company’s actual results may vary materially from thoseexpressed or implied in its forward-looking statements.

7

A bo u t the M its u bishi E state G ro u p

Mitsubishi Estate Co., Ltd., is a leading creator of urban change through the developmentof real estate including office buildings, residential properties, and commercial properties.
As part of our ongoing commitment to achieve sustainable growth, we strive to create
new value in Japan and overseas under the brand slogan “A Love for People, a Love for the City.”

Building Business
Office Building Group
This is Mitsubishi Estate’s core business,
which engages in the development, leasing,and property management of officebuildings, mainly in Tokyo and other major
Japanese cities. We promote urban development that contributes to increased appealof cities while maintaining a balance
between management property andturnover property in our asset portfolio.

Retail & Logistics Property GroupThe Retail Properties Field develops
a variety of commercial properties acrossJapan and is continually engaged inproperty planning, development, tenantleasing, and management operations
through its comprehensive business structure.
		 The Logistics Properties Field, alongwith office buildings as well as residential andretail properties, is another promising pillarof our business actively engaged in thedevelopment of projects throughout Japan.

Revenue from Operations

1,075,285 million¥

Residential BusinessThis business focuses on the development,
sales, leasing, and management of condominiums, single-unit homes, and residential
land. As the circulation of existing homes
expands and people’s lifestyles growincreas­ingly diverse, we are strengthening
our renova­tion business to seize uponsuch changes.

Operating Income

161,271 million¥

International Business
Mitsubishi Estate has pursued businessoverseas since the 1970s by establishing realestate leasing and development businesses
in the United States and the United Kingdom.
In recent years, we have also been proactively developing our real estate businessin rapidly expanding Asian markets.

Total Assets¥

4,765,368 million
Investment Management Business
For investors seeking real estate asset
management, we provide a wide range ofservices based on our specialized expertise.
These services include real estate investment trusts (REITs) to meet management
needs for long-term stability as well asprivate placement funds to meet the specificmanagement needs of institutional investors.

Architectural Design & Engineering Business
Making use of the knowledge, design
sense, and cutting-edge technologies
accumulated over the 120-year period since
our founding in the Meiji period, thiscomprehensive urban and architecturalplanning business meets societal needs
through construction, civil engineering,and urban and regional development
planning and consulting.

Millions of yen

Revenue from Operations

Operating Income

Total Assets

Building Business*

525,829

116,277

3,433,585

Residential Business

403,259

27,778662,350

International Business

80,36625,579455,358

Investment Management Business

6,288

3,046

30,035

Architectural Design & Engineering Business

19,946

1,252

24,246

Hotel Business

29,219737

24,636

Real Estate Services Business

27,097

1,544

24,781

3,674

(246)

28,075(20,396)(14,698)

82,347

Fiscal year ended March 31, 2014 (consolidated)

Other
Adjustments

Hotel Business

Real Estate Services BusinessThis business maintains a network of sevenhotels under the Royal Park Hotels brand in
Sendai, Tokyo (Nihonbashi and Shiodome),
Yokohama, Nagoya, Kyoto, and Fukuoka.
We are promoting the expansion of Group
hotels and improved brand value with amanagement foundation focused on
customer satisfaction.

This business provides a wide range ofservices for individuals and corporations,from real estate agency and consulting to
the management of condominium andoffice building leasing and coin-operated
parking lots.

* As of April 2014, the Commercial Property Development & Investment Business has been integrated into the Building Business.

8

MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2014

9

R eal E state M ar k et in J apan

F inancial H ighlights
Years ended March 31

Supply of New Office Buildings in the 23 Wards of Tokyo

Office building development in Tokyo
is ongoing, with 95% of new supply
concentrated in the Chuo-ku, Chiyoda-ku,
and Minato-ku located in the city center.
The completed construction of largescale office buildings in 2012 resulted
in the largest new supply in the past 10
years. As a result, in 2013 the supply
amount declined in comparison withthe annual average.

m2
1,200,000
1,000,000
800,000
600,000
400,000

Revenue from Operations

EBITDA

Millions of yen

Millions of yen

1,200,000

300,000

800,000

200,000

400,000

100,000

Sales of properties by the Building andInternational businesses and an increasein the number of condominium units soldin the Residential Business contributed to
substantial growth in consolidated revenue
from operations in fiscal 2014, the fiscal
year ended March 31, 2014.
EBITDA came in below its targeted
medium-term management performanceof ¥265.0 billion because of a decline inbusiness sentiment driven by the prolonged
sovereign debt crisis in Europe and theslowdown in China’s economy. Neverthe­less, EBITDA did advance ¥45.7 billion
compared with fiscal 2013.

200,000
0

0
2004

2005

2006

2007

2008

2009

2010

2011



2012

CY

2013

0
2010

2011

2012

2013

2014

2010

2011

2012

2013

2014

Source: Sanko Estate Co., Ltd.

Net Income / ROE

Office Building Market (Vacancy Rates in Five Central Tokyo Metropolitan Wards)
Yen / tsubo-month%
25,00010

20,0008

15,000

6

10,0004

Amid improving corporate earnings,
vacancy rates in the five central Tokyo
metropolitan wards are clearly on
the decline. Accordingly, since thebeginning of 2014, average rents havebeen slowly rising.

Total Assets / ROA

Millions of yen%Millions of yen%

80,00085,000,000

5

60,00064,000,000

43,000,000

3

40,00042,000,000

2

1,000,000

1

2

20,000
5,000

2

0

0

0

0
3/05

3/06

Average Rent (left scale)

3/07

3/08

3/09

3/10

3/11

3/12

3/13

Vacancy Rate (right scale)

2010

M/Y

3/14

Net Income (left scale)UnitMillions of yen
50

80,00040

60,00030

40,00020

20,00010

0In 2013, the supply and prices ofcondominiums in Tokyo’s 23 wards
increased compared with the previous
fiscal year due to expectations of
economic recovery, higher stock prices,
and anticipated interest rate hikes.

2007

2008

0

2014

0
2010

ROE (right scale)

2011

Total Assets (left scale)

2012

2013

2014

ROA (right scale)

2009

Sales of New Condominiums in the Tokyo Area (left scale)
Condominium Prices (right scale)

2010

2011

2012

Millions of yenTimes

Millions of yen

2,500,000

2.0

25,0002,000,000

1.6

20,0001,500,000

1.2

15,0001,000,000

0.8

10,000500,000

0.4

5,000

0

0

2010

CY

2013

Unrealized Gain on Rental Properties

0

0
2006

2013

Interest-Bearing Debt /Debt-to-Equity Ratio*

100,000

2005

2012

Source: Miki Shoji Co., Ltd.

Sales of New Condominiums in the Tokyo Area / Condominium Prices

2004

2011

ROE and ROA improved in fiscal 2014
because of the increase in consolidated
net income. The development of officebuildings in particular led to growth inportfolio assets or, in other words, growthin the balance sheet. A policy of Mitsubishi
Estate is to maintain or improve theefficiency of its portfolio assets throughappropriate asset turnover.

2011

2012

2013

2010

2014

2011

2012

2013

As of March 31, 2014, interest-bearing debt
decreased ¥112.3 billion year on year.
Mitsubishi Estate plans to control its debt
ratio while continuing to invest to enhance
its corporate value by maintaining a balance
between its management property andturnover property development projects.

2014Interest-Bearing Debt (left scale)
Deb-to-Equity Ratio (right scale)

Source: Real Estate Economic Institute Co., Ltd.

* Interest-Bearing Debt / Total Equity

Tokyo Stock Exchange REIT Index

The Tokyo Stock Exchange REIT Indexis trending higher due to the success ofgovernment policies aimed at invigorating REIT activities, the expansion of
REIT purchases by the Bank of Japan,
and expectations that real estate prices
will increase.

March 31, 2003 = 1,000
3,000
2,500
2,000

Free Cash Flow

Earnings per Share

Millions of yen

Yen

250,000

50

In fiscal 2014, growth in revenue fromproperty sales, including inventory assets
and fixed assets, resulted in free cash flowof ¥202.9 billion, compared with negative
free cash flow recorded a year earlier of¥95.7 billion. Earnings per share rose
¥13.55, to ¥46.34.

200,000
40

150,000
100,000

30

1,500
50,0001,000

20

0–50,000500

10–100,000
0
3/03



10

3/04

3/05

3/06

3/07

3/08

3/09

3/10

3/11

3/12

3/13

3/14

0

–150,000

M/Y

2010

Source: The Association for Real Estate Securitization

MITSUBISHI ESTATE CO., LTD.

2011

ANNUAL REPORT 2014

2012

2013

2014

2010

2011

2012

2013

2014

11

T o Ou r S ta k eholders

of development in their own cities. Clearly, even for professional
developers, Marunouchi has a strong appeal that instills a desire
to develop other areas in a similar manner. That appeal includes
a development style that creates a sense of unity among skyscrapers packed with the latest innovations and the retail shops
and restaurants, museums, and plazas sprinkled throughout
the district as well as the appeal of the high levels of energy
generated by the businesspeople working in the district—thedrivers of Japan’s economy.
To begin with, during the initial period in the developmentof the Marunouchi district, our development concept was not
to build office buildings but to produce and manage a major
business center—an idea that is symbolic of Mitsubishi Estate’s
approach. We believe that by anticipating the changing times
and continuing to develop an area in response to the needs ofan as-yet-unrealized society of the future, we amplify the area’s
added value, which in turn enhances our corporate value.
Hirotaka Sugiyama

Changes in the Business Environment

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

Achieving Sustainable Growth and Increasing
Corporate Value from a Long-Term Perspective
through Urban Development That Creates New Value

Mitsubishi Estate’s Management Vision
and Urban Development

The large-scale real estate development that Mitsubishi Estate
specializes in takes at least several years from planning to completion, and at times it can require more than 10 years. With
that in mind, more than anything else our business requires
the ability to anticipate the future. Over the course of 120 years,
from when we first began planning to build the ideal business
district that would become a leading business center of Japanin the expansive fields of Marunouchi to our operations today,

12

MITSUBISHI ESTATE CO., LTD.

our ability to envision the future and our approach of creating
value from a long-term perspective remain the unchanging
cornerstones of our business model. Without these cornerstones, even with the necessary land and funds, it would be
impossible to achieve our style of real estate development.
The urban development Mitsubishi Estate has achieved inits core business of the Marunouchi district represents the embodiment of those abilities—correctly envisioning and shaping thefuture and creating value from a long-term perspective. We havebeen developing this district in the center of Tokyo for more thana century, using a business model that continually emphasizes
redevelopment of the district in line with the needs of the times.
Extending over approximately 1.2 million square meters, thedistrict is unparalleled in size as a development project. And itis this scale that has enabled the unique evolution of the
Marunouchi district.
Recently, real estate developers from various cities in Asia
have visited us to see the Marunouchi development for themselves. When we show them around the district, many expressa desire to partner with us in projects to achieve the same type

ANNUAL REPORT 2014

I have started with an introduction of our management vision to
enable readers to gain an understanding of the special features ofour business. Before reporting on our business performance andour medium-term management strategies, I would like toexplain our view of the medium- to long-term business environment on which our performance and strategies are premised.
We are cautious about the medium-to-long-term businessenvironment. On a macroeconomic level, we see the changes
in demographics, specifically the decline in the working population, as having negative impacts on the real estate market.
These impacts are both direct and indirect. Directly, the changing
demographics, such as the declining population and smallerfamilies, will result in a contraction of the housing market.
Indirectly, a smaller working population leads to a decrease ineconomic activity, which could put downward pressure on
office lease demand.
Furthermore, given the rapid economic development of
Asian countries, competition for the role of Asia’s regional
economic hub has intensified between Tokyo and various Asian
cities, such as Singapore, Hong Kong, and Shanghai. Already, we
have seen some global corporations move their Asian headquarters to Singapore because of its geographic proximity to other
Asian countries, low corporate income tax rates, and facility withEnglish as its language of business. Therefore, Tokyo urgently
needs to establish its predominance as a global city. This is not a
status issue—over the long term, with Japan’s population expected
to decrease, we believe that it is essential for the country’s
continued economic development to attract overseas corporations and skilled human resources. For that reason, reinforcing
Tokyo’s global competitiveness is an extremely critical strategy.

13

T o O u r S ta k eholders

Long-Term Management Vision
BREAKTHROUGH 2020
and Medium-Term Management Strategies

Based on the background I have just described, in 2011, we
formulated our long-term management vision, BREAKTHROUGH
2020, establishing long-term management strategies to take
Mitsubishi Estate up to 2020. While reflecting on the detailsof the plan, let me report on the results of the first mediumterm management strategies of our management vision that
ended in fiscal 2014.
Under BREAKTHROUGH 2020, we have set a series ofgoals for the Mitsubishi Estate Group. Among them are reinforcing our value chains and achieving Group growth by cementing
our No. 1 position in the investment and development businessfields in Japan. Other goals include proceeding with the redevelopment of the Daimaruyu area, consisting of the Otemachi,
Marunouchi, and Yurakucho districts, building the REIT investment market, firmly establishing our new condominium brand,and expanding the International Business.
The details of the medium-term management strategies
covering the period from fiscal 2012 to fiscal 2014—positioned as
the preparation stage for the future growth of the Group—are shownon the page on the right. As shown at the top, we roughly attained
our targets for performance and stability—EBITDA over total
assets and net interest-bearing debt over EBITDA. Unfortunately,
we were unable to achieve our growth potential target, EBITDA,
primarily because of unexpected turns in several assumptions:the impact of the Great East Japan Earthquake lasted longer than
expected; and, similarly, the recovery of the office building
market was overly delayed against the backdrop of such abnormal conditions in the global economy as the stagnation in theMedium-Term Management Strategies (FY 2012–FY 2014) Targets and Initiatives
markets of emerging countries and the prolonged sovereign debt
crisis in Europe.
Although the Mitsubishi Estate Group did not reach its
targets numerically, on a qualitative basis, I think the results weresatisfactory in terms of what we expected to achieve during the
preparation stage under our long-term management strategies.
For example, the Marunouchi Eiraku Building completed in
January 2012 is situated at the intersection of the Marunouchi
and Otemachi districts, effectively expanding our redevelopmentarea. Moreover, opened in October 2012, Otemachi Financial
City, which is intended to strengthen the district’s function asa financial center, is also contributing to the enhancement ofTokyo’s functionality.
In the Residential Business, established in fiscal 2011,
we have taken steps to reinforce our value chains and upgrade
business efficiency, principally though Mitsubishi Jisho ResidenceCo., Ltd. In addition, we have strengthened our condominium
management business and progressed with the developmentof new business fields, such as the renovation business.
We have also been active overseas, expanding our property
portfolios in the United States and Europe as planned. Especiallyin London, I think we have put in place ideal business operations
demonstrating balanced capital flows—the business is steadily
recovering previous investments while continuing to invest in
new properties. Moreover, we are building our property portfolios in Asia. In Singapore, Mitsubishi Estate is proceeding with its
first office development project in Asia and making progress withhousing developments in China.

Quantitative Targets
Indicators

Targets

Actual results

Growth potential

EBITDA¥265.0 billion¥246.3 billion

Performance

EBITDA / Total assets

5.3% or above

5.2%

Stability

Net interest-bearing debt / EBITDA

7.5 times max.

7.1 times

Business Domain Themes
Business Domains

Related Major News Releases

	Mitsubishi Estate Launches Strategic Growth Center Project on Full Scale
Four Overseas Companies Move into EGG JAPANn Mar. 2013
Third Phase of the Otemachi Chain Redevelopment Project Under Wayn Nov. 2012	‌Decision Made to Rebuild the Fuji Building, Tokyo Kaikan Building,and Tokyo Chamber of Commerce and Industry Buildingn Oct. 2012	FINE TOKYO Opens on the Fifth Floor of Otemachi Financial City
South Towern Jun. 2012	Otemachi 1-1 Project (Tentative Name) Announced to Rebuild the Resona
Maruha Building and the Bank of Tokyo-Mitsubishi UFJ Otemachi Building
n Feb. 2012
Marunouchi Eiraku Building Completed

n May 2013

Maximize the value ofthe Marunouchi district	Construction Starts on First Independent Logistics Center Development,
Logicross Fukuoka Hisayaman May 2013
Construction Begins on Dai Nagoya Buildingn Mar. 2013	Grand Opening of MARK IS minatomirai Set for Junen Dec. 2013

Investment &Development
Business Group

Promote projects andlead the market• Article on opening of MARK IS shizuoka included in same news release

April Grand Opening Announced for SHISUI PREMIUM OUTLETS
	Grand Front Osaka to Open to the Public in Apriln May 2012
Shinjuku Eastside Square Construction Completed
n May 2011	‌Shinjuku Front Tower Completed
n Feb. 2013
n Jan. 2013

Strengthen operations
centered on
the condominium
sales businessAll 883 Units of The Parkhouse Harumi Towers’ Krono Residence Sold
Mitsubishi Jisho Residence Enters the Renovated Condominium Market
n Sep. 2013	All Units of The Parkhouse Gran Chidorigafuchi Sell Out on
Application Day
n Mar. 2014n Oct. 2013n Apr. 2014

Expand portfolios
in Europe andthe United States andreinforce Asian operations	Investment in U.S. Office Building Fund Managed by the Rockefeller
Group Closed• Investment subscriptions ended in July 2013

Mitsubishi Estate Acquires Clive House Office Building in London
Local Subsidiary Established in Shanghai
n Jan. 2013
Mitsubishi Estate Acquires 1 Victoria Street Office Building in London
n Jul. 2011	‌Mitsubishi Estate to Participate in Office Development in Singapore—
Decision Made to Participate in First Office Development Project in Asian Dec. 2013n Apr. 2013	Mitsubishi Estate and Marubeni Corporation Merge Condominium
Management Businessesn Mar. 2014
General Outline Decided for Royal Park Hotel THE Hanedan Apr. 2013	Mitsubishi Jisho Investment Advisors’ Private-Placement REITs’ Assets underManagement Exceed ¥100 Billionn Apr. 2012
Construction Starts on Royal Park Hotel THE Nagoyan Mar. 2014

Management& Services
Business Group

Provide solutions
and services based onGroupwide advantages

Note: Some of the above news releases are available only in Japanese.
Otemachi Financial City

14

Marunouchi Eiraku Building

Top: 1 Victoria Street
Bottom: MARK IS minatomirai

MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2014

15

T o O u r S ta k eholders

EBITDA / Operating Income
First Stage of the Marunouchi Redevelopment Project (CY 1998–2007)

Millions of yen

Second Stage of the Marunouchi Redevelopment Project (CY 2008–2017)

300,000

250,000

200,000

150,000

100,000

50,000

0

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

(Estimates)
EBITDA

2017

2018

2021

FY

(Plan)

Operating Income

BREAKTHROUGH 2020
Medium-Term
Management
Strategies(FY 2012–FY 2014)

Aim and Outline of New Medium-Term
Management Plan (FY 2015–FY 2017)

Business conditions in Japan have been favorable since thesecond half of the fiscal year ended March 31, 2014. Against a
backdrop of improved corporate performances, office leasing
fees and occupancy rates are on the rebound. In the condominium market, the reaction to the demand rush ahead of thehike in the consumption tax was limited, and sales have trended
upward because of expectations that real estate values andinterest rates will rise. The J-REIT market is also recording
growth because of the continued influx of investment funds.
Furthermore, positive signs have emerged in the external environment, such as the awarding of the 2020 Summer Olympic
and Paralympic Games to Tokyo.
Taking into consideration the business environment and thesteady progress with the redevelopment of the Daimaruyu area,
Mitsubishi Estate has formulated new medium-term management plan covering the three-year period starting in April 2014.
The underlying theme of the plan is achieving an increase incorporate value over the term.
Under the current medium-term management plan,we will not achieve significant increases in growth potential or
profitability. We are expecting this result because of the higher
initial costs related to the completion of several large-scalebuildings, such as amortization expenses, and due to lower
leasing income related to the closing of buildings prior to thestart of new redevelopment projects. Therefore, the impact of
the current medium-term management plan will not begin to
emerge until fiscal 2018. Up until that point, we will aim tosteadily build up the fundamental strengths that will be the16source of future growth and profitability. To do so, our course ofaction will be to continue with our current strategies, such as theredevelopment of the Daimaruyu area and the expansion of ouroverseas property portfolios. In overseas operations, in particular,
we will take steps to achieve our goal of increasing the contribution to total operating income by the International Business to 20%
by fiscal 2021. To that end, we will be accelerating businessdevelopment and seeking out joint investment partners based on
our collaborations with Group companies, such as Rockefeller
Group, Inc., of the United States.
Under the medium-term management strategies, we will beproceeding with large-scale investments, primarily in the redevelopment of the Daimaruyu area and the International Business.
Consequently, achieving a sound balance between investments
and our financial position will be a key point in our operations.
I believe it will be a period where our accumulated know-how,including portfolio management, will be strongly tested.
To prepare for the implementation of the medium-term
management strategies, we revised our organizational structure
as of April 1, 2014, merging the previous Commercial Property
Development and Investment Group into the Office Building
Group. This reorganization unifies the know-how and information accumulated by our management property development
and turnover property development businesses related to asset
management, development, leasing, and property management(PM). In addition, we set up departments to manage individual
areas of the International Business.

MITSUBISHI ESTATE CO., LTD.

Medium-Term
Management
Plan(FY 2015–FY 2017)

Business Objectives of Medium-Term Management Plan (FY 2015–FY 2017)
Business Domains

Business Objectives

Promote world-class urban development to secure Marunouchi as Asia’s top city
Strengthen efforts aimed at increasing the value of the existing portfolio in Marunouchi■ Actively pursue urban development outside of Marunouchi in line with the market■

Office Building■ urther promote the development of retail properties and increase revenues
Fthrough superior property management■ Develop the business against a backdrop of firm leasing demand for logistics■

Retail & Logistics Property
Investment &Development
Business Group

Boost efforts aimed at securing the profit rate in the condominium business
Strengthen the stock business■ Strengthen the rental housing business■Residential Business■ ith Europe / U.S. businesses as the core areas, further develop business in Asia, such asWcondominiums and shopping centers■ Promote the business model based on the value chain■

International Business

Management &Services BusinessGroup

ANNUAL REPORT 2014■

 ake advantage of the strength of the Group to provide solutions and services and toTreinforce values chains17T o O u r S ta k eholders

Companywide Quantitative Targets for FY 2015–FY 2017
Indicator

Fiscal 2014 Results

Fiscal 2017 Targets

EBITDA¥246.3 billion¥250.0 billion or above

Operating income¥161.3 billion¥165.0 billion or above

Performance

EBITDA / Total assets

5.2%

5.0% or above

Stability

Net interest-bearing debt / EBITDA

7.1 times

Approx. 8.0-8.9 times

Fiscal 2014 Results

Fiscal 2017 Targets

Building Business¥116.3 billion¥120.0 billion

Residential Business¥27.8 billion¥28.0 billion

International Business¥25.6 billion¥25.5 billion

Management Services Business¥6.6 billion¥7.0 billion¥(15.0) billion¥(15.5) billion

Growth potential

Operating Income Targets by Business Segment

Eliminations or Corporate

Building an Organization Capable of
New Concepts in Urban Development

From the vantage point of creating value from a long-term
perspective through urban development, the key management
resource is not capital or land, but people. For example, when
we were redeveloping the Tokyo, Shin-Marunouchi, andMarunouchi Park buildings into high-rise buildings during
the first stage of the Marunouchi Redevelopment Project, we
presented the idea of transferring the unused portion of theallowable floor area ratio* for JR Tokyo Station to the high-risebuildings. In the end, what enabled us to achieve the transfer
after persistent negotiations with authorities and other relatedparties was people power. Based on such an example, to continue our style of urban development that generates completely
new value based on new concepts, I believe it will be necessary
for the overall Group to strengthen its human resources.

18

Urban redevelopment must continually change in responseto the requirements of the times. During the 1960s, an era ofhigh economic growth in Japan, the first priority was to create anenvironment in which numerous people could work efficiently.
Therefore, we pursued functionality in our development of the
Marunouchi district. In today’s economically prosperous Japan,
however, people’s sense of values, working habits, and otherfactors have changed—greater weight is placed on the importance of leisure time. In response to the needs of the times,
we have continued to transform the Marunouchi district intoa town where people not only work but interact and exchange
information under the concept of the world’s most interactioninspiring neighborhood.

As mentioned previously, we expect competition to further
intensify between Tokyo and other global cities with highbusiness concentrations in Asia, such as Singapore, Hong Kong,and Shanghai. Moreover, as office building development progresses in downtown Tokyo, competition will arise among
business areas within Tokyo. Facing stronger competition athome and abroad, Mitsubishi Estate must build an organization
capable of generating new concepts to address the issues surrounding enhanced competitiveness. We have to creatively
consider what will be necessary to make Marunouchi theworld’s most interaction-inspiring neighborhood, the type ofdevelopment that will enrich the lives of the people of the
future, and the measures that will be necessary for Tokyo andJapan to flourish.

In 2012, we set up a business development support center in
our Shin-Marunouchi Building under the name “EGG JAPAN.”
Through the center, we are providing a variety of businesssupport services to not only Japanese small and medium-sized
venture enterprises but also foreign venture enterprises planningto enter the Japanese market. Already, as of July 2014, 15 foreigncompanies, including U.S. IT companies with bases in Silicon
Valley, have set up operations in our facilities. When asked what
the appeal of Tokyo is to these companies, the answer is thecity’s location in the center of Japan’s most sophisticatedconsumer market that is unparalleled in other cities of Asia.
With that assessment in mind, Mitsubishi Estate will continue to practice urban development that generates new value.
We will undertake development with a view to further enhancing Tokyo’s reputation in a way that will result in growth in our
corporate value over the long term.

Tokyo’s Reputation Linked to Increasein Mitsubishi Estate’s Corporate Value

A variety of preparations are in motion in Tokyo in the lead-up
to the 2020 Summer Olympic and Paralympic Games. Considering
the type of urban development that we undertake usuallyrequires a time frame of 10 or 20 years, there is a limit to what
can be achieved in the six years left until the opening ceremony.
However, the Olympics will draw a multitude of people toTokyo from within Japan and around the globe—and for us, thisrepresents a tremendous opportunity to fully demonstrate to theworld the appeal of Tokyo and Marunouchi.

August 2014

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

* Ratio of total floor space of a building to land area under Japanese building laws

MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2014

19

the M its u bishi E state G ro u p ’ s Bu siness M odel

“Demonstrating the Mitsubishi Estate Group’s strength—integration
capabilities—I try to tap the various potential inherent in the city,
the mix of people in the city, and our business partners.

Integration Capabilities Fosteredby Urban Development as a Source of Growth

The next step is building on the collective value generated

Through the redevelopment of the Marunouchi district, we haveenhanced our integration capabilities and expertise as a comprehensive real estate developer. Our know-how and performancerecord accumulated through the process of collaboration withvarious stakeholders, such as landowners, tenants, and local
authorities, and unifying their aspirations for the developmentof an area have become a source of value creation for the future.
Our integration capabilities also demonstrate their true value
in the development of REITs, which require the ability to bring
together and organize specialists with advanced skills, and inoverseas real estate development.

by the area to achieve long-term growth.”

Enhancing Value as an Expert

The ability to envision changes in the needs of people working
and living in an area and an understanding of the perspective ofcustomers has arisen from our interactions with 4,000 businesstenants in the Marunouchi district alone. When it comes toplanning urban development with a view to the future, envisioning change and understanding customers are decisive assets. By
refining these assets, along with our competitive management
services, we contribute to the advanced functionality of Tokyo
as a city—and achieve sustainable growth for cities around theworld and for Mitsubishi Estate.

Bunroku Naganuma
General Manager
Corporate Planning Department

Value-Creation Initiatives
Integration Capabilities to Tap Stakeholder Potential
Urban
Development

Advanced Expertise
Understanding the Customer Base andCustomer Perspective

Management(Asset Management /Property Management) /Development /Leasing and Sales

Creating
Cash Flow

Reinvestment

Sustainable
GrowthAbility to Envision Changes in Business andLiving Needs

20

MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2014

21

the M its u bishi E state G ro up ’ s B u siness M odel

in the area by about three times and their total revenues haverisen to approximately ¥70.0 billion. As a result, on the weekend,
in contrast with its previous reputation as an inactive area, thebusiness center has transformed into a lively commercial center
bustling with people.
1 Total commercially leased floor space of Mitsubishi Estate (non-consolidated)

Mariko Shigematsu

Concentration
Daimaruyu
Area
Redevelopment
Project

Manager, Urban Planning Office,Urban Development Promotion Department

Interaction

As an intersection between Japan andthe world, I think we need to proactively
promote the appeal of this area at home
and abroad for its globally recognizeddrawing power and safety, facilities thatoffer a hands-on experience of Japan’srich culture, and other attributes.

Collaboration
Frontier

C ase 1

Marunouchi Redevelopment Project

DA I M A RU Y U A R E A*—Where the future offers excitement and inspiration


Value D rivers
1‌Utilize the concentration and accumulatedresources of a business center withmore than 120 years of history.

2

Promoteinteraction between the businesses‌and people assembled in the area to create
new value.

3

Pursueurban development in partnership‌with stakeholders and authorities.

4‌Continuously implement transformations
ahead of time with a view to the requirementsof the future.

* Consisting of the Otemachi, Marunouchi, and Yurakucho districts

22

TOKYO, JAPANConcentration of Resources in the Daimaruyu Area
Rises Even Higher through Redevelopment

Urban Redevelopment from the Aspectsof Both Core and Support Infrastructure

One of our business themes is how we can leverage the highconcentration of resources of the Daimaruyu area. While
Mitsubishi Estate is a real estate developer, our job does not end
with completing office buildings and finding tenants. Beyond
that, we believe a vibrant area only comes into existence after
we have created a community or the activities that bring thebusinesses and people assembled in the area together to interact
and trade ideas. We work to create value from the aspectsof both core infrastructure, such as the office buildings, andsupport infrastructure, such as implementing schemes topromote interaction.
Recently, in terms of core infrastructure, Mitsubishi Estate isemphasizing achieving an overall improvement in the building
performance through the addition of such functions as advanced
disaster management functions and heightened energy conservation efficiency that reduces carbon dioxide emissions per unit offloor space. At the same time, we are enhancing aspects ofsupport infrastructure, such as business and employee support
systems. Our business-matching service for venture enterprisesthat are starting up in the area or overseas companies planning toenter the Japanese market and day-care centers in our buildingsfor office employees are just a few of the systems we have
implemented as support infrastructure.

Pedestrian Traffic in the Marunouchi District
People / Day
100,000

80,00060,00040,00020,0000
Weekdays

Saturdays

SundaysJul. 2002 (Before the Opening of the Marunouchi Building)Nov. 2012

Survey of pedestrian traffic for 10 to 20 hours in 10 locations in the Marunouchi and
Yurakucho districts

As a major transportation hub for Tokyo as well as a gateway
to Japan, the Daimaruyu area is an expanse of approximately
1.2 million square meters that lays on the west side of Tokyo
Station. One of Japan’s leading business centers, the area isdotted with the offices of about 4,000 enterprises, including thehead offices of 75 companies listed on the First Section of theTokyo Stock Exchange. Approximately 230,000 people work in
the Daimaruyu area.
Beginning with the completion of the Marunouchi Building
in 2002, through the Marunouchi Redevelopment Project thatwas extended to include the wider Daimaruyu area we haveachieved another leap in the concentration of resources in thearea. Specifically, from the start of the second stage of the
project until today, we have rebuilt nine buildings. In comparison
with floor space before the redevelopment, total floor space1 has
expanded about 1.7 times. In tandem with the redevelopment,by promoting the use of lower floors of the office buildings bycommercial businesses, we have increased the number of stores

MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2014

23

the M its u bishi E state G ro up ’ s B u siness M odel

Improving the Appeal of Tokyo as a Global City

We believe that Mitsubishi Estate’s development efforts, including
those in the Daimaruyu area, improve the appeal of Tokyo as
a city overall and increase its international competitiveness. We
see our rivals in Asia as Singapore, Hong Kong, and Shanghai.
Completed in October 2012, Otemachi Financial City is not
only filled with financial institutions but is also the address ofthe FINE TOKYO center. Established by Mitsubishi Estate, thecenter provides services aimed at fostering financial professionals
with advanced skills suitable to the district’s position as a global
financial base.
The reasoning behind the center’s establishment was thatproviding a space where experts from the information-intensive
financial industry could gather would contribute to the strengthening of Tokyo’s international competitiveness. In addition,
assuming further progress in the globalization of the workforce
in the Daimaruyu area, we took steps in our development plans
to include more diverse response capabilities, such as encouraging a hospital providing services in both English and Japanese toestablish a medical center in the area.

Co-Creation of Area’s Future Urban Planning throughCollaboration with the Public and Private Sector

Constantly Pursuing Progress as a Pioneer
Creating Mainstream Trends in Urban Development

In urban development, partnerships from a variety of perspectives
and of diverse combinations play an extremely important role.
A major goal such as strengthening the international competitiveness of Tokyo cannot be achieved by the Mitsubishi
Estate Group on its own. In developing the Daimaruyu area, weformed an urban development organization to enable collaboration
among the area’s landowners, authorities, and other stakeholders
in forming a shared vision of the development goals. Throughnetwork-building and collaboration with stakeholders, weelicited the co-creation of an urban development plan.
A solid example of this co-creation process is currently under
way as the third phase of the Otemachi Chain Redevelopment
Project. This project utilizes the idle land in the Daimaruyu area
previously occupied by a national government ministry as seedland for a chain development process. We established a systemthat would enable the stakeholders of urban development in
the area to accelerate the upgrading of company offices in thearea—including those in the Otemachi district, where many
companies operate around the clock—without forcing them tomove to temporary office space. At first, some owners of buildings in the area and others built new buildings on the idle former
government ministry site and moved their tenants. Subsequently,
using the vacated sites in the area, we carried out a continuous
process of rebuilding in multiple stages. While Mitsubishi Estateparticipated in both the second phase—Otemachi Financial
City— and the third phase of the project, the groundwork forthe project was laid by the mutual trust and performance record
built over many years of working with various stakeholders ona shared vision of the area’s future.

Urban development is a constant, ongoing process. Even the
Daimaruyu area has undergone major transformations fromthe 1960s, when it underpinned the Japanese economy as theheadquarters of corporate Japan, through its 1980s era as adense conglomeration of high-rise office buildings, to today’s
multi-functional area, with amenities ranging from museums,commercial facilities, and medical facilities to business support,such as venture enterprise fostering and financial education
services. Inheriting our business spirit of constantly pursuing thenext frontier in our actions, we continue to meet the challengeof achieving new value creation through urban development.

Mitsubishi Estate-Owned Buildings in the Daimaruyu Aream2
120,000

Marunouchi Park Building
90,000Otemachi Financial City
Marunouchi Eiraku Building

60,00030,00000Top: FINE TOKYO
Bottom: St. Luke’s MediLocus

24

10

20

30

40

50

60 Years

Vertical Axis: Leased Office Area (m2)
Horizontal Axis: Building Age (years)
Circle Size: Total Area (m2)

MITSUBISHI ESTATE CO., LTD.

Developing Future Markets though Business Support
Aiming to maintain the Marunouchi district’s position as an attractive business centerof choice for global companies, Mitsubishi Estate set up the Tokyo Client Business
Development Office in-house in 2012. While providing business development support
for foreign companies planning to enter the Japanese market and Japanese small andmedium-sized venture enterprises aspiring to expand internationally, the Tokyo Client
Business Development Office promotes the establishment of business bases by suchcompanies in the Marunouchi district. Promoting the business expansion of our tenantfirms and creating new jobs in the district through our business support services
stimulate new office space demand and lead to an increase in business opportunities
for the Group in the medium-to-long term.
While the taxation systems, regulations, and other aspects of business in Japan may
be complex, its mature markets have an appeal not found in any other market in Asia.
Particularly for information and communication technology companies that have their
headquarters on the U.S. West Coast and offer cloud services and other “big data”related services, the various accumulated data on the Japanese market holds greatsignificance for their businesses. As of July 2014, EGG JAPAN,* the innovation platform
office operated by the Tokyo Client Business Development Office, has a total of 41
foreign and Japanese companies located in its office space, achieving full occupation
well ahead of its original schedule. Going forward, the Tokyo Client Business
Development Office plans to act as a pacesetter in creating an environment thatfacilitates its tenant firms’ business. The office will do so through such proactive
measures as providing tenant companies with business partner matching services andsupport in expanding their personal contact networks through the operation of its
business club.
I think the job of business support requires serious consideration of the customer’s
market environment, competitive advantages, and other factors as well as the use ofcomprehensive business capabilities. Believing the vitalization of the Marunouchi
district leads inevitably to the vitalization of Japan, I intend to develop our organization
into a highly attractive business support center for foreign and Japanese companies.

ANNUAL REPORT 2014

Masato Aikawa
General Manager
Tokyo Client Business Development Office*	EGG JAPAN: The Entrepreneur Group for
Growing JAPAN is an innovation platform
office for creating new businesses andsupporting business growth. EGG JAPANprovides business support services basedon the needs of the tenant firms located in
its office space and utilizing the membership base of its business club.

25

the M its u bishi E state G ro up ’ s B u siness M odel
Dai Nagoya Building

C ase 2

Building Business
Nagoya Station

DA I N AG OYA B U I L D I N G—Where 50 years of local color and traditions are passed on to the next generation



NAGOYA, JAPAN

Yusuke Izumo
Project Promotion Office,Nagoya Branch

Construction progressing on the Dai Nagoya Building

It has only been one year since
I joined the Dai Nagoya Building
Redevelopment Project, so I am
acutely aware of the importanceof meeting the expectations of
Nagoya residents and the
responsibility of the project.

The former Dai Nagoya Building, which was beloved by
local residents for more than 50 years

Value D rivers
1

2

3

4

‌Meet the expectations of local residents bybringing out the distinctive character of thebuilding that is representative of the local area.
Dai Nagoya
Building‌Create a bustling environment that acts
as an intersection between the terminal train
station and the surrounding area.

Ease of Navigation

Approximately

65,000 m

2

Total retail space:

SafetyApproximately

8,500 m2

Large-scale underground automatedbicycle parking rack system capacity:

Protectthe safety of tenants by installing‌
advanced disaster management functions.

The city of Nagoya forms the center of one of the three major
metropolitan areas of Japan. The Dai Nagoya Building, situatedin front of Nagoya Station, was constructed in 1962. For 50 years,
the landmark building—with its name boldly displayed on theroof—has become a familiar part of the lives of local residents.
Amid a sense of expectations for its replacement, we areprogressing with the construction of a new building scheduled
for completion in fiscal 2016.
Mitsubishi Estate is attempting to fuse the operational
management know-how and latest engineering and design
technologies developed in managing the Otemachi, Marunouchi,
and Yurakucho districts in Tokyo to create a dazzling new faceof Nagoya. In addition to using highly distinct curtain walls,
we will have open garden spaces fronting the mid-levelof the building to evoke a special impression that will attract
people’s attention as soon as they exit the station. We haveTotal office floor space:Innovation‌Meet the challenge of the Company’s Nagoyabased new development initiative.

Rebuilding a Landmark Beloved by Local Residents

26

Identity

Approximately

planned such amenities as sidewalks and underground corridors
to increase the ease of getting around Nagoya Station, thesurrounding area, and the underground shopping malls.
Moreover, we have kept in mind the preservation of the building’s previous popularity and its significance as a local landmark
by retaining the name of the building.

Addressing the Area’s Issues and Disaster Managementwith State-of-the-Art Technology

To assist with planning, Mitsubishi Estate participates in an area
development committee consisting of representatives of the
Nagoya City government and landowners of the surroundingarea. We are currently working toward solving one of the issues
raised by that committee—the illegal parking of bicycles in
the area around the station. Our solution of building an underground automated bicycle parking rack system capable of

MITSUBISHI ESTATE CO., LTD.

accommodating approximately 960 bicycles in an office building
is a first-time experience for us.
Moreover, we have taken steps to meet the business continuity
plan (BCP)* needs of tenants. In addition to using the mostadvanced earthquake-resistant engineering and structures, weare installing disaster management functions, such as flooding
prevention barriers and an aboveground emergency electric
power generation system, in consideration that the area is only
two meters above sea level.
Bridging the expectations for change and the desire to keep
the familiar surroundings of the local residents and the manyother people involved in the project, we are pushing forwardwith area development that will contribute value to the area foranother 50 to 100 years.
* ‌BCP: A business continuity plan establishes facilities and measures to preventthe disruption of essential businesses and services in the event of a major incident
or disaster.

ANNUAL REPORT 2014

960 bicycles

Other Activities in the Building BusinessIn addition to developing buildings premised on long-termownership, the Building Businesspursues the strategic developmentof quality income-generating
properties in response to theneeds of investors in the realestate development market. In
this category in fiscal 2014, theBuilding Business completed theconstruction of Front Place
Nihonbashi in Chuo-ku, Tokyo.

Front Place Nihonbashi

27

the M its u bishi E state G rou p ’s B u siness Model
Cumulative sales of
MARK IS minatomirai
since opening:

25,640 million¥

Valu e Drivers
1

spaces that make people’s daily
Provide‌
lives enjoyable and relaxing.

2

Meet
not only material needs but also‌those for space and time.

3

 evelop an area in which commercial
D
properties can target different
consumer groups.

Minatomirai Station

MARK ISminatomirai

MARK IS minatomirai and Landmark Tower

C ase 3

4

Retail & Logistics Property GroupM I NATO M I R A I D I S T R I C T—Where people living, working, and visiting interact
LivingMinatoMirai

Interactive
Experience
Diversity
Multi-Functional

28

Creating Spaces That Bring Enjoyment
into People’s Lives

YOKOHAMA, JAPAN

Motonori Nagaseki
Retail Property Leasing Department‌Chart a course to a future where people
live and work in the same area.

The Yokohama Minato Mirai district lies southeast ofTokyo. A conglomeration of buildings, including officebuildings, a convention center, commercial properties,
art galleries and museums, and residences, approximately 93,000* people work in this district, which
attracts a total of about 72 million* tourists, shoppers,
and other visitors annually. Mitsubishi Estate chose
this district as the location for its commercial property
MARK IS minatomirai, which opened in June 2013.
The development concept for MARK IS minatomirai
is a “life entertainment mall,” while the merchandisingconcept is “Enjoy a comfortable, relaxed, and beautiful
life—Enjoy living in Yokohama.” We searched out
tenant stores for the commercial property that would
offer a full range of items necessary to the enjoyment ofpeople living, working, or visiting the Minato Mirai district.
Moreover, Mitsubishi Estate has used the know-how
accumulated from its experience in planning, developing,and managing shopping and entertainment centers to fulladvantage in designing such spaces within the commercial property as spacious seating areas and the rooftop
garden, which features a fruit orchard and a vegetablegarden, where people can pass the time.

Landmark
Tower

JR Sakuragicho
StationCharting the Future of Urban Development

In contrast with MARK IS minatomirai, which targets
daily use by families, the Landmark Plaza, another
Mitsubishi Estate commercial property in the Minato
Mirai district, features many stores selling high-end
accessories for men and women and luxury brands
that attract customers from a large surrounding area.
Developing the area in an integrated manner as a single
complex with people flowing between the properties
because of their very different offerings represents anurban development style unique to Mitsubishi Estate.
In the sense that the Minato Mirai district has beendeveloped as a place where people live and work in thesame area, we believe it offers a different vision of future
urban development than the Marunouchi district.
Through the development and management of properties that meet the lifestyle needs of the residents ofthe district, we intend to continue to refine the appealof this town.
* Announced by Yokohama City on March 12, 2014

In a very literal sense, the real workin developing a successful commercial property doesn’t happen
until after the facility opens. Throughcollaboration with tenants, we foster
the creation of spaces that customers will keep coming back to time
and time again.

MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 201429

the M its u bishi E state G ro up ’ s B u siness M odel

New “The Parkhouse” Project
Proceeding Favorably

C ase 4

The Parkhouse Harumi Towers is situated along the banksof the canals in the area of Tokyo that has been in the
spotlight recently as one of the sites for the 2020 Summer
Olympic and Paralympic Games. The large-scale residential
housing project rises 49 stories aboveground and contains
1,744 units. Of the two towers in the complex, the Krono
Residence was completed in October 2013. The othertower, the Tiaro Residence, is scheduled for completionin 2016.
The Company is developing various types of the
Parkhouse projects, such as The Parkhouse Kamisaginomiya,which is a large-scale low-rise condominium building in aquiet residential district.

Residential Business

CONDOMINIUM
DEVELOPMENT—Where value springs from community harmony

JAPANThe Parkhouse Harumi Towers

Nobuyuki Nagasaki

Advanced
Development
Residential
Business

Assistant Manager
Mitsubishi Jisho Residence Co., Ltd.

Trust

Our goal is to supply housing thatwill last for 100 years along withthe local area through development that blends properties into
the existing community and also
increases the overall value addedof the neighborhood.

Community
Relations

Value D rivers
1

Pursue the highest quality possible based on
our own standards.

2N urture trust that forms the base for residents’sense of safety and security.

3C reate an environment where residents will
become members of the community.

4

Provide homes that attract long-term dwellers,
thereby leading to an expansion in the business domain.

30

Pursuing Definitive Quality
for Irreplaceable Homes

The source of the value provided by the Residential Business of
the Mitsubishi Estate Group is its pursuit of advanced development and quality. To that end, Mitsubishi Jisho Residence has
established a proprietary condominium quality management andperformance indication system known as “Check Eyes.” Utilizing
this system, we carry out quality control management thatvisualizes all the processes in condominium development, fromthe design stage to construction and after-sales services forresidents following their move into the building. The Mitsubishi
Estate Group’s insistence on safety and security as a key aspect

MITSUBISHI ESTATE CO., LTD.

of the services of the Group has been cultivated over the years
through its development of the Marunouchi district. This
insistence has resulted in buildings designed to provide a base forsafe and secure living for customers.
In general, newly constructed housing that features the latest
equipment is highly appealing to customers. However, we believethat behind the various reasons that customers choose ourresidences lies a trust in the quality we provide and a need forthe greater safety we offer. Especially after the Great East Japan
Earthquake, interest in safety and security has heightened among
our customers. And the measures the Mitsubishi Estate Group
has taken for that purpose in the past are now being recognizedand highly evaluated.

Utilizing the Special Characteristics of the Community
to Offer Homes Suited to Long-Term Dwelling

The basis of feeling safe and secure in a home is not just in thequality of the building. The Group aim to provide residencesthat will blend in with the different characteristics of each
community and be an asset for both the people living there andthe neighborhood itself.
A condominium building that becomes a familiar andappreciated part of the local community—and loved, of course,
by its residents—will be inhabited for a long time. We aim as a
unified Group to support that process even after construction iscompleted. We form ongoing business relations with customers,
providing for their needs in all scenarios involving their home,including moving to bigger or smaller homes and renovation.
We want to carry out residential development that will contributeto the overall goals of the Residential Business: “Pursue thecreation of lifelong value for customers” and “Expand stockbusiness by strengthening the residential value chain.”

ANNUAL REPORT 2014

Residential Leasing Field
PARK HABIO, a leasing
condominium brand that
Mitsubishi Estate has beendeveloping since 2004, offers
comfortable, safe and secure,and high-quality properties inhighly convenient locations in
downtown Tokyo. By the endof fiscal 2015, we expect tohave 51 buildings with 4,300
units on the market under thisbrand name.

PARK HABIO Ebisu

Custom-Built Housing Field
Mitsubishi Estate Home Co., Ltd., provides custom-built
housing featuring superior construction methods forthermal insulation, seismic resistance, durability, andother specifications. Custom-built housing offered by
the company boasts high energy efficiency and comfort
levels due to its proprietary Aerotech barrier-free
air-conditioning system. Moreover, the company canhandle full custom-order services for particular needs insuch areas as subcontracting for rental and sales housing
and hospitals and stores as well as renovations.

Makuhari Home Gallery

Nishinomiya Kitaguchi Home Gallery(newly opened in April 2014)(newly opened in April 2014)31

t h e M i t su bi sh i E s tat e Gr o up ’s B us in ess Mod elLondon Stock Exchange

Paternoster Square

Shinichi Kagitomi
Director & General Manager
Mitsubishi Estate London Limited

Warwick
Court

Valu e D rivers

For the past few years, we havebeen purchasing properties with
future development potential,laying the strategic groundwork forfurther expansion of our business.

1‌Pursue localized business utilizing
accumulated experience.

2‌Earn the trust of professionals
in the business.

3

Build
personal relationships‌with highly skilled professionals
in specialty fields.

4

Capitalize
on business opportunities‌
offering future development potential.

St Paul’s Cathedral

Paternoster Square

C ase 5Experience andPerformance
UnitedKingdomBusiness

Integrity and Trust
Partnerships

International Business

LO N D O N—Where Mitsubishi Estate has established a strong presence thanks to its performance

LONDON, U.K.

Information
Gathering32

Raising Our Market Presence
through Large-Scale Projects

Reputation Creates
Valuable Personal Networks

Against the backdrop of the high degree of transparency and liquidity of real estate transactions in the
United Kingdom, London has a robust market that
attracts investment funds from around the world. Since
the laws and regulations, business practices, and business schemes of the local market are completely different
than those of Japan, the know-how and other businessassets we have accumulated in Japan cannot be applied
as they are. Facing this challenging environment,
Mitsubishi Estate established a local subsidiary in 1986.
Since then, we have put down roots in London’s real estatemarket and established ourselves as an active player.
Mitsubishi Estate significantly raised its presence inthe market with the Paternoster Square Redevelopment
Project, which was completed in 2003. Over 13 years
starting in 1990, we worked with many different business partners as the project owner. By successfully
executing this large-scale project, our reputation in thelocal real estate market rose substantially.

It is not excessive to say that the reputation Mitsubishi
Estate has earned in the market is the most influential
factor on our business development in London. This isbecause the driving forces in the market are the networks of professionals active in various specialty fields.
If a company have a good reputation, skilled business
partners from different specialty fields naturally gravitate to its projects, and business opportunities expand as
the networks bring information about quality properties
coming on the market.
At March 31, 2014, Mitsubishi Estate owned sevenproperties in London. These properties generate a stable
income, allowing us to plan our vision for future redevelopment projects. In keeping with our goal of strengthening
the International Business under our medium-term
management strategies, we intend to continue to expand
the portfolio.

MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2014

Major International Business
Projects from 2013 Onward
2013 
Jan.

Purchase of 1 Victoria Street, an office building in
London, U.K.

Apr.

Establishment of a local subsidiary in Shanghai, China

Dec.

Purchase of Clive House, an officebuilding in London, U.K.

Dec.	‌Announcement of the Company’s

first participation in a complex
development in Taiwan

Clive House

2014 
Mar.

Purchase of 28 State Street, an office building in
Boston, U.S.A.

Dec.	‌Scheduled completion of CapitaGreen, an officebuilding in Singapore

33Summary of Management & Services Business Group

Investment Management BusinessArchitectural Design & Engineering Business

Hotel Business

Real Estate Services Business

Value D rivers

Valu e D rivers

Valu e Drivers

Valu e Drivers

1 	Wide selection of services capable of handling diverse1 	Building and urban development design, technology,1 	“Best for the Guest” customer satisfaction policy.

1 	One-stop services utilizing the comprehensive

investment needs (Total assets under management:
In excess of ¥2 trillion at March 31, 2014).
2 	Global platform that spans Japan, the United States,

and Europe.
3 	
Know-how developed through real estate managementin Japan and overseas.

and proposal capabilities attained throughthe Marunouchi district development.
2 	Project management know-how accumulated fromworking in partnership with clients.

capabilities of the Mitsubishi Estate Group.

2 	Brand power of Royal Park Hotels.
3 	Ardent development of innovative hotel brand

2 	Precise information collected througha nationwide network.

“The Series.”3 	High degree of expertise and know-how

3 	C hina and Southeast Asia business operations based in

as a corporate real estate (CRE) strategy specialist.

Shanghai and Singapore.

4

Broad customer base extending from companies withlarge property holdings and real estate companies to
education and public corporations and to individuals.

F iscal 2 01 4 T opics

F iscal 2 0 1 4 T opics

Fiscal 2 0 1 4 T opics

Fiscal 2 0 1 4 T opics

In Japan, the total assets under management of Mitsubishi
Jisho Investment Advisors, Inc. (MJIA), continued theirsteady upward path. Just three years since its launch, theassets under management of MJIA’s open-ended, unlisted
private-placement real estate investment trust (REIT) rose
to around ¥200 billion. A Japanese REIT ( J-REIT) managed
by Japan Real Estate Asset Management Co., Ltd., andspecializing in office buildings, Japan Real Estate Investment
Corporation recorded stable performance for the thirteenth
year as the longest existing J-REIT on the market.
Overseas,* the Mitsubishi Estate Group continued
to expand its investments. In fiscal 2014, Mitsubishi Real
Estate’s U.S. subsidiary Rockefeller Group, Inc. (RGI),
through its U.S. REIT, jointly purchased 28 State Street, anoffice building in Boston, with Mitsubishi Estate New YorkInc. RGI’s U.S. REIT already owns premium office buildings in San Francisco and Washington, D.C.
Whether at home or overseas, the Group is endeav­oring to further expand its operations in real estatemarkets in response to the diverse asset management
needs of investors.

During the fiscal year under review, Mitsubishi Jisho
Sekkei Inc. completed projects in a variety of fields,
including Grand Front Osaka, Meiji University’s
Nakano Campus, and Tsukishima-Sou, a company
dormitory facility based on a system of shared living
space for multiple companies. Overseas, the company
opened a representative office in Singapore in May 2013as a base for expanding operations in the Southeast Asia
region, which has shown marked economic growth in thepast few years. Mitsubishi Jisho Sekkei is also expanding
operations in China and Taiwan through its local subsidiary in Shanghai. Construction began on Mitsubishi Jisho
Sekkei’s first overseas high-rise building, the Taipei
Nanshan Plaza Project, in November 2013.
Going forward, the company plans to aggressively
acquire orders for new and renovation projects in thearchitectural design and engineering business. By accurately responding to the diverse needs of clients, suchas quality, design, and environment, the company isaiming to expand business in all fields, including urban
development, construction management, and urban
energy-use planning.

During the fiscal year, the Hotel Business focused on,among other areas, building a foundation for the evolution of the Group through the opening of new hotels,
the rebranding of existing hotels, and the establishmentof a membership sharing system.
Opened in November 2013, Royal Park Hotel The
Nagoya is in a premier location about a five-minute walkfrom JR Nagoya Station. With facilities and services
refined to specifically target businesspeople, the hotel has
enjoyed a greater-than-90% occupancy rate every monthsince its opening. In other projects, the 10-year-old Royal
Park Shiodome Tower underwent a rebranding process,with a renovation of its facilities and revisions to its
services. The hotel reopened in October 2013 under thename Royal Park Hotel The Shiodome, becoming theflagship hotel of the business’ new “The Series” brand.
At the same time, its operating company merged with
Royal Park Hotel Management Co., Ltd., which operates“The Series” hotel chain.
In addition, launched in October 2013, the business’
hotel loyalty program—The Club Royal Park Hotels—has
steadily been expanding its membership. The HotelBusiness will strive to develop further applications of thissystem in increasing customer satisfaction.

Mitsubishi Real Estate Services Co., Ltd., concentrates
on providing a full range of corporate real estate services,
covering corporate brokerage, office leasing brokerageand management, real estate appraisal, and parking
business. In February 2014, the company began offeringa “¥300,000 Cap Business Succession Plan” based on its
new business alliance with Landmark Licensed Tax
Accountant’s Co. The new service provides a custommade business succession plan with a ¥300,000 cap on
consulting services that targets business enterprise owners
primarily in the Tokyo metropolitan area.
Mitsubishi Jisho House Net Co., Ltd., handles realestate services for individuals, encompassing purchase,sales, and leasing brokerage of homes and leasing management. In May 2014, as part of the company’s efforts tostrengthen purchase and sales brokerage and leasing sales,
the company opened the Bancho Sales Office in the
Nibancho district, where many of the existing condominiums and rental apartments of the Mitsubishi Estate Groupare concentrated. The new office is offering one-stop
services that accurately target the real estate needs in thearea, including purchase, sales, and leasing brokerage ofhomes and leasing management.

*	For accounting purposes, overseas fund-related business is included in theInternational Business segment.

34

MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2014

35

Bu siness D evelopment,
Consulting & Solutions Grou p

F inancial H ighlights by S egment

Value D rivers

Revenue from Operations (left scale)1 	Strategic sales organization

2 	Ability to recognize problems

comprising of horizontally
integrated segments.

Operating Income Ratio (right scale)3 	Robust solutions using

through consulting.

Companywide resources.

S cope of A ctivities

needs to propose ideal solutions utilizing a wide variety ofbusiness services and resources developed by the Mitsubishi
Estate Group. In addition to offering consultation on individual
real estate projects, we provide comprehensive real estate
diagnostics for all related real estate properties to customers
who hold or lease multiple real estate properties, focusing on
CRE strategy support services to enhance corporate value.

The Business Development, Consulting & Solutions Group
provides services, leveraging such Mitsubishi Estate Group
strengths as vast experience and comprehensive capabilities. The
Group provides services through two collaborating departments:
the Corporate Solutions Sales Department, which develops
proposal-based sales from the perspective of the customer’s
corporate real estate (CRE)* strategy, and the Real Estate
Solutions Department, which provides overall management ofproject-based development and a variety of consulting services.
Specifically, we consult with customers to ascertain theircurrent situation as well as their unique issues, concerns, andOperating Income (left scale)

Building BusinessResidential BusinessMillions of yen%Millions of yen%

600,000

60

500,000

50

500,000

50

400,000

40

400,000

40

300,000

30

300,000

30

200,000

20

200,000

20

100,000

10

100,000

10

0

0

0

–100,000

0
2010

2011

2012

2013

2014

–10
2010

FY

2011

2012

2013

2014

FY

* 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 increased corporate value.

Commercial Property Development & Investment Business

Offering consulting services and solutions

Consulting

International BusinessMillions of yen%Millions of yen%

80,00080

100,000

50

60,00060

80,00040

60,00030

40,00040
40,00020

20,00010Consult20

20,000

Determine current status
0

Conduct research
and analysis

Business
Development,
Consulting &Solutions Group

Propose initiatives

Customers

02010 1

Determine proposal
Implement

2011

2012

2013

2014

0

0
2010

FY

2011

2012

2013

2014

FY

1. Including the Investment Management Business

Investment Management BusinessArchitectural Design & Engineering BusinessMillions of yen%Millions of yen%

10,00050

25,000

10

8,000

40

20,000

8

6,000

30

15,000

6

4,000

20

10,000

4

2,000

10

5,000

2

0

0

Analyze and review

Solution0

Real estate development

Real estate investment

Development method proposalsnBusiness plan supportnProject management■

Market research and analysis■ ‌

Effective utilization / joint ventures(equivalent exchanges / term leasehold)■Due diligence

■ ‌

■

Acquisition support

■ ‌

■

Asset managementnnProvisional usenReconstruction

Comprehensive building analysis■

Earthquake resistance analysis■

Facility management■

Energy saving and IT utilization inbuildings and facilities■

Interior and exterior renovation■

Barrier-free facility construction■■

Anti-aging measures for buildings
and facilities
Conversion

36

■Real estate investment strategy
formulation support

Real estate liquiditynConstruction■■

Single-unit homes and rental andcorporate housing

Real estate-backed financial support■ ‌

Building operation and management■

Securitization■ ‌Specified real estate joint ventures■

Sales and leaseback■

Real estate brokerage

Design and supervision■■

Residential and office renovation
■

■
■

■

Environmental assessment and researchConsulting for urban development andprivate finance initiatives (PFIs)
Consulting, design, and supervision forenvironmental and civil-engineeringsolutionsOperation and management plan analysis
and proposals
Long-term maintenance plan consulting
Commissioned operation andmanagement of buildings, retail facilities,
and hotels■

Subleasing■

Tenant marketing2010 2

2011

2012

2013

2014

0
2010

FY

2011

2012

2013

2014

FY

2. This segment did not exist.

Hotel Business

Real Estate Services BusinessMillions of yen%Millions of yen%

30,000

630,00012

20,0004

20,0008

10,0002

10,000

4

0

0

0

0

–2

–10,000

CRE strategy support■

Organization of CRE information■

CRE valuation■

Support for strategy formulation andimplementation

Construction management–10,000

Design and supervision for buildings
and structures

2010

2011

2012

2013

2014

FY

–4
2010

2011

2012

2013

2014

FY

Design and supervision for interior
and exterior
MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2014

37

C orporate G overnanceCorporate Governance Status
The Mitsubishi Estate Group endeavors to promote management that is focused on the interests of shareholders while fully supporting its statutory auditor system and the introduction of an executive officer system. To ensure greater transparency and objectivity, as well as to improve the management and oversight of the Board of Directors, outside directors are to be appointed, while
efforts are continuing to promote separation and greater control of supervision and auditing, etc., as well as to strengthen theGroup’s business execution functions.

Message from the Chairman of the Board

Corporate Governance Reports: http://www.mec.co.jp/e/investor/irlibrary/corp/

Status of Board of Directors Meetings and Other Initiatives in Fiscal 2014
Items

Constantly enhancing the corporate governance system is one of the highest management priorities of the Mitsubishi Estate Group. This emphasis arises from the desire of
the Group to attain its fundamental mission of “By building attractive, environmentallysound communities where people can live, work, and relax with contentment, we
contribute to the creation of a truly meaningful society.” As chairman of the Board,I work to ensure the proper operation of our governance functions through the substantial
discussions that I chair in the Board of Director meetings.
In addition to making decisions on important operational matters of the Company,
the Board of Directors provides oversight of business execution. Adopting the outside
director system in 2006, Mitsubishi Estate has four outside directors on its 13-member
Board. These outside directors contribute considerably to the enrichment of the Board’s
discussions by expressing opinions or giving advice that utilize their individual extensive
business and management experience and expertise. Moreover, three out of the four
statutory auditors participating in the Board meetings are outside statutory auditors.
I take care to ensure that there is active discussion by all of the members attending
the meetings, including the outside directors and statutory auditors, who have a varietyof backgrounds.
The Group is currently addressing such issues as the strengthening of the urban
function of Tokyo in terms of increasing its international competitiveness as a global
city and the expansion of the Group’s international business. There are indispensable
aspects in making full use of opportunities to take a giant step forward in business while
responding on an ongoing basis to the changes in the business environment and markets.
It is essential to pursue strategies and make business decisions that are bold yet prudent.
In addition, we must establish a governance system to support those business actions.
Going forward, I intend to tirelessly develop and strengthen appropriate governancesystems for the Group, aiming to increase our long-term corporate value and generatesocial value.
August 2014

Details

Number of directors (outside directors)

13 (4)

Frequency of Board of Directors(BOD) meetings

15

BOD attendance by outside directors

Isao Matsuhashi

Number of statutory auditors(outside statutory auditors)

15

Fumikatsu Tokiwa15

Yasumasa Gomi 14

4 (3)Frequency of Board of Statutory
Auditors (BOSA) meetings

13

BOSA attendance by statutory auditors(outside statutory auditors)

Kazuhiko Hasegawa 13

Kenjiro Hata*13

Akio Utsumi

13

BOD attendance by statutory auditors(outside statutory auditors)

Kazuhiko Hasegawa 15

Kenjiro Hata*14

Akio Utsumi

15

Accounting auditors

Ernst & Young ShinNihon LLC

Annual remuneration paid toindependent audit corporation¥135 million

Shu Tomioka

15* Retired as of the closing of the general meeting of shareholders on June 27, 2014.

Total Remuneration Paid to Directors and Statutory Auditors
Category

Amount Paid

Total remuneration, etc., paid to directors(outside directors)
Total remuneration, etc., paid to statutory
auditors (outside statutory directors)¥606 million (¥40 million)¥88 million (¥53 million)

Notes:
1.	The above amounts include remuneration payments made to the four directors who retired their positions as of the end of the 114th general meeting of shareholders
held on June 27, 2013.
2.	The Company has not paid any employee-based compensation to its directors.
3.	The upper limit of remuneration paid to directors determined by general meeting of shareholders’ resolution is ¥800 million per fiscal year for ordinary remuneration(excluding employee-based compensation) and a separate upper limit of ¥200 million per fiscal year for deferred remuneration paid to directors based on the granting ofstock options. These remuneration upper limits were decided at the 92nd and 107th general meetings of shareholders, respectively, held on June 27, 1991, and June 29,
2006. Please note that stock options are not granted to outside directors.
4.	The upper limit of remuneration paid to statutory auditors determined by general meeting of shareholders’ resolution is ¥100 million per fiscal year. The upper limit was
decided at the 107th general meeting of shareholders held on June 29, 2006.
5.	The above amounts include stock option-based remuneration (¥77 million allotted to nine directors) paid in the fiscal year under review.
6.	The Company’s outside directors and auditors have not received any remuneration, etc., as directors or auditors of any of the Company’s subsidiaries.

Policy for
Determining
the Remunerationof Directors
and Auditors

Chairman of the Board
Mitsubishi Estate Co., Ltd.

The Company has decided on an upper limit for remuneration of ¥800 million per fiscal year and a separate upper limit of ¥200
million for remuneration by stock options per fiscal year as the total amount of remuneration for directors. Similarly, it has
decided on an upper limit of ¥100 million per fiscal year as the amount of remuneration for statutory auditors.
Looking at the composition of the remuneration, the Company has adopted a system that combines performance-linked
remuneration and deferred remuneration stock options for all corporate officers except outside directors and statutory auditors.
Outside directors only receive fixed remuneration because by definition they are not involved in business execution. Statutory
auditors also only receive fixed remuneration in accordance with their roles as standing or non-standing statutory auditors as
determined by discussion among the statutory auditors.
Performance-linked remuneration consists of fixed and variable portions paid on an annual basis. Directors receive a fixedmonetary portion for the discharge of their duties. The variable portion of their remuneration reflects corporate performanceand the performances of the businesses for which they are responsible. Accounting for 30% of the annual monetary remuneration, the variable portion is calculated based on performance evaluations of corporate results and by-sector results as well as oncomparisons with past results and fiscal year targets.
In fiscal 2007, the Company introduced a deferred remuneration stock options system to inspire greater enthusiasm andmotivation among directors to improve the Company’s stock price and business performance, thereby encouraging a common
interest with shareholders. In the same fiscal year, the Company abolished the retirement benefits system for directors based ona resolution by the general meeting of shareholders.
The Board of Directors approves the final decisions regarding remuneration for the Company’s corporate officers.

38

MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2014

39

Cor po r ate G o v e r nanc e

Name
PositionAppointment year
Number of shares held
(As reported in Fiscal 2014 Financial
Report, available only in Japanese)

Directors and Statutory Auditors

Keiji Kimura

Hirotaka Sugiyama

Yutaka Yanagisawa

Toshihiko Kazama

Jo KatoRepresentative Director
Chairman of the Board

Representative Director
President & Chief Executive Officer

Representative Director

Representative Director

Representative Director







2000

2007

2009

2013

2011

26,000 shares

21,000 shares

13,000 shares

12,000 shares

50,213 shares

Naoto Aiba

Masamichi Ono

Toru Okusa

Junichi Tanisawa

Representative Director

Director

Director

Director


2013

2010

2013

2014

18,000 shares

7,000 shares

19,000 shares

3,000 shares

Isao Matsuhashi

Fumikatsu Tokiwa

Yasumasa Gomi

Shu Tomioka

Outside DirectorOutside DirectorOutside DirectorOutside Director


2007

2006

2009

2006

– shares– shares– shares– shares

Born on April 16, 1933

Born on November 13, 1933

Born on February 8, 1943

Born on April 15, 1948

Apr. 1956 Joined Japan Travel Bureau

Apr. 1957 Joined Kao Sekken Kabushiki Kaisha

Apr. 1966 Joined Mitsubishi Bank, Ltd.

Nov. 1975 Joined Morgan Guaranty Trust(currently Kao Corporation)

May 2003 Became Deputy President ofFoundation
Jun. 1990 Became President andJun. 1990 Became President and Director ofRepresentative Director of JTB Corp.
Jun. 1996 Became Chairman and

Kao Corporation

JTB Corp.

Kao Corporation

Oct. 2005 Became Chairman and Director ofJun. 2006 Became Director of the Company

Apr. 2004 Became Chairman and Director of

Mitsubishi UFJ Securities Co., Ltd.
UFJ Securities Co., Ltd.
Jun. 2009 Became Director of the Company

Jul. 1998

Apr. 2010 Became Senior Advisor of Mitsubishi(incumbent)

UFJ Securities Holdings Co., Ltd.

Jun. 2007 Retired from the position as

Feb. 2013 Became Senior Advisor of Mitsubishi

Chairman and Director of NARITA
INTERNATIONAL AIRPORTCORPORATION

UFJ Securities Holdings Co., Ltd.
(incumbent)

Masamichi Ono

Executive Vice President

Executive Vice President

Jo KatoNaoto Aiba

Soichiro Hayashi

Koji Kiyosawa

Executive Vice President

Executive Vice President

Executive Vice President

Senior Executive Officer

Kenichi Iwata

Atsuo Kyono

Toru Okusa

Yutaka Tajima

Senior Executive Officer

Senior Executive Officer

Senior Executive Officer

Senior Executive Officer

Became Director and Vice Chairmanof J.P. Morgan Securities Asia Pte.
LimitedApr. 1999 Became Representative in Japanof J.P. Morgan Securities Asia Pte.
Limited(incumbent)

Jun. 2004 Became Adviser of JTB Corp.

Toshihiko Kazama

Deputy President

Representative in Japan of J.P.
Morgan Securities Asia Pte. Limited,Tokyo Branch

May 2009 Became Senior Advisor of Mitsubishi(incumbent)

NARITA INTERNATIONAL AIRPORTCORPORATION

Yutaka Yanagisawa

President & Chief Executive Officer

Company of New York

Mitsubishi Securities Co., Ltd.

Jun. 2000 Retired from Kao Corporation

Hirotaka Sugiyama

Feb. 1991 Became Branch Manager and

Jun. 2004 Became Chairman and Director ofJun. 1997 Became Chairman and Director ofRepresentative Director of JTB Corp.
Jun. 2002 Became Director and Adviser ofBank of Tokyo-Mitsubishi, Ltd.

Executive Officers

Mar. 2001 Became Vice Chairman of J.P.

Morgan Securities Asia Pte. Limited
Oct. 2002 Retired from J.P. Morgan Securities

Asia Pte. Limited
Jun. 2006 Became Director of the Company(incumbent)

Jun. 2007 Became Director of the Company(incumbent)

Executive Officers


Hiroshi Danno

Kazuhiko Hasegawa

Akio Utsumi

Kenji Matsuo

Standing Statutory AuditorOutside Standing Statutory AuditorOutside Statutory AuditorOutside Statutory Auditor


2012

2008

2007

2014

35,000 shares

13,000 shares– shares– shares

Born on June 5, 1952

Born on September 7, 1942

Born on June 22, 1949

Apr. 1975 Joined Mitsubishi Bank, Ltd.

Apr. 1965 Joined Mitsubishi Trust andApr. 1973 Joined Meiji Life Insurance Company

Jun. 2002 Became Executive Officer ofBank of Tokyo-Mitsubishi, Ltd.
Jun. 2005 Became Standing Statutory Auditorof Bank of Tokyo-Mitsubishi, Ltd.
Jan. 2006 Became Standing Statutory Auditorof The Bank of Tokyo-Mitsubishi
UFJ, Ltd.

Banking Corporation
Mitsubishi Trust and Banking
Corporation

Masami Amano
Hiroshi Katayama

Tetsuji Arimori

Hidemi Waki

Junichi Tanisawa

Senior Executive Officer

Senior Executive Officer

Senior Executive Officer

Shinichi Takeuchi
Akinori Nakajo

Became Director, President, andRepresentative Executive Officer of
Meiji Yasuda Life Insurance Company

Jul. 2013

Became Representative Executive
Officer of Meiji Yasuda Life Insurance
Company

Jul. 2013

Sep. 2005 Retired from the position as Director of

Became Special Advisor of Meiji
Yasuda Life Insurance Company(incumbent)

Hisashi Komada

Mitsubishi Tokyo Financial Group, Inc.

Jun. 2014 Became Statutory Auditor of the

Kenji Hosokane

Apr. 2001 Became Chairman of the Board of

Mitsubishi Tokyo Financial Group, Inc.
Apr. 2004 Became Chairman of the Board ofTokyo-Mitsubishi UFJ, Ltd.
Jun. 2008 Became Standing Statutory Auditor

Jun. 2004 Became Director of Mitsubishi Tokyoof the Company (incumbent)

Representative Director of Meiji
Yasuda Life Insurance Company

Kazuhiko Arahata

Jul. 2006

Mitsubishi Trust and Banking
Corporation

Jun. 2008 Retired from The Bank ofDec. 2005 Became President andJun. 1999 Became President and Director of

Kazuyuki Yabu

Financial Group, Inc.

Oct. 2005 Became Chairman of the Board of

Noboru Nishigai
Futoshi Chiba
Akihiko Watanabe

Company (incumbent)

Keiji Takano

Mitsubishi UFJ Trust and Banking
Corporation
Jun. 2007 Became Statutory Auditor of theCompany (incumbent)
Jun. 2008 Became Senior Advisor of Mitsubishi

UFJ Trust and Banking Corporation(incumbent)

40

MITSUBISHI ESTATE CO., LTD.

Junichi Yoshida

Tetsuo Yuasa

Senior Executive Officer

Senior Executive Officer

ANNUAL REPORT 2014

41

R is k M anagement

In accordance with the Mitsubishi Estate Group Risk Management Regulations, the Group has formed a risk management system.
Based on that organization and system, the Group thoroughly implements a Plan-Do-Check-Act (PDCA) cycle to identify risk
exposures and to plan and implement mitigation measures and monitor risks.

Risks of Fluctuationsin the Real Estate Market

Risks of Changes
in Laws and Regulations

Risks of Increases
in Interest Rates

Risks of Fluctuations
in Exchange Rates

Risks of Natural and
Man-Made Disasters, Etc.

42The real estate market is closely correlated with movement in the economy.
Deterioration in the economy has a strong impact on declines in real estate prices andrental fees and the increase in vacancy rates. In view of this correlation, the basic policyof the Group is to conclude relative long-term lease contracts with customers in its
office building leasing business. The prospects of stable lease revenues mitigate toa certain degree the risk of sharp movements in the economy.

Interest-Bearing Debt (Mitsubishi Estate Non-Consolidated)
Billions of yen

100

2,000

80

1,500

60

1,000

40

500

20

0

0
2005

Straight bond
Convertible bond

As an expert in large-scale urban development, the Group must comply with various
laws and regulations in its Japanese and overseas operations. Should there be anychanges in these laws and regulations, such changes could have an impact on theGroup’s operations in terms of additional costs arising from adapting to the new
systems and of substantial changes to the competitive environment. Therefore, theGroup constantly monitors trends in revisions of its related legal systems.
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 quantitative and qualitative
monetary easing in response to the credit crunch in financial markets and the slowdown
in the global economy. Should interest rates rise, however, because of a change in BOJ
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 aspect of the Group’s business.
The Group hedges the interest rate risk on a certain portion of its variable interest
rate financing by 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.
In addition to those held in Japan, the Group is developing and holding assets in the
United States, Europe, and Asia, for which the book values and income are accounted
for in local currencies. Consequently, any fluctuation in exchange rates would affect theyen conversion rate used for foreign currency denominated assets and liabilities andbusiness transactions. The group minimizes these risks of fluctuations in interest rates
using such methods as borrowing funds in local currencies when procuring assets overseas.
The occurrence of an earthquake, flood, or other natural disaster or an accident, fire,or other man-made disaster would impact the performance, financial position, or otheraspect of the Group’s business. The Group is redeveloping its properties to installadvanced disaster management functions and has established disaster response measuresthrough area management.

MITSUBISHI ESTATE CO., LTD.

%

2,500

Bank loan (fixed interest)
Bank loan (adjustable interest)
Commercial paper
Fixed interest ratio (right scale)Interest-bearing debt ratio(right scale)

2006

2007

2008

2009

2010

2011

2012

2013

2014

510.0
100.0
211.2
171.7
58.0
78.1

475.0
13.6
201.2
171.7
—
80.1

465.0
—
221.0
152.2
—
81.8

540.0
—
290.2
212.2
—
79.6

575.0
—
285.6
389.2
—
68.8

560.0
—
329.1
401.2
—
68.6

550.0
—
324.0
365.7
—
70.2

620.0
—
306.8
453.7
—
66.9

715.0
—
319.8
640.7
35.0
60.3

685.0
—
314.3
615.7
—
61.7

53.6

44.0

42.4

48.0

53.4

53.4

51.8

53.5

59.3

57.9
Years ended March 31

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

3.0

10

2.5

8

2.0

6

1.5

4

1.0

2

0.5
0

0
2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Straight bond / Duration

7.13

8.38

8.23

9.47

9.04

8.89

8.22

7.71

7.52

6.82

 traight bond / Average interestS(right scale)

1.90

1.92

1.94

1.93

1.90

1.88

1.88

1.72

1.54

1.55

 ank loans / Average interestB(right scale)

1.16

0.99

1.25

1.33

1.29

1.05

1.01

0.87

0.72

0.70

 otal / Average interestT(right scale)

1.53

1.52

1.65

1.66

1.58

1.42

1.40

1.27

1.05

1.07
Years ended March 31

Mitsubishi Estate’s Ratings(As of July 31, 2014)

Rating agency

Long-term bonds

Short-term bonds

Moody’sStandard and Poor’s (S&P)
Rating & Investment Information, Inc. (R&I)

A2
A+
AA–

P-1
A-1
a-1+

ANNUAL REPORT 2014

43

F inancial section
Years ended March 31

Eleven-Year Summary of Selected Financial Data (Consolidated)

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014
¥1,075,285

Financial Results (Millions of yen)¥  679,918¥  775,381¥  844,217¥  947,641¥  787,652¥  942,626¥1,013,415¥  988,447¥1,013,069¥  927,157

Operating income

Revenue from operations

103,749

118,233

137,614

166,165

177,983

138,567

148,972

158,258

146,299

118,349

161,271

Ordinary income

78,701

93,675

121,236

151,674

162,061

108,624

117,381130,830

120,665

92,381

139,638

Net income

34,98936,24555,82597,662

86,96345,423

11,90064,21956,51245,50764,297

Financial Position (Millions of yen)

Total assets

3,068,842

3,124,514

3,280,209

3,447,272

4,327,137

4,429,070

4,355,065

4,245,209

4,387,015

4,711,521

4,765,368

Total equity 1

897,499

920,930

1,133,623

1,225,644

1,238,889

1,148,494

1,183,156

1,202,270

1,256,791

1,239,547

1,329,057

Interest-bearing debt

1,211,888

1,198,371

1,007,761

1,012,588

1,645,407

1,834,195

1,762,111

1,639,050

1,716,890

2,085,417

1,973,042

Capital expenditures

70,20579,79362,204

138,169

270,798

201,088

114,085

76,332

282,171

208,135

159,677

Depreciation and amortization

57,02455,54553,65554,25756,86760,36473,92670,62867,46573,36474,805

Cash Flows (Millions of yen)

Cash flows from operating activities

77,70888,900169,744

150,710(16,248)

45,824

212,668

259,263203,243

122,286

336,489

Cash flows from investing activities(60,645)(92,409)29,883(85,389)(212,207)(214,500)(112,639)(67,223)(272,009)(217,992)(133,537)

Cash flows from financing activities(31,658)(33,485)(132,463)(34,093)

238,942

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

57,18927,150(177,514)

Cash and cash equivalents at end of year

136,063

97,324

167,090

206,089

219,712

184,552

177,825

229,062

215,771

191,837

224,739

Net income¥26.96¥27.93¥42.60¥70.95¥62.99¥32.90¥8.58¥46.27¥40.72¥32.79¥46.34

Cash dividends

8.00

8.00

10.00

14.00

16.00

16.00

12.00

12.00

12.00

12.00

12.00

¥167,444¥178,386¥200,928¥233,406¥245,911¥209,522¥230,730¥237,109¥222,885¥200,587¥246,332

3.6%

4.0%

4.6%

5.3%

4.9%

3.3%

3.5%

3.8%

3.5%

2.7%

3.5%

3.9

4.7

7.4

9.5

8.5

4.7

5.2

6.6

6.5

5.0

7.5

ROE

4.0%

4.0%

5.4%

8.3%

7.1%

3.8%

1.0%

5.4%

4.6%

3.6%

5.0%

Payout ratio

29.7%

28.6%

23.5%

19.7%

25.4%

48.6%

139.9%

25.9%

29.5%

36.6%

25.9%

Per Share Amounts (Yen)

Principal Financial Indicators

EBITDA2 (Millions of yen)
ROA
Interest coverage ratio 3 (Times)

Stock Information

Stock price4 (Yen)
Number of shares issued and outstanding (Thousands of shares)
Mitsubishi Estate’s Stock
Price Changes in Tokyo
Stock Exchange¥1,411¥1,246¥2,790¥3,870¥2,420¥1,102¥1,530¥1,407¥1,476¥2,596¥2,446

1,299,185

1,299,185

1,371,189

1,382,518

1,382,518

1,382,518

1,390,397

1,390,397

1,390,397

1,390,397

1,390,397

Yen
5,000

4,000

3,000

2,000

1,000

0
4/20034/20044/20054/20064/20064/20074/20084/20094/20104/20114/20124/2013

2014/4

Notes:
1. Total equity is calculated by deducting minority 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 andamortization, and goodwill.
3. ‌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 the sum total of interest expenses and commercial paper interest.
4. As of March 31

44

MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2014

45

F inancial SE C T IO N

Financial Review
Revenue from Operations / Operating IncomeIn fiscal 2014, the fiscal year ended March 31, 2014, consolidated
revenue from operations increased ¥148,127 million, or 16.0%,
from a year earlier, to ¥1,075,285 million. Consolidated operating
income rose ¥42,921 million, or 36.3% year on year, to ¥161,271
million. Results for each business segment are as follows.
In the Building Business segment, revenue from operations
increased because of a full year of rental revenue contributed by
the buildings completed in the previous fiscal year and revenue
from the sale of a property. As of March 31, 2014, the vacancy
rate for all properties nationwide climbed to 5.29%, comparedwith 3.98% as of the end of the previous fiscal year. The higher
vacancy rate resulted from the inclusion of the vacancies in the
new building completed in fiscal 2013. Taking these factors into
account, revenue from operations grew ¥41,481 million compared with fiscal 2013, to ¥484,229 million. Operating income
increased ¥505 million, to ¥108,172 million.
In the Residential Business segment, Mitsubishi Estate’s
revenue in the condominium business rose year on year becauseof an increase in the number of condominiums sold. As a result,revenue from operations increased ¥87,908 million, to ¥403,259
million. Operating income in this segment amounted to ¥27,778
million, surging ¥25,460 million compared with the previous
fiscal year.
The Commercial Property Development & Investment
Business segment recorded lower revenue compared with theprevious fiscal year in reaction to the sale of a large-scale property in fiscal 2013. Consequently, revenue from operations
declined ¥2,249 million year on year, to ¥48,029 million.
Operating income also contracted, decreasing ¥3,049 million, to¥8,130 million.
In the International Business segment, revenue increased
compared with fiscal 2013 because of the sales of property
located in the United Kingdom and the impact of the deterioration of the yen. As a result, revenue from operations rose ¥19,473
million from fiscal 2013, to ¥80,366 million, while operating
income grew ¥17,207 million year on year, to ¥25,579 million.
Revenue in the Investment Management Business segment
declined because of the absence of the revenue from the sale ofan equity investment and other income recorded in the previous
fiscal year. As a result, revenue from operations decreased ¥820
million from a year earlier, to ¥6,288 million. On the other hand,operating income increased, rising ¥917 million year on year, to¥3,046 million. Growth in asset management fees was responsible
for the further improvement in operating income.
In the Architectural Design & Engineering Business segment,
Mitsubishi Estate recorded revenue in connection with suchprojects as the Otemachi 1-1 Project (the tentative name fora project in Chiyoda-ku, Tokyo) and the Dai Nagoya Building(Nagoya, Aichi Prefecture). Although the number of projects
generating earnings by the architectural design and engineeringbusiness and by the interior design and construction businessincreased in fiscal 2014, earnings decreased due to a decline in
the average amount received per project. However, other income
increased. As a result, segment revenue from operations andoperating income were approximately the same as in the previous
fiscal year, at ¥19,946 million and ¥1,252 million, respectively.
With a central role played by Royal Park Hotels and Resorts
Co., Ltd., which oversees the Group’s Hotel Business activities,
steps were taken to reinforce the management structure at each
hotel under the Royal Park Hotel brand. At the same time,
particular emphasis was placed on further promoting anddeveloping a new hotel business under “THE series” brandof Royal Park Hotels. In the fiscal year ended March 31, 2014,
revenue from the accommodations department increased mainly
because of the opening of Royal Park Hotel The Nagoya. As aresult, revenue from operations in the Hotel Business segment
edged up ¥920 million, to ¥29,219 million. Operating income
was ¥737 million, rising ¥262 million from a year earlier.
In the Real Estate Services Business segment, real estate
brokerage revenue grew year on year because of an increase in
the number of transactions. As a result, revenue from operations
was approximately the same as in the previous fiscal year,
amounting to ¥27,097 million. Operating income increased¥485 million, to ¥1,544 million.
Revenue from operations in the Other segment decreased¥733 million, to ¥3,674 million. Consequently, the Mitsubishi
Estate Group incurred an operating loss of ¥246 million in the
Other segment, a year-on-year deterioration of ¥235 million.

Other Income (Expenses)

Other income decreased ¥812 million year on year, to ¥9,323
million. Despite an increase in other income from equity inearnings of unconsolidated subsidiaries and affiliates, the elimination of amortization of negative goodwill and other factors
resulted in an overall decline. Other expenses declined ¥5,148
million, to ¥30,956 million, due to a reduction in interest
expenses, among other factors.
Looking at extraordinary items, Mitsubishi Estate booked
extraordinary gains of ¥11,644 million, consisting of a gain on
sales of fixed assets totaling ¥6,702 million and a gain on negative goodwill amounting to ¥4,942 million.
At the same time, the Company posted an extraordinary loss
totaling ¥42,596 million. The breakdown consisted of ¥2,303
million in loss related to retirement of fixed assets, ¥32,644
million in impairment loss, and ¥7,648 million in impairment
loss on equity investments.
Net IncomeIncome before income taxes and minority interests rose ¥51,944
million year on year, to ¥108,685 million. Net income increased¥18,789 million, or 41.3%, to ¥64,297 million. Net income pershare amounted to ¥46.34.

Millions of yen

Revenue from Operations

Building BusinessResidential Business	Commercial Property
Development& Investment Business
International Business	Investment Management
Business	Architectural Design& Engineering Business
Hotel Business
Real Estate Services Business
Other
Adjustments

3/20143/2013YOY Change

1,075,285
484,229403,259

927,157
442,748
315,351

148,127
41,48187,90848,02980,36650,27860,892(2,249)19,473

6,288

7,108

(820)

19,946
29,21927,097
3,674(26,825)
161,271
108,172
27,77819,56828,29927,2094,408(28,707)
118,349
107,667
2,317

378
920
(112)
(733)
1,882
42,921505
25,4608,130
25,57911,1808,371(3,049)17,207

3,046

2,129

917

1,252
737
1,544
(246)
(14,724)

1,234
474
1,058
(10)
(16,074)

17
262
485
(235)
1,349

Operating Income

Building BusinessResidential Business	Commercial Property
Development& Investment Business
International Business	Investment Management
Business	Architectural Design& Engineering Business
Hotel Business
Real Estate Services Business
Other
Adjustments

Comparison of Fiscal 2014 and Fiscal 2013 Revenue from Operations
Millions of yen

1,075,285
Commercial
Property
Development& Investment
Business

International
Business

19,473

Investment
Management
Business(820)

Architectural
Design &Engineering
Business

Hotel
Business

920

378

Real Estate
Services
Business

Other

Adjustments

(733)

1,882

(112)

(2,249)Residential
Business

927,157

87,908
Building
Business

41,4813/2013

Revenue from Operations

Operating Income /Operating Income Ratio

Net Income / ROE

Millions of yen

Millions of yen%Millions of yen%Millions of yen

1,200,000

200,000

20

80,0008

300,000

3/2014

EBITDA
Comparison of Fiscal 2014 and Fiscal 2013 Operating Income
Millions of yen

161,271

1,000,000
150,000

15

60,0006

800,000

Investment
Management
Business

200,000

600,000

10

100,000

Commercial
Property
Development& Investment
Business

4

40,000400,000

100,000
50,0005

20,000

2

0

0

0

0

118,349
Building
Business

200,000505

02010 2011 2012 2013 20142010 2011 2012 2013 2014

Operating Income (left scale)Operating Income Ratio (right scale)46

2010 2011 2012 2013 2014

Net Income (left scale)ROE (right scale)

Residential
Business

International
Business

917

Architectural
Design &Engineering
Business

17

Hotel
Business

262

Real Estate
Services
Business

Other

(235)

Adjustments

1,349

485

17,207(3,049)25,46002010 2011 2012 2013 2014

Years ended March 31

MITSUBISHI ESTATE CO., LTD.

3/2013

ANNUAL REPORT 2014

3/201447

F inancial section

Analysis of Financial Position
(1) Consolidated Cash Flow
On a consolidated basis, cash and cash equivalents at the end of
the fiscal year under review increased ¥32,902 million year on
year, to ¥224,739 million. Major cash inflows included income
before income taxes and minority interests, decrease in inventories, and long-term borrowings. Major cash outflows included
purchases of property and equipment and the repayment oflong-term borrowings.

Cash Flows from Operating Activities
Net cash provided by operating activities was ¥336,489 million,up ¥214,202 million compared with the previous fiscal year.
Income before income taxes and minority interests amounted
to ¥108,685 million, while depreciation and amortization—a
non-cash item—totaled ¥74,805 million. These and other cash
inflows were adjusted to reflect movements in inventories, notes
and accounts payable, and other items.
Cash Flows from Investing Activities
Net cash used in investing activities totaled ¥133,537 million, up¥84,455 million year on year. The increase in net cash used was
primarily due to purchases of property and equipment.
Cash Flows from Financing Activities
Net cash used in financing activities amounted to ¥177,514
million, compared with net cash provided by financing activitiesof ¥27,150 million recorded in the previous fiscal year. The
decline can mainly be attributed to repayment of long-termborrowings and corporate bonds compared with fiscal 2013.

(2) Consolidated Balance Sheets
Compared with March 31, 2013, total assets as of March 31,
2014, increased ¥53,847 million, to ¥4,765,368 million,
principally as a result of the operating, investing, and financing
activities previously identified, which led to movements inassets and liabilities.
Total liabilities contracted ¥27,234 million, to ¥3,318,275
million. The balance of interest-bearing debt as of March 31,
2014, declined ¥112,375 million compared with the year-end
balance in fiscal 2013, to ¥1,973,042 million. Deducting cash andcash equivalents, the balance of net interest-bearing debt as ofMarch 31, 2014, decreased ¥145,277 million year on year, to¥1,748,303 million.
Net assets expanded ¥81,081 million year on year, to¥1,447,093 million. Reductions in net assets caused by changes insuch items as land revaluation reserve and remeasurements ofdefined benefit plans were more than offset by increases inretained earnings, foreign currency translation adjustments, andother items.

Matters Related to Rental Properties
Mitsubishi Estate and some of its consolidated subsidiaries own
certain office buildings and retail facilities in Tokyo and othermajor cities in Japan as well as in the United States and theUnited Kingdom, with the aim of obtaining rental revenue fromthese buildings and facilities. Because certain leased officebuildings among these are used by the Company or some of its
consolidated subsidiaries, the Company has classified suchbuildings 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 fairvalues of investment and rental properties and other real estatethat includes portions used as investment and rental properties.

for each fiscal year.
 Millions of yen

Fiscal Year
Fiscal Year
Ended
Ended
March 31, 2014 March 31, 2013
(April 1, 2013, to
March 31, 2014)(April 1, 2012, toMarch 31, 2013)

Rental revenue

373,047

349,767

Rental costs

256,935

231,696

Difference

116,111118,070

Other income (loss)(30,873)(17,189)

Rental revenue

17,074

17,646

Rental costs

16,227

16,431

Difference

847

1,215

(1,474)(5,534)

 Millions of yen

Fiscal Year
Fiscal Year
Ended
Ended
March 31, 2014 March 31, 2013
(April 1, 2013, to
March 31, 2014)(April 1, 2012, toMarch 31, 2013)

Rental Properties

Amounts recorded on consolidated balance sheets
Balance as of the beginning of the period

2,965,396

2,622,741

Increase (decrease) during the period

109,249

342,654

Balance as of the end of the period

3,074,645

2,965,396

Market value as of the end of the period

5,060,986

4,920,768

Rental Properties Containing Self-Use Space

Rental Properties Containing Self-Use Space

Other income (loss)

Amounts recorded on consolidated balance sheets
Balance as of the beginning of the period

Rental Properties

227,564

232,419

Increase (decrease) during the period(2,987)(4,854)

Balance as of the end of the period

224,577

227,564

Market value as of the end of the period

334,700

339,800

Notes:
1.	The amount included in the consolidated balance sheets presented in the table
above is equal to the total acquisition price for applicable properties or real estateless the aggregate amounts of depreciation and impairment loss for these propertiesor real estate.
2.	The principal contributor to the increase (decrease) in rental properties and realestate that includes portions used as rental properties during the fiscal year underreview was the increase resulting from the consolidation of the special purpose
company, Shinjuku 6-chome (¥166,998 million).
3.	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.

Notes:
1.	Real estate that includes portions used as investment and rental
properties has portions that are used by Mitsubishi Estate and some of its consolidated subsidiaries for the purpose of providing related services and conducting
operation management. Accordingly, rental revenue associated with these portions
has been excluded. Costs associated with applicable properties and real estate, suchas depreciation costs, building management costs, and taxes, have been included inrental costs.
2.	Other losses for the fiscal year under review included impairment lossesof ¥32,365 million.

Also, the following table shows profit and loss related to realestate, including the rental properties containing self-use space

Cash Flow

Total Assets / ROA

Total Equity / Total Equity Ratio

Interest Coverage Ratio

Net Income per Share

Millions of yen

Millions of yen%Millions of yen

%

Times

Yen

400,000

5,000,000

5

160,000

40

8.0

50

4,000,000

4

120,00030

6.0

3,000,000

3
80,00020

4.0

40,000

10

2.0

0

0

300,000
200,000
100,000
02,000,000–100,000–200,000

40

30

20

2

1,000,000

1

10–300,000
0–400,000
2010

2011

Cash Flows from Operating Activities
Cash Flows from Financing Activities

2012

2013

2014

Cash Flows from Investing Activities

02010 2011 2012 2013 2014

Total Assets (left scale)
ROA (right scale)02010 2011 2012 2013 201402010 2011 2012 2013 20142010 2011 2012 2013 2014

Years ended March 31

Total Equity (left scale)
Total Equity Ratio (right scale)Years ended March 31

48

MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2014

49

F inancial section

Consolidated Balance Sheets
Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
March 31, 2014 and 2013

2014

Millions of yen

Thousands of
U.S. dollars (Note 3)

2013

2014

AssetsLiabilities and net assets

Current assets:

Current liabilities:

Cash on hand and in banks (Notes 6, 14 and 16)¥   224,121¥    192,076$    2,177,625

Notes and accounts receivable – trade (Notes 6 and 14)

28,53929,925277,299

Marketable securities (Notes 14 and 15)

1,333

612

12,955

Allowance for doubtful receivables

(208)

(201)

(2,022)Inventories (Note 4)

402,658

511,036

3,912,341

Equity investments (Notes 14 and 15)

223,911

208,523

2,175,583

Deferred income taxes (Note 8)

21,152

21,064

205,525

Other current assets
Total current assets

45,01463,736437,372

946,522

1,026,773

9,196,681

Investments:
	Investments in and advances to unconsolidated subsidiaries
and affiliates (Note 14)

	Short-term borrowings and current portion of long-term debt
(Notes 6 and 14)
Notes and accounts payable – trade (Note 14)

Millions of yen

Thousands of
U.S. dollars (Note 3)

2014

2013

2014

¥ 463,486¥ 327,304$ 4,503,363

105,27153,044

1,022,846

Accrued income taxes (Note 8)

14,423

8,935

140,139

Advances and deposits

119,160

89,282

1,157,795

Accrued expenses and other current liabilities

65,40660,877

635,509

767,747

539,4447,459,654

Long-term debt (Notes 6 and 14)

1,500,052

1,747,905

14,574,938

Lease deposits received (Note 14)

3,722,149

Total current liabilities
Long-term liabilities:

383,083

378,876

Accrued employees’ retirement benefits (Note 7)–

16,671–

Liability for retirement benefits (Notes 2 and 7)

20,380–198,020

Deferred income taxes (Note 8)

512,028

516,800

4,975,018

Negative goodwill

92,35688,143897,362

Other non-current liabilities

42,62557,668414,164

17,73015,663

172,278

Total long-term liabilities

2,550,527

2,806,065

24,781,652

Investment securities (Notes 6, 14 and 15)

196,076

185,491

1,905,131

Total liabilities

3,318,275

3,345,509

32,241,307

Asset for retirement benefits (Notes 2 and 7)

6,320

—

61,414

163,909148,525

1,592,592

384,037

349,680

3,731,416

			 Issued – 1,390,397,097 shares in 2014 and 2013

141,373

141,373

1,373,622

		Capital surplus

170,485

170,485

1,656,486

		Retained earnings

465,757

413,392

4,525,436

		 Less treasury stock, at cost

(4,811)(4,585)(46,749)

772,805

720,666

7,508,796

75,97170,608738,162

Other investments (Notes 5 and 14)
Total investments

Net assets:
Shareholders’ equity (Note 9):
		 Common stock, without par value:
			 Authorized – 1,980,000,000 shares;

Property and equipment (Note 6):Land

1,897,116

1,883,246

18,432,926

Total shareholders’ equity

Land in trust

440,852

377,854

4,283,448

Accumulated other comprehensive income:

Buildings and structures

2,148,557

2,063,217

20,875,991

		 Unrealized holding gain on securities

Machinery and equipment and other

140,336

135,637

1,363,553

		 Deferred gain (loss) on hedging instruments

125

(221)

1,214

Construction in progress

53,65733,909521,347

		 Land revaluation reserve493,153

498,103

4,791,620

4,680,520

4,493,866

45,477,267

		 Foreign currency translation adjustments(8,249)(49,608)(80,155)(1,351,915)(1,270,029)(13,135,593)

		 Retirement benefits liability adjustments (Notes 2 and 7)

3,328,605

3,223,836

32,341,674

Less accumulated depreciation
Property and equipment, net(4,748)—(46,135)

556,252

518,8815,404,707

494

500

4,809

117,540

125,963

1,142,057

Total net assets

1,447,093

1,366,011

14,060,369

Total liabilities and net assets¥4,765,368¥4,711,521$46,301,677

Total accumulated other comprehensive income
Stock acquisition rights
Minority interests

Intangible and other assets
Total assets

106,203¥ 4,765,368

111,230¥ 4,711,521

1,031,904$ 46,301,677

Contingent liabilities (Note 12)

See accompanying notes to consolidated financial statements.

50

MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2014

51

F inancial section

Consolidated Statements of Income

Consolidated Statements of Changes in Net Assets

Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2014 and 2013

Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2014 and 2013
Millions of yen

Thousands of
U.S. dollars (Note 3)

2014

2013

2014

¥1,075,285¥ 927,157$10,447,775

Cost of revenue from operations(836,249)(733,392)(8,125,234)

Selling, general and administrative expenses(77,764)(75,415)(755,586)

Operating income

161,271

118,349

1,566,955

4,109

4,023

39,926(22,176)(24,594)(215,477)

Revenue from operations

Other income (expenses):
Interest and dividend income
Interest expenses
Equity in earnings of unconsolidated subsidiaries and affiliates
Other, net (Note 13)
Income before income taxes and minority interests

1,547

517

15,039(36,065)(41,554)(350,421)(52,585)(61,608)(510,932)

108,685

56,741

1,056,022

Millions of yen

Balance at April 1, 2012

Commonstock

CapitalsurplusRetainedearnings¥141,373¥170,485¥471,087¥(4,366)¥778,580¥47,251¥(238)

141,373

170,485(89,146)
381,940(4,366)(89,146)
689,433

47,251(238)

23,35623,35670,608

16
16
(221)

5,363
5,363
¥75,971

346
346
¥ 125

Cumulative effect of changes
in accounting policy
Restated balance at April 1, 2012
Changes in the year:
Cash dividends paid
Net income
Purchase of treasury stock
Disposal of treasury stock
Land revaluation reserve (Note 1-h)Changes in the scope of consolidation
	Net change in items other than thosein shareholders’ equity
Total of changes in the year

(16,652)
45,507
(29)
1,160
1,466

141,373

Balance at April 1, 2013

Income taxes (Note 8):
Current(22,403)(16,479)(217,681)

Prior years(20,684)(48)(200,973)

Deferred

2,359

14,62022,926(40,728)(1,907)(395,728)

Income before minority interests

67,957

54,833

660,293

Minority interests(3,660)(9,325)(35,562)¥   64,297¥   45,507$   624,731

Net income

170,485

Changes in the year:
Cash dividends paid
Net income
Purchase of treasury stock
Disposal of treasury stock
Land revaluation reserve (Note 1-h)Changes in the scope of consolidation
	Net change in items other than thosein shareholders’ equity
Total of changes in the year
Balance at March 31, 2014

Shareholders’ equity
Total
Treasuryshareholders’stockequityAccumulated othercomprehensive income
Unrealized
Deferred gain
holding (loss) on hedging
gain on securities
instruments

31,451
413,392(384)
166(16,652)
45,507
(384)
136
1,160
1,466

(218)
(4,585)31,233
720,666(411)
185(16,651)
64,297
(411)
147
4,870
(114)

(226)
¥(4,811)

52,138¥772,805(16,651)
64,297
(37)
4,870
(114)

¥141,373¥170,485

52,365¥465,757

See accompanying notes to consolidated financial statements.

Millions of yen

Landrevaluation
reserve

Balance at April 1, 2012

Consolidated Statements of Comprehensive Income
Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2014 and 2013
Millions of yen

Thousands of
U.S. dollars (Note 3)

2014

2013

2014

¥ 67,957¥54,833$  660,293

Unrealized holding gain (loss) on securities

5,364

23,35852,119Deferred gain (loss) on hedging instruments

426

(65)

4,140

Income before minority interests
Other comprehensive income (Note 21):Land revaluation reserve(79)(1,384)(768)

41,754

19,556405,693	Share of other comprehensive income of companies
accounted for by the equity method

1,405

679

13,655

Total other comprehensive income

48,87042,145474,840

Comprehensive income (Note 21)¥116,827¥96,979$1,135,134

Shareholders of Mitsubishi Estate Co., Ltd.

¥111,287¥87,337$1,081,303

Minority interests¥  5,540¥ 9,641$   53,830

Foreign currency translation adjustments

Total comprehensive income attributable to:

See accompanying notes to consolidated financial statements.

52

Minority
interests

Total
net assets¥(69,449)—¥478,211¥451¥116,672¥1,373,915

500,647(69,449)—478,211451

116,672(89,146)
1,284,768(16,652)
45,507
(384)
136
1,160
1,466

(2,544)(2,544)
498,103

Balance at April 1, 2013

Balance at March 31, 2014

Stock acquisitionrights¥500,647

Cumulative effect of changes
in accounting policy
Restated balance at April 1, 2012
Changes in the year:
Cash dividends paid
Net income
Purchase of treasury stock
Disposal of treasury stock
Land revaluation reserve (Note 1-h)Changes in the scope of consolidation
	Net change in items other than thosein shareholders’ equity
Total of changes in the year
Changes in the year:
Cash dividends paid
Net income
Purchase of treasury stock
Disposal of treasury stock
Land revaluation reserve (Note 1-h)Changes in the scope of consolidation
	Net change in items other than thosein shareholders’ equity
Total of changes in the year

Accumulated other comprehensive income
Retirement
Total
Foreign currency
benefits liability
accumulatedtranslation
adjustments
other compreadjustments(Notes 2 and 7)
hensive income

19,84019,840(49,608)———

40,66940,669518,881

49
49
500

9,291
9,291
125,963

50,00981,243
1,366,011(16,651)
64,297
(411)
147
4,870
(114)

(4,949)(4,949)¥493,153

41,35941,359¥ (8,249)¥(4,748)(4,748)¥(4,748)

37,37137,371¥556,252

(5)
(5)
¥494

(8,423)(8,423)¥117,540

28,942
81,081¥1,447,093

See accompanying notes to consolidated financial statements.

MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2014

53

F inancial 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, 2014 and 2013

Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2014 and 2013
Millions of yen

Thousands of
U.S. dollars (Note 3)

2014

2013

2014

¥ 108,685¥ 56,741$ 1,056,022

Depreciation and amortization

74,80573,364

726,836(Gain) loss on sales or disposal of property and equipment(3,131)

11,560(30,429)(Gain) loss on sales of securities

(314)

(260)

(3,059)Valuation loss on equity investments

7,648

8,985

74,316

Impairment loss

32,644

2,826

317,187

Equity in net income of affiliates(1,547)(517)(15,039)

Increase (decrease) in allowances(7,180)

4,973(69,766)

Increase (decrease) in liability for retirement benefits(2,746)—(26,688)

Interest and dividend income(4,109)(4,023)(39,926)

Interest expense

22,176

24,594215,477(Increase) decrease in notes and accounts receivable(1,143)

11,672(11,114)(Increase) decrease in inventories

93,854

43,173

911,921(Increase) decrease in equity investments(18,180)(24,319)(176,649)

Increase (decrease) in notes and accounts payable

49,165(13,833)

477,707

Increase (decrease) in lease deposits received

3,995

5,965

38,820Thousands of U.S. dollars (Note 3)

Balance at April 1, 2012

Cumulative effect of changes
in accounting policy
Restated balance at April 1, 2012
Changes in the year:
Cash dividends paid
Net income
Purchase of treasury stock
Disposal of treasury stock
Land revaluation reserve (Note 1-h)Changes in the scope of consolidation
	Net change in items other than thosein shareholders’ equity
Total of changes in the year
Balance at April 1, 2013

Commonstock

CapitalsurplusRetainedearnings$1,373,622$1,656,486$4,577,224

1,656,486(866,177)
3,711,046

1,373,622$(42,428)$7,564,904(42,428)(866,177)
6,698,727(161,803)
442,164(283)
11,271
14,246

1,373,622

1,656,486

Changes in the year:
Cash dividends paid
Net income
Purchase of treasury stock
Disposal of treasury stock
Land revaluation reserve (Note 1-h)Changes in the scope of consolidation
	Net change in items other than thosein shareholders’ equity
Total of changes in the year
Balance at March 31, 2014

Shareholders’ equity
Total
Treasuryshareholders’stockequity305,595
4,016,642(3,736)
1,614(2,122)(44,551)(161,792)
624,731(362)
47,327(1,109)$1,373,622$1,656,486

508,793$4,525,436(3,997)
1,799(2,197)$(46,749)

Accumulated othercomprehensive income
Unrealized
Deferred gain
holding (loss) on hedging
gain on securities
instruments$459,109
459,109$(2,316)(2,316)(161,803)
442,164(3,736)
1,330
11,271
14,246
303,472
7,002,200

226,938
226,938
686,048

162
162(2,153)(161,792)
624,731(3,997)1,437
47,327(1,109)506,595$7,508,796

52,114
52,114$738,162

3,368
3,368
$ 1,214

Thousands of U.S. dollars (Note 3)Landrevaluation
reserve

Balance at April 1, 2012

Cumulative effect of changes
in accounting policy
Restated balance at April 1, 2012
Changes in the year:
Cash dividends paid
Net income
Purchase of treasury stock
Disposal of treasury stock
Land revaluation reserve (Note 1-h)Changes in the scope of consolidation
	Net change in items other than thosein shareholders’ equity
Total of changes in the year
Balance at April 1, 2013

Changes in the year:
Cash dividends paid
Net income
Purchase of treasury stock
Disposal of treasury stock
Land revaluation reserve (Note 1-h)Changes in the scope of consolidation
	Net change in items other than thosein shareholders’ equity
Total of changes in the year
Balance at March 31, 2014

$4,864,437
4,864,437

Accumulated other comprehensive income
Retirement
Total
Foreign currency
benefits liability
accumulatedtranslation
adjustments
other compreadjustments(Notes 2 and 7)
hensive income$(674,789)(674,789)——$4,646,441
4,646,441

192,775
192,775(482,013)———

395,156
395,156
5,041,597

Stock acquisitionrightsMinority
interests

Total
net assets$4,384$1,133,622$13,349,353

4,384

1,133,622(866,177)
12,483,175

479
479
4,864

90,27590,275
1,223,898

485,911
789,384
13,272,560(161,792)
624,731(3,997)1,437
47,327(1,109)(48,095)(48,095)$4,791,620

401,858
401,858$ (80,155)$(46,135)(46,135)$(46,135)

363,110363,110$5,404,707

(55)
(55)
$4,809(81,840)(81,840)$1,142,057

281,214787,809$14,060,369

See accompanying notes to consolidated financial statements.

54

Income before income taxes and minority interests

Other

28,593(26,539)

277,820

		Subtotal

383,216

174,363

3,723,435

Interest and dividends received
Interest paid

4,530

6,277

44,020(22,154)(24,940)(215,261)

Income taxes paid

(29,102)(33,413)(282,768)

Net cash provided by operating activities

336,489

122,286

3,269,426

Cash flows from investing activities

Proceeds from sales of marketable securities
Proceeds from sales of property and equipment(161,803)
442,164(3,736)
1,330
11,271
14,246(24,720)(24,720)
4,839,716

Cash flows from operating activities

Purchases of property and equipment

—

181

—

32,4409,948

315,203(159,366)(206,608)(1,548,453)

Proceeds from sales of investment securities

1,034

2,247

10,050Purchases of investment securities(1,401)(2,804)(13,617)

Other(6,243)(20,957)(60,668)(133,537)(217,992)(1,297,485)(20,905)(13,301)(203,126)

Net cash used in investing activities
Cash flows from financing activities

Net increase and decrease in short-term borrowings
Net increase and decrease in commercial paper(35,000)

35,000(340,069)

Increase in long-term borrowings

165,587399,752

1,608,898

Repayment of long-term borrowings(207,047)(486,374)(2,011,732)

Proceeds from issuance of corporate bonds

15,761

187,650

153,143

Repayment of corporate bonds(68,207)(82,881)(662,721)

Cash dividends paid

(16,658)(16,652)(161,862)

Other(11,044)

3,958(107,312)

Net cash provided by (used in) financing activities(177,514)

27,150(1,724,783)

8,321

3,838

80,851

Effect of exchange rate changes on cash and cash equivalents
Net increase and decrease in cash and cash equivalents

33,758(64,716)

328,008

Cash and cash equivalents at beginning of year

191,837

215,771

1,863,945—

42,724—

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 16)(856)(1,942)(8,320)¥ 224,739¥ 191,837$ 2,183,634

See accompanying notes to consolidated financial statements.

MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2014

55

F INANC I A L SE C TIO N

Notes to Consolidated Financial Statements
Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2014 and 20131l. Derivative financial instruments

S ignificant A cco u nting P olicies

a. Basis of preparationg. Inventories

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 Reporting Standards,
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 of Japan,
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 with the 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.

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

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.

Property and equipment, except for land as discussed below, is stated atcost less accumulated depreciation. Depreciation is calculated principallyby the declining-balance method, except for buildings acquired in Japan
subsequent to March 31, 1998 and property and equipment of foreignsubsidiaries on which depreciation is calculated by the straight-line
method at rates determined based on the estimated useful lives of therespective assets. The Company and its consolidated subsidiaries havecapitalized 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 amountof the assets may not be fully recoverable. They perform cash flow
analyses to determine if impairment exits. If impairment is determined
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

c. Use of estimatesi. Intangible and other assets

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.

Intangible and other assets primarily consist of goodwill and land use
rights. Goodwill is stated on the basis of cost and is being amortized overa 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.

d. Foreign currency translation

j. Retirement benefits

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 also translated
into yen at the rates of exchange in effect at the balance sheet date.
The components of shareholders’ equity are translated at their historicalexchange rates.

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 balance sheet date.
The retirement benefit obligation for employees is attributed to eachperiod by the straight-line method over the estimated years of service ofthe eligible employees.
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 are shorter than the
average remaining years of service of employees.
Certain foreign consolidated subsidiaries have adopted the corridor
approach for the amortization of actuarial gain or loss.
Prior service cost is being amortized as incurred by the straight-line
method over periods (mainly 1 year through 10 years), which are shorter
than the average remaining years of service of employees.

b. Principles of consolidatione. 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,
2014 and 2013 is presented in Note 16.
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 arecarried at amortized cost. Marketable securities classified as othersecurities are carried at fair value with any changes in unrealized holding
gain or loss, net of the applicable income taxes, included directly inshareholders’ equity. Non-marketable securities classified as othersecurities are carried at cost. Cost of securities sold is determined by themoving average method.

56

k. Income taxes

Deferred tax assets and liabilities are determined based on the financial
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 theestimated future tax effects attributable to operating loss carry forwards.
Valuation allowances are established to reduce deferred tax assets if it ismore likely than not that the some portion or all of the deferred tax
assets will not be realized.

MITSUBISHI ESTATE CO., LTD.

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 service business segment is recognizedat the time of contract conclusion for services provided up to theconclusion and at the time of ownership transfer for services
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 percentage-of-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 completed-contract
method continues to be applied for other contracts for which thepercentage of completion cannot be reliably estimated.
(e)	Other operating revenue is recognized on an accrual basis.
n. 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 9 for more information.
o. Standards issued but not yet effective(“Accounting Standard for Business Combinations”)

On September 13, 2013, the Accounting Standards Board of Japan (ASBJ)
issued “Revised Accounting Standard for Business Combinations” (ASBJ
Statement No. 21) and “Revised Accounting Standard for Consolidated
Financial Statements” (ASBJ Statement No. 22), “Revised AccountingStandard for Business Divestitures” (ASBJ Statement No. 7), “Revised
Accounting Standard for Earnings Per Share” (ASBJ Statement No. 2),“Revised Guidance on Accounting Standard for Business Combinations
and Accounting Standard for Business Divestitures” (ASBJ Guidance No.
10), and “Revised Guidance on Accounting Standard for Earnings Per
Share” (ASBJ Guidance No. 4).
(1) Overview
		Under these revised accounting standards, the accounting treatment
for any changes in a parent’s ownership interest in a subsidiary when
the parent retains control over the subsidiary and the corresponding
accounting for acquisition-related costs were revised. In addition,
the presentation method of net income was amended, the reference
to “minority interests” was changed to “non-controlling interests,”
and transitional provisions for these accounting standards werealso defined.

ANNUAL REPORT 2014

(2) Scheduled date of adoption
		 The scheduled date of adoption is to be determined.
(3) Impact of adopting revised accounting standards and guidance		The Company is currently evaluating the effect of adopting theserevised standards on its consolidated financial statements.
(“Accounting Standard for Retirement Benefits”)

On May 17, 2012, the ASBJ issued “Accounting Standard for Retirement
Benefits” (ASBJ Statement No. 26) and “Guidance on AccountingStandard for Retirement Benefits” (ASBJ Guidance No. 25), which
replaced the Accounting Standard for Retirement Benefits that had been
issued by the Business Accounting Council in 1998 with an effective dateof April 1, 2000 and the other related practical guidance, being followedby partial amendments from time to time through 2009.
(1) Overview
		The standard provides guidance for the accounting for unrecognizedactuarial differences and unrecognized prior service costs, thecalculation methods for retirement benefit obligation and service
costs, and enhancement of disclosures taking into consideration
improvements to financial reporting and international trends.
(2) Scheduled date of adoption		The revised accounting standard and guidance were adopted as ofthe end of the fiscal year ended March 31, 2014. However, revisions
to the calculation methods for the retirement benefit obligation andservice costs are scheduled to be adopted from the beginning of the
fiscal year ending March 31, 2015.
(3) Impact of adopting revised accounting standard and guidance		The Company is currently evaluating the effect of adopting thisrevised standard on its consolidated financial statements.
p. Additional information

To implement a plan for management integration between Mitsubishi
Estate Community Co., Ltd. (hereinafter, “Mitsubishi EstateCommunity”), a subsidiary of the Company, and Marubeni Community
Co., Ltd. (hereinafter, “Marubeni Community”), a subsidiary of
Marubeni Corporation (hereinafter, “Marubeni”), the Company andMarubeni resolved at each meeting of their Board of Directors held on
March 27, 2014 that the Company and Marubeni shall establish a holding
company that will wholly own both Mitsubishi Estate Community andMarubeni Community by way of a joint stock transfer, and they
concluded a management integration agreement as of March 28, 2014.
The outline of the joint stock transfer is as follows:(1) Purpose of joint stock transfer
		Through this management integration, the Company aims toprovide even more satisfactory services to its customers through(i) improvement of the quality of property management services by
the rationalization and effective use of the systems and expertise
mutually held by Mitsubishi Estate Community and Marubeni
Community; (ii) enhancement of the efficiency of business
operations by taking advantage of benefits of scale arising from
more than 300,000 units to be managed by the new holding company; and (iii) development of alliances, etc. with each company
representing the residential value chain of both groups.
(2) Method of joint stock transfer
		The Company will implement a joint stock transfer whereby a newly
established holding company will hold all shares issued by Mitsubishi
Estate Community and Marubeni Community.
(3) Effective date of joint stock transfer
		 July 1, 201457

F inancial section

At March 31, 2014 and 2013, long-term debt consisted of the following:

C hanges in A cco u nting P olicy

2(“Revised Accounting Standard for Retirement Benefits”)

The Company adopted “Accounting Standard for Retirement Benefits”(ASBJ Statement No. 26 of May 17, 2012) and “Guidance on AccountingStandard for Retirement Benefits” (ASBJ Guidance No. 25 of May 17,2012) (except for certain provisions described in the main clause of
Section 35 of the standard and in the main clause of Section 67 of theguidance) as of the end of the fiscal year ended March 31, 2014.
These accounting standards require entities to apply a revised method
for recording the retirement benefit obligation, after deducting pension
plan assets, as a liability for retirement benefits. In addition, unrecognizedactuarial differences and unrecognized prior service costs are recorded as

a liability for retirement benefits. Concerning the application of the“Accounting Standard for Retirement Benefits,” based on the provisional
treatment set out in Clause 37 of the standard, the effects of such changes
in the current fiscal year have been recorded in retirement benefits
liability adjustments through accumulated other comprehensive income.
As a result of this change, a liability for retirement benefits wasrecognized in the amount of ¥20,380 million ($198,020 thousand), an
asset for retirement benefits was recognized in the amount of ¥6,320
million ($61,414 thousand), and accumulated other comprehensive
income decreased by ¥4,748 million ($46,135 thousand) as of March 31,
2014. In addition, net assets per share decreased by ¥3.42 ($0.03).

U. S. D ollar A mo unts

3

Translation of yen amounts into U.S. dollar amounts is included solely
for convenience, as a matter of arithmetic computation only, at the rateof ¥102.92 = U.S. $1.00, the approximate rate of exchange prevailing on

March 31, 2014. 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.

I nventories

4

Inventories at March 31, 2014 and 2013 are summarized as follows:
Millions of yen

Thousands of U.S. dollars

Millions of yen

Thousands of U.S. dollars

2014

2013

2014

0.785% unsecured bonds due 2013—

¥10,000—

1.675% unsecured bonds due 2014—

10,000—1.349% unsecured bonds due 2014—

10,000

—1.65% unsecured bonds due 2014¥   10,000

10,000$   97,162

1.75% unsecured bonds due 2014

10,00010,00097,162

0.42% secured bonds due 2014

4,647

4,664

45,1561.655% unsecured bonds due 2014

10,00010,00097,162

1.409% unsecured bonds due 2015

10,00010,00097,162

1.295% unsecured bonds due 2015

10,00010,00097,162

1.572% unsecured bonds due 2015

10,00010,00097,162

1.443% unsecured bonds due 2016

15,00015,000145,7441.985% unsecured bonds due 2016

10,00010,00097,162

1.88% unsecured bonds due 2016

10,00010,00097,162

0.553% unsecured bonds due 2016

15,00015,000145,7440.459% unsecured bonds due 2016

10,00010,00097,162

10,00010,00097,162

2014

2013

2014

1.79% unsecured bonds due 2017

Real estate for sale

¥ 66,484¥152,354$  645,9780.428% unsecured bonds due 2017

20,00020,000

194,325

Land and housing projects in progress

319,355

343,621

3,102,952

2.045% unsecured bonds due 2017

10,00010,00097,162Land held for development

8,609

8,615

83,6551.825% unsecured bonds due 2017

10,00010,00097,162

Other

8,208

6,444

79,7553.125% unsecured bonds due 2017

10,00010,00097,162$3,912,341

1.77% unsecured bonds due 2017

20,00020,000

194,3250.187% unsecured bonds due 2018

15,00015,000145,744

1.65% unsecured bonds due 2018

10,00010,00097,1622.005% unsecured bonds due 2018

10,00010,00097,1620.811% unsecured bonds due 2018

10,00010,00097,162

3% unsecured bonds due 2018

10,00010,00097,162

Total¥402,658¥511,036

O ther I nvestments

5

Other investments at March 31, 2014 and 2013 were as follows:
Millions of yen

Lease deposits
Long-term prepaid expenses and other
Total

Thousands of U.S. dollars

2014

2013

2014

¥113,015¥110,689$1,098,089

1.84% unsecured bonds due 2018

15,00015,000145,744

50,89437,836494,503

1.72% unsecured bonds due 2018

10,00010,00097,162$1,592,592

0.631% unsecured bonds due 201910,00010,00097,162

1.87% unsecured bonds due 201915,00015,000145,744

1.62% unsecured bonds due 201910,00010,00097,162¥163,909¥148,525

S hort- T erm B orrowings and L ong - Term D ebt

6

At March 31, 2014 and 2013, short-term borrowings and the current portion of long-term debt consisted of the following:

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

10,00010,00097,162

10,00010,00097,162

10,00010,00097,162Millions of yen

Thousands of U.S. dollars

2014

2013

2014

1.975% unsecured bonds due 2019

¥ 63,762¥ 68,291$ 619,537

1.805% unsecured bonds due 201910,00010,00097,162—35,000—2.5% unsecured bonds due 2020

10,00010,00097,162399,723

224,0133,883,825

1.165% unsecured bonds due 2020

10,00010,00097,162¥463,486¥327,304$4,503,363

0.577% unsecured bonds due 2020

15,00015,000145,744

0.54% unsecured bonds due 2021

15,00015,000145,744

1.262% unsecured bonds due 2021

15,00015,000145,744

1.103% unsecured bonds due 2021

20,00020,000

194,325

The weighted-average interest rates per annum on short-term borrowings outstanding at March 31, 2014 and 2013 were 0.54% and 0.59%,
respectively. Short-term borrowings are principally unsecured.

58

0.571% unsecured bonds due 2019
1.53% unsecured bonds due 2019

MITSUBISHI ESTATE CO., LTD.

1.095% unsecured bonds due 2021

10,00010,00097,162

1.178% unsecured bonds due 2022

20,00020,000

194,325

1.087% unsecured bonds due 2022

20,00020,000

194,325

1.026% unsecured bonds due 2022

30,00030,000291,488

ANNUAL REPORT 2014

59

F inancial section

The following debts included in long-term debt are non-recourse loans at March 31, 2014 and 2013, which are secured by collaterals as the ultimate
sources of repayment.

Millions of yen

Thousands of U.S. dollars

2014

2013

2014

2.42% unsecured bonds due 2022¥   10,000¥   10,000$    97,162

0.929% unsecured bonds due 2022

10,00010,00097,162

1.5% unsecured bonds due 2022

10,00010,00097,1622.075% unsecured bonds due 2023

10,00010,00097,162

2.28% unsecured bonds due 2024

10,00010,00097,162

1.067% unsecured bonds due 2024

10,00010,00097,1622.305% unsecured bonds due 2027

10,00010,00097,1622.385% unsecured bonds due 2027

10,00010,00097,162

2.52% unsecured bonds due 2027

15,00015,000145,7442.425% unsecured bonds due 2027

10,00010,00097,1622.555% unsecured bonds due 2028

10,00010,00097,162

2.9% unsecured bonds due 2032

10,00010,00097,162

Cash on hand and in banks

2.615% unsecured bonds due 2032

10,00010,00097,162

Notes and accounts receivable – trade

1,834

1,103

17,8202.04% unsecured bonds due 2032

20,00020,000

194,325

Buildings and structures

43,82145,692425,786

1.72% unsecured bonds due 2033

10,00010,00097,162

Machinery and equipment

138

155

1,345

Floating rate bonds due 2013 (payable in U.S. dollars)—

27,567—1,202,115

Floating rate bonds due 2014 (payable in U.S. dollars)

11,948—116,093

Loans from banks and insurance companies:
Secured221,849

236,2122,155,556

Unsecured

976,330

988,473

9,486,301

1,899,775

1,971,918

18,458,763(399,723)(224,013)(3,883,825)¥1,500,052¥1,747,905$14,574,938

Year ending March 31,

Millions of yen

Thousands of U.S. dollars

2015¥   399,774$ 3,884,326

2016

129,6811,260,022

2017

241,574

2,347,208

2018

218,459

2,122,616

2019

193,818

1,883,198

2020 and thereafter

716,517

6,961,891¥1,899,827$18,459,265

Less current portion

The aggregate annual maturities of long-term debt subsequent to March 31, 2014 are summarized as follows:

Total

Millions of yen

Thousands of U.S. dollars¥170,405$1,655,712

1,955

19,001

311,833

3,029,866

Construction in progress

354

3,446

Other property and equipment

1,990

19,33868

668¥486,609$4,728,034

Machinery and equipment
Land

Investment securities
Total

Thousands of U.S. dollars

2013

2014

Bonds

¥  4,647—$   45,156

Long-term borrowings

174,061—

1,691,229—¥  4,664—

Current portion of long-term debt:

Bonds
Long-term borrowings
		TotalLand

MITSUBISHI ESTATE CO., LTD.

174,635—¥179,299$1,736,385

Millions of yen

Thousands of U.S. dollars

2014

2013

2014

¥ 16,307¥ 15,693$ 158,450

123,721

137,505

Construction in progress

354

353

3,446

Other property and equipment

1,989

2,171

19,331¥188,168¥202,675$1,828,298

Total

7

R etirement B enefit P lans

For the year ended March 31, 2014
The Company and most of its domestic consolidated subsidiaries have either funded or unfunded defined benefit plans, defined contribution plans
and lump-sum payment plans in the form of a defined benefit plan. The Company has adopted a retirement benefit trust for the lump-sum payment
plan and defined benefit plan. Rockefeller Group, Inc., a foreign consolidated subsidiary of the Company, has adopted defined benefit plans.
The simplified method, which assumes 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 year ended March 31, 2014 are as follows:
Millions of yen

Thousands of U.S. dollars¥108,134$1,050,666

Service cost

4,735

46,011

Interest cost

1,621

15,750

Actuarial gain

(1,651)(16,042)Retirement benefit paid

(4,387)(42,626)

Retirement benefit obligation at April 1, 2013

30

299

Foreign currency translation adjustments

2,902

28,201Other(1,541)(14,976)¥109,844$1,067,284

Millions of yen

Thousands of U.S. dollars¥80,940$786,441

Expected return on plan assets

1,933

18,782

Actuarial gain

9,966

96,838Contributions by the Company

4,489

43,624Retirement benefits paid

(3,059)(29,722)

Foreign currency translation adjustments

1,801

17,504

Other

(563)

(5,472)¥95,509$927,995

Retirement benefit obligation at March 31, 2014
The changes in plan assets during the year ended March 31, 2014 are as follows:

Plan assets at April 1, 2013

Plan assets at March 31, 201460—
¥178,708

The repayment sources at March 31, 2014 and 2013 are the following assets and their accompaniments.

Prior service cost

The assets pledged as collateral for short-term borrowings of ¥100 million ($971 thousand) and long-term debt of ¥226,497 million($2,200,713 thousand) at March 31, 2014 were as follows:

Buildings and structures

Millions of yen

2014

ANNUAL REPORT 2014

61

F inancial section

The following table sets forth the funded status of the plans and the amounts recognized in the consolidated balance sheet as of March 31, 2014 for
the Company’s and the consolidated subsidiaries’ defined benefit plans:Millions of yen

Thousands of U.S. dollars

Funded retirement benefit obligation¥ 96,033$ 933,092

Plan assets at fair value(95,509)(927,995)

524

5,097

Unfunded retirement benefit obligation

13,810134,191

Net liability for retirement benefits in the balance sheet

14,335

139,288

Liability for retirement benefits

20,380198,020

Asset for retirement benefits(6,320)(61,414)

276

2,682

¥ 14,335$ 139,288

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, at March 31, 2014 were included in “Other current liabilities.”

The required contribution to defined contribution plans by the consolidated subsidiaries for the year ended March 31, 2014 is ¥234 million($2,305 thousand).
For the year ended March 31, 2013
Millions of yen

Retirement benefit obligation¥(108,134)

Plan assets at fair value

80,940Unfunded retirement benefit obligation(27,194)

The net retirement benefit obligation at transition of the accounting standards(116)

Unrecognized actuarial loss

19,408Unrecognized prior service cost(155)

Net amounts recognized in the consolidated balance sheets(8,058)Prepaid pension expenses

8,845

Accrued employees’ retirement benefits

The components of retirement benefit expense for the year ended March 31, 2014 are as follows:¥ (16,903)* The accrued employees’ retirement benefits recognized by Rockefeller Group, Inc., a consolidated subsidiary, in the amount of ¥232 million at March 31, 2013 was included in “Other
current liabilities.”

Millions of yen

Thousands of U.S. dollars

Service cost

¥ 4,735$ 46,011

Interest cost

1,621

15,750

Expected return on plan assets(1,933)(18,782)

Service cost

¥ 4,437

Amortization of actuarial loss

729

7,088

Interest cost

2,116
(1,654)The components of expenses related to the pension and severance plans for the years ended March 31, 2013 were as follows:
Millions of yen

Amortization of prior service cost

(61)

(599)

Expected return on plan assets

Amortization of net retirement benefit obligation at transition(116)(1,127)

Amortization of net retirement benefit obligation at transition

442

4,297

Amortization of actuarial loss

¥ 5,417$ 52,638

Other

3
1,611

Other

746

* Retirement benefit expenses for executive officers of the Company and some domestic consolidated subsidiaries adopting the simplified method are included in “Service cost.”

Total¥ 7,261

Unrecognized prior service cost and unrecognized actuarial loss included in accumulated other comprehensive income (before tax effect) as ofMarch 31, 2014 are as follows:

The assumptions used in accounting for the pension and severance plans for the years ended March 31, 2013 were as follows:

Retirement benefit expense

Millions of yen

Thousands of U.S. dollars

Unrecognized prior service cost¥   328$  3,190

Unrecognized actuarial loss

(8,097)(78,674)¥(7,768)$(75,484)

Total

The fair values of plan assets, by major category, as a percentage of total plan assets as of March 31, 2014 are as follows:

Bonds

20%

Stocks

56%

General accounts at insurance companies

14%

Other

10%

Total

100%

* Approximately 40% of total plan assets are held in the retirement benefit trust.

The expected rate of return on the plan assets was estimated based on the current and anticipated allocation of plan assets as well as the current andanticipated long-term returns on various kinds of assets constituting the plan assets.
The assumptions used in accounting for the above plans are as follows:

Discount rates

1.0 – 3.95%

Expected rates of return on plan assets

0.5 – 7.5%

Discount rates

1.0 – 4.6%

Expected rates of return on plan assets

0.5 – 7.5%

8I ncome Taxes

Income taxes in Japan applicable to the Company and its domestic consolidated subsidiaries consist of corporation tax, inhabitants’ taxes and enterprise
tax which, in the aggregate, resulted in a statutory tax rate of 38.01% for the year ended March 31, 2014 and 2013. Income taxes of the foreign
consolidated subsidiaries are based generally on the tax rates applicable in their countries of incorporation.
The effective tax rates reflected in the consolidated statements of income for the years ended March 31, 2014 and 2013 differ from the statutory
tax rate for the following reasons:
2014

2013

—

38.01%

Change in valuation allowance—(17.68)Different tax rates applied—(0.28)

Revenues deductible for income tax purposes—(0.74)

Expenses not deductible for income tax purposes

—

2.99

Undistributed earnings of affiliates

—

0.26

Equity income—(0.33)

Reversal of temporary differences associated with investment in affiliates—(19.44)

Other

—

0.57

—

3.36%

Statutory tax rate
Increase (decrease) in income taxes resulting from:

Effective tax rates* Disclosure of the reconciliation of the statutory tax rate and the effective tax rate for the year ended March 31, 2014 has been omitted since the difference is less than 5% of thestatutory tax rate.

62

MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2014

63

F inancial section

The significant components of deferred tax assets and liabilities as of March 31, 2014 and 2013 were as follows:

10
Millions of yen

Thousands of U.S. dollars

2013

2014

2014

Deferred tax assets:
Net operating loss carry forwards
Accrued retirement allowances and pension costs

¥

3,111

¥

9,151

$

30,230—13,647—

Liability for retirement benefits

15,952—

154,994

Valuation loss on inventories

14,362

18,620139,549

Unrealized loss on property and equipment

86,28082,926

Unrealized loss on property and equipment by consolidation

11,568Land revaluation reserve
Loss on valuation of equity investments
Other
Total gross deferred tax assets

2014¥46.34¥32.79

$0.45

32.78

0.45

12.00

0.11

838,322

Yen

U.S. dollars

As of March 31,

2014

2013

2014

13,466112,400

Net assets¥957.80¥893.27$9.30

29,75529,834

289,116

8,031

4,626

78,03429,55332,245287,147

204,519

1,929,795(67,509)(753,880)

Total deferred tax assets

121,025

137,010

1,175,914

Deferred tax liabilities:
Reserves under Special Taxation Measures Law(51,707)(74,104)(502,403)

Land revaluation reserve(319,090)(322,051)(3,100,373)

Unrealized gain on property and equipment by consolidation(123,472)(122,681)(1,199,697)

Unrealized gain on property and equipment(42,679)(42,644)(414,688)

Unrealized gain on securities(39,307)(36,494)(381,923)

Other(26,439)(18,851)(256,896)

Total deferred tax liabilities(602,697)(616,827)(5,855,984)

Net deferred tax liabilities¥(481,672)¥(479,817)$(4,680,069)

As a result, the effective statutory tax rate used to measure theCompany’s deferred tax assets and liabilities was changed from 38.01%
to 35.64% for the temporary differences expected to be realized or settled
from fiscal years beginning April 1, 2014.
The announced reduction of the effective statutory tax rate did nothave a significant impact on deferred tax assets and liabilities as of March
31, 2014.

DilutedU.S. dollars

2013

46.32

(77,589)

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.

11

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 theinterim cash dividends paid.

L eases

Future minimum lease payments subsequent to March 31, 2014 on noncancelable operating leases are summarized as follows:Year ending March 31,

20152016 and thereafter
Total

Millions of yen

Thousands of U.S. dollars¥ 6,644
139,189¥145,834$ 64,563
1,352,408$1,416,972

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, 2014 from noncancelable operating leases is summarized as follows:Year ending March 31,

20152016 and thereafter
Total

12

Millions of yen

Thousands of U.S. dollars¥204,868
661,932¥866,801$1,990,565
6,431,523$8,422,088

Millions of yen

Thousands of U.S. dollars¥ 420
75,59754¥76,071$ 4,080734,526525$739,132

Millions of yen

Thousands of U.S. dollars¥16,342$158,784

C ontingent L iabilities

At March 31, 2014, the Company and its consolidated subsidiaries had the following contingent liabilities:

S hareholders ’ E qu ity

The Companies Act of Japan provides that an amount equal to 10% of
the amount to be disbursed as distributions of capital surplus (other thanthe 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 to ¥170,485

Net income:
Basic

Yen

2014

12.00

198,614

9

Year ended March 31,

Cash dividends applicable to the year

Valuation allowance

The “Act for Partial Amendment of the Income Tax Act, etc.” (ActNo. 10 of 2014) was promulgated on March 31, 2014 and, as a result, theCompany is no longer subject to the Special Reconstruction Corporation
Tax effective for fiscal years beginning on or after April 1, 2014. In addition,
the “Act for Partial Amendment of the Local Tax Act, etc.” (Act No. 4 of2014) and the “Act for Partial Amendment of the Local Corporate Tax
Act, etc.” (Act No. 11 of 2014) were promulgated on March 31, 2014, andthe Company is subject to the amended Local Corporate Tax effective
for fiscal years beginning on or after April 1, 2015.

A mo u nts per S hare

million ($1,656,486 thousand), and the legal reserve amounted to¥21,663 million ($210,491 thousand) at March 31, 2014. Such distributions can be made at any time by resolution of the shareholders or by
the Board of Directors if certain conditions are met, but neither thecapital reserve nor the legal reserve is available for distributions.

(1) Guarantee of loans

Guarantees of affiliates’ loans from banks
Guarantees of house purchasers’ loans from banks
Other
Total
(2) Guarantee for business undertakings

Business undertaking guarantees

Mitsubishi Estate Asia Pte. Ltd. provides business undertaking guarantees for residential development projects in proportion to its share.
(3) Obligation of additional investment

Obligation of additional investment

Millions of yen

Thousands of U.S. dollars¥28,500$276,914

The Company’s additional contribution obligation for the special purpose company is 50% as its stake.

64

MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2014

65

F inancial section

O ther I ncome (E x penses )13

The components of “Other, net” in “Other income (expenses)” for each of the years ended March 31, 2014 and 2013 were as follows:
Millions of yen

Thousands of U.S. dollars

2013

2014

835

—

2014

Amortization of negative goodwill—¥

Gain on sales of fixed assets¥ 6,7026,165$ 65,119Gain on negative goodwill

4,942

1,374

48,021

Loss on disposal of fixed assets(4,029)(5,744)(39,154)

Loss related to retirement of fixed assets(2,303)(24,338)(22,379)

Impairment loss*(32,644)(2,826)(317,187)

Loss on valuation of equity investments(7,648)(8,985)(74,316)—(7,030)—1

Provision for loss on guarantees
Other, net*1. Impairment loss
The Company recorded consolidated impairment losses for the following asset groups
for the fiscal year ended March 31, 2014:
Major Application

Leased assets, etc.
(total 24 groups)

Category

Land, Buildings, etc.

14

(1,005)(10,523)¥(41,554)$(350,421)

Major Application

Osaka, Osaka Prefecture,
Nagoya, Aichi Prefecture, etc.

Leased assets, etc.
(total 19 groups)

Category

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 rate, reducing interest expenses, and hedging the risk offluctuations in foreign exchange rates and do not enter into derivatives
for speculative purpose.
(2) Types of financial instruments and related risk

Trade receivables – notes and accounts receivable – are exposed to credit
risk in relation to customers. Trade receivables denominated in foreign
currencies, which arise from overseas operation, are exposed to foreign
currency exchange risk.
Marketable securities and investment securities are exposed to market
risk. Those securities are composed of mainly held-to-maturity debt
securities and the shares of common stock of other companies withwhich 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 investment unit of trust held in realestates and investments in silent partnership for special purpose companies. They are exposed to credit risks of issuers, risks of fluctuations ininterest rates and market prices, respectively.

	In order to mitigate the interest rate risk for loans payable and bonds
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 andthe financial position of the issuers (business partners). In addition, theGroup continuously evaluates whether securities other than thoseclassified as held-to-maturity should be maintained taking into accounttheir fair values and relationships with the issuers (business partners).

	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 arereflected in estimating the fair value, different assumptions and factors
could result in different fair value.

Estimated Fair Value of Financial Instruments

Carrying value of financial instruments on the consolidated balance sheets as of March 31, 2014 and 2013 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 toNote 2 below).

Land, Buildings, etc.

Millions of yen

Saitama, Saitama Prefecture, etc.

Asset grouping for 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 as shared assets. As a result, for the fiscal year ended March 31, 2013,
the book values of 19 asset groups, consisting of those for which the market prices fell considerablycompared with the book values due to the decline of land prices and those for which profitability
decreased considerably due to fallen rent levels or deteriorated market conditions, etc., werereduced to the respective collectible amounts and such reduced amounts were recorded as
impairment losses in the amount of ¥2,826 million.
The breakdown of such impairment losses was ¥1,615 million in land, and ¥1,210 million inbuildings and structures.
The collectible amounts of asset groups are measured with net sale value or use value, and thenet 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.

Lease and guarantee deposit for leased assets are exposed to credit
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 20 years from the balance sheet date. Certain longterm 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 swap) as a hedging instrument.
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 andcurrency swap transactions in accordance with the same policies andpurposes 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

Thousands of U.S. dollars

2014

Location

F inancial I nstr uments

OVERVIEW(1) Policy for financial instruments(b)	Monitoring of market risks (the risks arising from fluctuations in foreignexchange rates, interest rates and others)(c)	Monitoring of liquidity risk (the risk that the Group may not be able tomeet its obligations on scheduled due dates)

The Company recorded consolidated impairment losses for the following asset groups
for the fiscal year ended March 31, 2013:

Location

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 fromcash flows of other assets or asset groups. Company condominiums are regarded as shared assets.
As a result, for the fiscal year ended March 31, 2014, the book values of 24 asset groups, consistingof those for which the market prices fell considerably compared with the book values due to thedecline 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 reduced amounts were recorded as impairment losses in the amount of ¥32,644 million($317,187 thousand).
The breakdown of such impairment losses was ¥18,418 million ($178,963 thousand) in land, and¥14,226 million ($138,224 thousand) in buildings and structures.
The collectible amounts of asset groups are measured with net sale value or use value, and thenet 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.

(1,083)¥(36,065)

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 of bad debts
from customers who are having financial difficulties.

1) Cash on hand and in banks2) Notes and accounts receivable – trade
		 Allowance for doubtful receivables(*1)3) Securities and Investment securities
		 (i) Held-to-maturity debt securities
		 (ii) Other securities
4) Equity investments
Total assets
1) Notes and accounts payable – trade2) Short-term borrowings
3) Current portion of long-term borrowings
4) Commercial paper5) Current portion of long-term bonds6) Long-term bonds7) Long-term borrowings
Total liabilities

Carrying
Value

Estimated
Fair Value

Difference¥ 224,121
28,539(208)
28,331¥ 224,121—

28,331—

622
190,975
10,526¥ 454,578¥ 105,271
63,762
343,127—
56,595645,000
855,052¥2,068,810

635
191,141
10,526¥ 454,756¥ 105,271
63,762
343,127—
56,595685,169
865,951¥2,119,879

¥

12
165
—
¥ 178
—
—
—
—
—
¥40,169
10,898¥51,068

Carrying
Value

Estimated
Fair Value

Difference$ 2,177,625 $ 2,177,625
277,299(2,022)275,276
275,276
6,052
1,855,574
102,281$ 4,416,811$ 1,022,846
619,537
3,333,923—
549,901
6,267,003
8,307,934$20,101,147

6,177
1,857,182
102,281$ 4,418,544$ 1,022,846
619,537
3,333,923—
549,901
6,657,306
8,413,831$20,597,347

—

—
$

124
1,608
—
$ 1,733—————$390,302
105,897$496,199

Millions of yen

20131) Cash on hand and in banks2) Notes and accounts receivable – trade
		 Allowance for doubtful receivables(*1)3) Securities and Investment securities
		 (i) Held-to-maturity debt securities
		 (ii) Other securities
4) Equity investments
Total assets
1) Notes and accounts payable – trade2) Short-term borrowings
3) Current portion of long-term borrowings
4) Commercial paper5) Current portion of long-term bonds6) Long-term bonds7) Long-term borrowings
Total liabilities

Carrying
Value

Estimated
Fair Value

Difference¥ 192,076
29,925(201)
29,724¥ 192,076—

29,724—624
179,609
13,097¥ 415,132¥ 53,044
68,291
166,445
35,00057,567
689,664
1,058,240¥2,128,254

645
179,746
13,097¥ 415,290¥ 53,044
68,291
166,445
35,00057,567
736,636
1,071,791¥2,188,777

¥

20
137
—
¥ 157
—
—
—
—
—
¥46,972
13,550¥60,523(*1) The value of notes and account receivable-trade is shown at net value, after deducting allowance for doubtful accounts.

66

MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2014

67

F inancial section

Note 1: Methods to determine the estimated fair value of financial instruments andother matters 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 is mainly based on prices provided by the financial institutions making
markets in these securities. For information on securities classified by holding purpose,
please refer to Note 15. “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.
Commercial paper	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 rate in a short period of time, their carrying value approximates fairvalue. The fair value of long-term borrowings with fixed interest rate is based on thepresent value of the total of principal and interest discounted by the interest rate to be
applied if similar new borrowings were entered into.
Derivatives Transactions
Please refer to Note 17. “Derivatives and Hedging Activities.”
Note 2: Financial instruments for which it is extremely difficult to determine the fair value
Millions of yen

Thousands of
U.S. dollars

2014

2013

2014

(i) Unlisted stocks*1¥ 23,391¥ 21,383$ 227,280(ii) Equity investments*2

213,384

195,426

2,073,301(iii) Lease and guarantee deposit receivables*3

113,015

110,689

1,098,089(iv) Lease and guarantee deposit payables*4

383,083

378,876

3,722,149*1	Because no quoted market price is available and it is extremely difficult to determine thefair value, 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 is difficult, it is extremely difficult to estimate a reasonableamount 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 is difficult, it is extremely difficult to estimate a reasonableamount of cash flow, and therefore they are not included in the above table.

Note 3: Redemption schedule for receivables and marketable securities with maturities at March 31, 2014
Millions of yen

As of March 31, 2014
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:
Corporate bonds
Other
Total

Thousands of U.S. dollars

Due in One
Year or Less

Due after One Yearthrough Five Years

Due after Five Years
through Ten Years

Due after
Ten Years

Due in One
Year or Less

Due after One Yearthrough Five Years

Due after Five Years
through Ten Years

Due after
Ten Years¥224,121
28,539

—
—

—
—

—
—

$2,177,625
277,299

—
—

—
—

—
—

110
—
25

¥ 35
223
—

¥234
—
—

—
—
—

1,068
—
242

$   340
2,166—$2,273
—
—

—
—
—

—
1,200
¥253,995

—
—
¥258

—
119
¥353

—
—
—

—
11,659$2,467,896——$2,506—
1,160$3,434———15

M ar k etable S ec u rities and I nvestment S ec urities

Marketable and investment securities classified as other securities at March 31, 2014 and 2013 are summarized as follows:
Millions of yen

Thousands of U.S. dollars

Cost

Fair Value

Unrealized
Gain (Loss)

2014
Cost

Fair Value

Unrealized
Gain (Loss)

Securities whose fair value exceeds their cost:
Equity securities
Other
		Subtotal¥72,565
5,331
77,896¥182,304
10,527
192,832¥109,739
5,196
114,935$705,067
51,799756,867$1,771,323
102,292
1,873,616$1,066,255
50,492
1,116,748

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

8,065
10
1,342
9,418
¥87,314

7,450
10
1,209
8,670
¥201,502

(614)
—
(133)
(748)
¥114,187

78,36497
13,04791,509$848,377

72,39397
11,74984,240$1,957,856(5,971)—(1,297)(7,268)$1,109,479

Millions of yen

2013
Cost

Fair Value

Unrealized
Gain (Loss)

Securities whose fair value exceeds their cost:
Equity securities
Other
		Subtotal¥72,476
5,331
77,807¥172,229
13,098185,328¥ 99,752
7,767
107,520

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

8,276
10
492
8,778
¥86,586

7,009
10
359
7,378
¥192,706(1,266)—(133)(1,400)¥106,120

Proceeds from sales of securities classified as other securities totaled ¥377 million ($3,670 thousand) and ¥759 million in 2014 and 2013, respectively.
Gross realized gain was ¥345 million ($3,355 thousand) and ¥362 million in 2014 and 2013, respectively. Gross realized loss was ¥40 million ($388
thousand) and ¥101 million in 2014 and 2013, respectively.
Marketable debt securities classified as held-to-maturity securities at March 31, 2014 and 2013 are summarized as follows:
Millions of yen

Thousands of U.S. dollars

Amortized Cost

Fair Value

Unrealized
Gain (Loss)

2014

Millions of yen

As of March 31, 2013
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:
Corporate bonds
Other
Total

Due in One
Year or Less

Due after One Yearthrough Five Years

Due after Five Years
through Ten Years

Due after
Ten Years¥192,076
29,925

—
—

—
—

—
—

10
233
—

¥145
—
25

¥234
—
—

—
—
—

—
350
¥222,595

—
—
¥170

—
—
¥234

—
—
—

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

Amortized Cost

Fair Value

Unrealized
Gain (Loss)

¥399
—
399

¥413
—
413

¥13
—
13

$3,885—
3,885$4,013
—
4,013

$127
—
127

223
223
¥622

222
222
¥635

(0)
(0)
¥12

2,166
2,166
$6,052

2,163
2,163$6,177

(3)
(3)
$124

Millions of yen

Note 4: The redemption schedule for bonds and long-term borrowings
Millions of yen

As of March 31, 2014
Corporate bonds
Long-term borrowings
Total

Due in One
Year or Less

Due after One
Year throughTwo Years

Due after Two
Years throughThree Years

Due afterThree Years
through FourYears

¥ 56,647
343,127¥399,774¥ 20,000
109,681¥129,681¥ 70,000
171,574¥241,574¥ 85,000
133,459¥218,459¥ 65,000
128,818¥193,818

Due in One
Year or Less

Due after One
Year throughTwo Years

Due after Two
Years throughThree Years

Due afterThree Years
through FourYears

Due after FourYears throughFive Years

Due after
Five Years¥ 57,800
166,445¥224,245¥ 44,664
337,875¥382,540¥ 20,000
118,913¥138,913¥ 70,000
166,077¥236,077¥ 85,000
111,148¥196,148¥470,000
324,224¥794,224

Due after FourYears throughFive Years

Due after
Five Years

Due in One
Year or Less

Due after One
Year throughTwo Years¥405,000
311,517¥716,517$ 550,403
3,333,923$3,884,326$ 194,325
1,065,696$1,260,022

Due after Two
Years throughThree Years

Due after FourYears throughFive Years

Due after
Five Years$ 680,139
1,667,069$2,347,208$ 825,884
1,296,732$2,122,616$ 631,558
1,251,640$1,883,198$3,935,095
3,026,796$6,961,891

Millions of yen

As of March 31, 2013
Corporate bonds
Long-term borrowings
Total

68

2013

Thousands of U.S. dollars

Due afterThree Years
through FourYears

MITSUBISHI ESTATE CO., LTD.

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

ANNUAL REPORT 2014

Amortized Cost

Fair Value

Unrealized
Gain (Loss)

¥389
235
624

¥405
239
645

¥16
3
20

—
—
¥624

—
—
¥645

—
—
¥20

69

F inancial section

3. Interest and currency related transactions

S u pplemental C ash F low I nformation

16

Millions of yen

Thousands of U.S. dollars

The following table represents a reconciliation of cash and cash equivalents as of March 31, 2014 and 2013:

Cash on hand and in banks

2014
Millions of yen

Thousands of U.S. dollars

2014

2013

2014

¥224,121¥192,076$2,177,625

Time deposits with maturities of more than three months

(605)

(605)

(5,880)Marketable securities with maturities of three months or less

1,223

366

11,888¥224,739¥191,837$2,183,634

Cash and cash equivalents

Class of Transactions

Subject to hedged accounting

Interest rate and currency swap
contracts	Payment in GBP and receipt
in JPY
Floating rate payment andfixed rate receipt

Corporate bonds

Total

Notional
AmountDue after
One Year

Fair Value

Notional
AmountDue after
One Year

Fair Value¥12,000—¥(719)$116,595—$(6,993)¥12,000—¥(719)$116,595—$(6,993)

derivatives and hedging activities

17

Millions of yen

2013

1. Currency related transactions
Millions of yen

Thousands of U.S. dollars

2014Class of Transactions

Subject to hedged accounting

Forward foreign exchange contracts

Loans to affiliated companies

Total

Notional
AmountDue after
One Year

Fair Value

Notional
AmountDue after
One Year

Fair Value

—

—

—

—

—

—

—

—

—

—

—

—

Class of Transactions

Subject to hedged accounting

Interest rate and currency swap
contracts	Payment in GBP and receipt
in JPY
Floating rate payment andfixed rate receipt

Corporate bonds

Total

Millions of yen

Notional
AmountDue after
One Year

Fair Value¥27,800—¥(2,113)¥27,800—¥(2,113)2013
Class of Transactions

Subject to hedged accounting

Forward foreign exchange contracts

Loans to affiliated companies

Total

Notional
AmountDue after
One YearCalculation method of fair value is based on the data obtained from financial institutions.

Fair Value¥4,496—¥(61)¥4,496

—

¥(61)

18

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

2014Class of Transactions

Subject to hedged accounting

Interest rate swap contracts
Fixed rate payment andfloating rate receipt

Long-term borrowings

Interest rate swap contracts by
short-cut method
Fixed rate payment andfloating rate receipt

Long-term borrowings andCorporate bonds

Notional
AmountDue after
One Year¥ 23,818¥23,818

Notional
AmountDue after
One Year

Fair Value¥52 $ 231,423$231,423$513

Fair Value

The Company and its consolidated subsidiaries are primarily engaged
in the real estate business. Their business segments are classified in termsof the nature of each operation or service and consist of following
segments: (1) Building Business; (2) Residential Business; (3) Commercial
Property Development and Investment; (4) International Business;(5) Investment Management; (6) Architectural Design and Engineering;(7) Hotels Business; (8) Real Estate Services; and (9) Other businesses.

The reportable segment information of the Company and its consolidated subsidiaries for the years ended March 31, 2014 and 2013 is summarized
as follows:
2014
Reportable Segments

142,099

74,402(*)

1,380,680

722,914(*)¥165,917¥98,220¥52 $1,612,103$954,338

$513

2013
Class of Transactions

Subject to hedged accounting

Interest rate swap contracts
Fixed rate payment andfloating rate receipt

Long-term borrowings

Long-term borrowings andCorporate bonds

Notional
AmountDue after
One Year

Building
Business

Revenue from:
External customers

Fair Value

Intersegment ortransfers
Total revenue¥ 19,567¥ 19,567

Commercial
Property
Development
Architectural
Residential
and International
Investment
Design andBusiness
Investment
Business Management Engineering

Hotel
Business

Real Estate
Services

Subtotal

Other¥401,037¥28,772¥25,956¥1,074,630¥   654

Eliminations
Total or Corporate Consolidated

Revenue, operating
income and assets byreportable segment

Millions of yen

Total

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 tomake decisions about resource allocation and to assess performance.
Business performances are aggregated according to business areas thatconsist of multiple business groups and defined as organizational units
having common business objectives and management responsibilities
within the Group, and such aggregated business areas are disclosed asreportable segments.

Millions of yen

Total

Interest rate swap contracts by
short-cut method
Fixed rate payment andfloating rate receipt

S egment I nformation¥(443)¥  476,636¥ 42,616¥ 80,366¥ 6,264¥12,981¥1,075,285—¥1,075,285

7,593

2,222

5,412

—

24

6,964

447

1,140

23,8053,020

26,825¥(26,825)—

484,229403,259

48,02980,366

6,288

19,946

29,21927,097

1,098,435

3,674

1,102,110(26,825)

1,075,285

Segment income (loss)¥  108,172¥ 27,778¥  8,130¥ 25,579¥ 3,046¥ 1,252¥   737¥ 1,544¥  176,241¥  (246)¥   175,995¥(14,724)¥  161,271

Segment assets¥3,040,634¥662,350¥403,188¥452,048¥30,035¥24,246¥24,636¥24,781¥4,661,921¥28,025¥4,689,947¥ 75,420¥4,765,368

Other items

147,073

136,863(*)¥166,640¥156,430¥(443)

Depreciation andamortization¥   57,500¥  3,032¥  4,985¥  6,748¥    43¥    72¥ 1,162¥   407¥   73,953¥   223¥   74,176¥    629¥   74,805

Capital expenditures¥   91,242¥ 18,380¥  4,907¥ 48,394¥    35¥    53¥ 2,040¥   294¥  165,349¥   869¥   166,218¥  6,360¥  172,579

Calculation method of fair value is based on the data obtained from financial institutions.
(*) The estimated fair value of interest rate swap contracts is included in the estimated fair value of long-term borrowings and corporate bonds since amounts in such derivative
contracts accounted for short-cut method are handled together with long-term borrowings and corporate bonds that are subject to hedged accounting.

70

MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2014

71

F inancial section

Thousands of U.S. dollars

Thousands of U.S. dollars

2014

2014

Reportable Segments

Building
Business

Reportable Segments

Commercial
Property
Development
Architectural
Residential
and International
Investment
Design andBusiness
Investment
Business Management Engineering

Hotel
Business

Real Estate
Services

Subtotal

Other

Eliminations
Total or Corporate Consolidated

Revenue from:
External customers$ 4,631,133$3,896,592$  414,069$  780,859$ 60,864$126,135$279,558

73,776

21,59352,593—233

67,672

4,345

Intersegment ortransfers
Total revenue

Building
Business

Amortization of
goodwill

Revenue, operating
income and assets byreportable segment$252,202 $10,441,416
11,080231,296
10,672,713$  6,358 $10,447,775
29,345

260,642

35,704

10,708,418— $10,447,775$(260,642)—(260,642)

10,447,775

4,704,910

3,918,185

466,663

780,859

61,097

193,808

283,904

263,282

Segment income (loss)$ 1,051,037$  269,899$   79,000$  248,534$ 29,604$ 12,167$  7,164$ 15,006 $ 1,712,415$  (2,391) $ 1,710,024$(143,069) $ 1,566,955

Segment assets$29,543,669$6,435,588$3,917,496$4,392,230$291,831$235,583$239,374$240,784 $45,296,559$272,306 $45,568,866$ 732,810 $46,301,677$

Commercial
Property
Development
Architectural
Residential
and International
Investment
Design andBusiness
Investment
Business Management Engineering

Subtotal

Eliminations
Total or Corporate Consolidated

Other

4,877

$ 30,373—$ 8,741

$683

—

—

—

$

44,675$3$

44,679—$—$111,461—$58,237

—

—

—

—

$ 169,698$0$ 169,698—$ 169,698

44,679Amortization ofnegative goodwill

—

—

—

—

—

—

—

—

—

—

—

—

—

Balance of negative
goodwill$1,067,061

—

—

—

—

—

—

—

$1,067,061—$1,067,061—$1,067,061
Millions of yen

2013
Reportable Segments

Depreciation andamortization$   558,689$   29,461$   48,441$   65,573$    421$    706$ 11,291$  3,964 $

718,549$  2,170 $   720,720$   6,115 $   726,836

Capital expenditures$   886,535$  178,588$   47,679$  470,218$    345$    523$ 19,825$  2,861 $ 1,606,579$  8,446 $ 1,615,025$  61,801 $ 1,676,827
Millions of yen

2013
Reportable Segments

HotelBusiness

Real Estate
Services

Subtotal

Other¥  434,743¥310,833¥ 46,113¥ 60,892¥ 7,044¥12,582¥27,841¥26,126¥  926,176¥   980¥   927,157—¥  927,157

8,004

4,517

4,165

–

64

6,986

457

1,083

25,2803,427

28,707¥ (28,707)—

Eliminations
Total or Corporate Consolidated

Revenue, operating
income and assets byreportable segment

Intersegment ortransfers

Building
Business

Amortization of
goodwill¥

Balance of goodwill

Commercial
Property
Development
Architectural
Residential
and International
Investment
Design andBusiness
Investment
Business Management Engineering

Building
Business

Total revenue

Real Estate
Services

Balance of goodwill

Other items

Revenue from:
External customers

Hotel
Business

442,748

315,351

50,27860,892

7,108

19,56828,29927,209951,456

4,408

955,865(28,707)927,157

Segment income (loss)¥  107,667¥  2,317¥ 11,180¥  8,371¥ 2,129¥ 1,234¥   474¥ 1,058¥  134,434¥   (10)¥   134,423¥ (16,074)¥  118,349

Segment assets¥3,030,858¥602,166¥432,556¥383,824¥31,240¥23,108¥24,152¥25,103¥4,553,010¥27,261¥4,580,272¥131,248¥4,711,521

Other items

Commercial
Property
Development
Architectural
Residential
and International
Investment
Design andBusiness
Investment
Business Management Engineering

Hotel
Business

Real Estate
Services

Subtotal

Eliminations
Total or Corporate Consolidated

Other

388

¥ 3,126

—

¥ 746

¥70

—

—

—

¥ 4,331¥0¥ 4,331—¥ 4,331—¥14,597—¥6,530

¥70

—

—

—

¥ 21,198¥0¥ 21,199—¥ 21,199

Amortization ofnegative goodwill

¥

835

—

—

—

—

—

—

—

¥

835

—

¥

835

—

¥

Balance of negative
goodwill¥109,342

—

—

—

—

—

—

—

¥109,342—¥109,342—¥109,342

835

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 income statement and property and equipment on the consolidatedbalance sheet, respectively.

Depreciation andamortization¥   56,479¥  2,664¥  6,248¥  5,987¥    38¥    72¥ 1,088¥   457¥   73,036¥    84¥   73,121¥    242¥   73,364

Major Customer Information

Capital expenditures¥  128,016¥ 32,254¥ 45,910¥  5,196¥    16¥    39¥   793¥   469¥  212,696¥    25¥  212,722¥  1,759¥  214,481

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 income statement. Accordingly major customer information has been omitted.

Impairment losses of the Company and its consolidated subsidiaries on fixed assets by reportable segments for the years ended March 31, 2014 and2013 are summarized as follows:
Millions of yen

2014
Reportable Segments

Building
Business

Impairment loss

¥24,600

Commercial
Property
Development
Architectural
Residential
and International
Investment
Design andBusiness
Investment
Business Management Engineering¥5,507¥12¥2,430——Hotel
Business

Real Estate
Services

Subtotal

Other

—

—

¥32,552—

Eliminations
Total or Corporate Consolidated¥32,552¥92¥32,644

Thousands of U.S. dollars

Impairment loss

$239,028$53,511$125$23,618

—

—

—

—

$316,284—$316,284$902

19

R ental P roperties

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) 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 the Company andsome of its consolidated subsidiaries.
The changes in the carrying value during the year ended March 31, 2014 and the fair values of these rental properties and real estate including spaceused as rental properties as of March 31, 2014 are as follows;$317,187

Millions of yen

Thousands of U.S. dollars

2014

Millions of yen

Carrying Value

2013
Reportable Segments

Building
Business

Impairment loss

¥16

Commercial
Property
Development
Architectural
Residential
and International
Investment
Design andBusiness
Investment
Business Management Engineering¥2,715

—

¥94

—

—

Hotel
Business

Real Estate
Services

Subtotal

Other

—

—

¥2,826—

Eliminations
Total or Corporate Consolidated¥2,826—¥2,826

The following table presents the amortization and balance of goodwill as of and for the years ended March 31, 2014 and 2013 by reportable segment:
Millions of yen

2014
Reportable Segments

Building
Business

Amortization of
goodwill

Hotel
Business

Real Estate
Services

Subtotal

Other

Real estate including spaces used asrental properties

As of April 1,
2013

Net Change

As of March 31, As of March 31,
2014
2014

¥2,965,396¥109,249¥3,074,645

227,564(2,987)

224,577

Carrying Value
As of April 1,
2013¥5,060,986 $28,812,631
334,700

2,211,083

Net Change

Fair Value

As of March 31, As of March 31,
2014
2014

$1,061,498 $29,874,130 $49,173,980(29,023)

2,182,060

3,252,040

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.

Eliminations
Total or Corporate Consolidated

501¥ 3,126

—

¥ 899

¥70

—

—

—

¥ 4,598¥0¥ 4,598—¥ 4,598

Balance of goodwill—¥11,471—¥5,993————¥ 17,465¥0¥ 17,465—¥ 17,465

Amortization ofnegative goodwill

—

—

—

—

—

—

—

—

—

—

—

—

—

Balance of negative
goodwill¥109,821

—

—

—

—

—

—

—

¥109,821—¥109,821—¥109,821

72

¥Commercial
Property
Development
Architectural
Residential
and International
Investment
Design andBusiness
Investment
Business Management Engineering

Rental properties

Fair ValueMITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2014

73

F inancial section

The changes in the carrying value during the year ended March 31, 2013 and the fair values of these rental properties and real estate including spaceused as rental properties as of March 31, 2013 are as follows;
Millions of yen

21

O ther C omprehensive I ncome

The following table presents reclassification and tax effects allocated to each component of other comprehensive income for the years ended March 31,
2014 and 2013:

2013
Carrying Value

Rental properties
Real estate including spaces used asrental properties

Fair Value

As of April 1,
2012

As of March 31, As of March 31,
Net Change
2013
2013

¥2,622,741¥342,654¥2,965,396¥4,920,768

232,419(4,854)

227,564

339,800

Amount arising during the year
Reclassification adjustments for gains and losses included in net income

Lease cost

Lease
income, net Other, net*2

Rental properties¥373,047¥256,935¥116,111

Real estate including
space used as rental
properties

17,074

16,227847

Lease
income*1

Lease cost¥(30,873)¥349,767¥231,696¥118,070(1,474)

17,646

16,431

1,215

Millions of yen

Thousands of U.S. dollars

2013

2014

Lease
income, net Other, net*2

Lease
income*1

Lease cost

Lease
income, net Other, net*2¥(17,189) $3,624,631 $2,496,455 $1,128,176(5,534)

165,900

157,6698,230$(299,977)

	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
0.3% and 2.6%.
3.	The changes in asset retirement obligations during the years ended
March 31, 2014 and 2013 are as follows:
Millions of yen

Thousands of
U.S. dollars

2014

2013

2014

¥ 490

¥401

$ 4,763

Increase due to the acquisitionof property and equipment

819

222

7,962

Adjustments due to the elapseof time

10

10

100

Increase (Decrease) due to thechange of estimate

—

(52)

—

Decrease due to the fulfillmentof asset retirement obligations

(3)

(10)

(34)

Balance at the end of the year

—

(81)

—

¥1,316¥490$12,791(2) Asset retirement obligations not recognized in the consolidatedbalance sheet

As below stated, certain obligations are excluded from recognition ofasset retirement obligations.

74$ 78,147

—

101

—

Amount before tax effects

8,042

34,58978,147

Tax effects(2,678)(11,231)(26,027)

Unrealized holding gain (loss) on securities

5,364

23,35852,119Amount arising during the year

929

(539)

9,034

Reclassification adjustments for gains and losses included in net income

(237)

468

(2,306)

Amount before tax effects

692

(71)

6,728

Tax effects

(266)

6

(2,587)

Deferred gain (loss) on hedging instruments

426

(65)

4,140

(79)

(1,384)(768)

Amount arising during the year

41,806

19,708406,203

Amount before tax effects

41,806

19,708406,203

Tax effects
Foreign currency translation adjustments:(14,324)A sset R etirement O bligations

Other¥ 34,488

Tax effects

(52)

(151)

(509)

41,754

19,556405,693

Amount arising during the year

1,405

679

13,655

Total other comprehensive income¥48,870¥ 42,145$474,840

Foreign currency translation adjustments
Share of other comprehensive income of companies accounted forby the equity method:(1) Asset retirement obligations presented in the consolidatedbalance sheet
1. Outline of asset retirement obligations

Balance at the beginningof the year

¥ 8,042

Revaluation reserve for Land:*1	Lease income excludes that from real estate including space used as rental properties used by the Company and some of its consolidated subsidiaries for leasing service andoperating management.
*2 Other, net includes impairment loss in the amount of ¥32,365 million ($314,474 thousand) in 2014.

20

2014

Deferred gain (loss) on hedging instruments:

The income or loss from rental properties and real estate including space used as rental properties for the years ended March 31, 2014 and 2013 wereas follows:
Lease
income*1

Thousands of U.S. dollars

2013

Unrealized holding gain (loss) on securities:

1. The carrying value represents the acquisition cost less accumulated depreciation and accumulated impairment loss.
2.	The components of net change in carrying value included increases mainly due to the consolidation of Shinjuku 6-chome Tokutei Mokuteki Kaisyain the amount of ¥166,998 million.
3. 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.

2014

Millions of yen

20141)	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 is therefore
difficult to reasonably estimate the timing to fulfill such obligation
based on the physical useful life of the assets caused by aging and it is
impossible to estimate the timing without specific business plans.
Although the Company has been voluntarily conducting asbestos
removal work when that is feasible due to such as termination oftenancy, it is impractical to make a reasonable estimation of progressof such voluntary removal work based on the actual record of thetenancy termination and of the remaining amount of asbestos atdemolition. Moreover, it is difficult to distinguish costs of asbestos
removal from total costs of demolition. Although the Company madethe best estimation taking into account all the evidence available as ofMarch 31, 2014, these obligations are excluded from recognition ofasset retirement obligations since the probability of obligations interms of scope and amount was not reasonably estimated.
2) Obligation of restoration based on some real estate rental agreements
	For some commercial facilities, the Company has an obligation ofrestoration 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 businessstrategies and the current business environment, the Company
intends to continue its operation and not to fulfill the obligation.
Although the Company made the best estimation taking into accountall the evidence available as of March 31, 2014, these obligations are
excluded from recognition of asset retirement obligations since theprobability of obligations in terms of scope and amount was notreasonably estimated.

MITSUBISHI ESTATE CO., LTD.

22

B u siness C ombination

1. ACQUISITION(1) Outline of the acquisition

i. Name and business of the acquired entity
		 Name: MM Development Tokutei Mokuteki Kaisya
		 Business: Holding, developing and disposing of real estateii. Objective of the acquisition		To increase the involvement in operations of “MARK IS
Minatomirai,” a shopping mall owned by MM Development
Tokutei Mokuteki Kaisya, by purchasing all the newly issued
preferred stocks.
iii. Date of the acquisition
		 August 1, 2013
iv. Legal form of the acquisition
		 Purchase of the newly issued preferred stocks
v. Name of the acquired entity after the acquisition
		 MM Development Tokutei Mokuteki Kaisya
vi. Change in the ownership ratio
		 Before the acquisition: 39.5%
		 After the acquisition:
81.0%
vii. Major rationale for determining the acquirer		As a result of the purchase of the newly issued preferredstocks, the Company obtained the substantial control of MM
Development Tokutei Mokuteki Kaisya.

ANNUAL REPORT 2014(2) 	Period for which the operational results of the acquiree were
included in the consolidated financial statements of the acquirer

From August 1, 2013 through January 31, 2014
(3) Consideration transferred for the acquisition

Cash on hand and in banks of ¥25,750 million ($250,194 thousand)(4) Amount of the recognized gain on the negative goodwill and its cause

Amount:¥470 million ($4,572 thousand)Cause:	The consideration transferred was less than the fairvalue of the net assets acquired.
(5) 	Amount of the assets acquired and the liabilities assumed at theacquisition date and their major categories

Current assets¥ 2,853 million ($ 27,725 thousand)Fixed assets		
¥32,100 million ($311,892 thousand)Total assets		
¥34,953 million ($339,618 thousand)Current liabilities ¥22,623 million ($219,815 thousand)Total liabilities¥22,623 million ($219,815 thousand)(6) 	Effect on the consolidated statement of income assuming theacquisition was completed at the beginning of the fiscal year
ended March 31, 2014 and the measurement method

Omitted due to immateriality

75

F inancial section

Independent Auditor’s Report
2. Common control transaction etc.
(1) Outline of the transaction

i. Name and business of the combined entity
		 Name: MM Development Tokutei Mokuteki Kaisya
		 Business: Holding, developing and disposing of real estateii. Date of the transaction
		 August 2, 2013
iii. Legal form of the transaction		Purchase of the existing preferred stocks from minority
stockholders
iv. Name of the combined entity after the transaction
		 MM Development Tokutei Mokuteki Kaisya
v. Other matters with regard to the transaction
		To increase the flexibility and the swiftness of managerial
decision making by purchasing the preferred stocks owned byminority stockholders

23

	The transaction was treated as a transaction under common
control in accordance with the “Accounting Standard for Business
Combinations” (ASBJ Statement No. 21 of December 26, 2008) andthe “Implementation Guidance on Accounting Standard for Business
Combinations and Accounting Standard for Business Divestitures”(ASBJ Guidance No. 10 of December 26, 2008).
(3) Consideration transferred for the acquisition

Cash consideration of ¥6,448 million ($62,657 thousand)(4) 	Amount of goodwill recorded, its cause and method and periodof amortizationi. Amount: ¥22 million ($221 thousand)ii.	Cause: The consideration transferred was greater than the fairvalue of the net assets acquired.
iii.	Method and period of amortization: Expensed in full in the fiscal
year ended March 31, 2014

S ignificant S u bseq u ent E vents

Consolidation of an anonymous partnership, Tokumei Kumiai First M(1) Outline of the business combinationi. Name and business of the acquired entity
		 Name: Tokumei Kumiai First M
		 Business: Holding, developing and disposing of real estateii. Objective of the acquisition
		Managerial decision making on the operational strategy of therental office building owned by Tokumei Kumiai First M isnecessary since the sole lessee will vacate the property.
iii. Date of the acquisition
		 April 7, 2014
iv. Legal form of the acquisition		 —v. Name of the acquired entity after the acquisition
		 Tokumei Kumiai First M
vi. Change in the ownership ratio
		 No change from the existing 51%
vii. Major rationale for determining the acquirer		In the course of starting to undertake managerial decision
making on the operational strategy for the rental office building
owned by Tokumei Kumiai First M, the Company obtained
substantial control of the acquired entity.

76(2) Outline of the accounting treatment(2) Consideration transferred for the acquisition

Cash consideration of ¥1,883 million ($18,300 thousand)(3) Amount of the recognized gain on negative goodwill and its cause

Amount:Approximately ¥12.0 billion ($116 million)
Cause:	The consideration transferred was less than the fairvalue of the net assets acquired(4) 	Amount of the assets acquired and the liabilities assumed at theacquisition date and their major categories (approximate amounts)

Current assets
Fixed assets
Total assets
Current liabilities
Long-term liabilities
Total liabilities¥   6.5 billion ($    63 million)¥118.4 billion ($1,150 million)¥124.9 billion ($1,213 million)¥  0.7 billion ($    6 million)¥ 84.0 billion ($  816 million)¥ 84.7 billion ($  823 million)

MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2014

77

C orporate D ata

Principal Mitsubishi Estate Group Companies
Consolidated Subsidiary

Affiliate Accounted for by the Equity Method

BUILDING BUSINESS

Address

Phone

Business Activities

World Import Mart Building, Sunshine City, 1-1,
Higashi-Ikebukuro 3-chome, Toshima-ku,
Tokyo 170-8630+81-3-3989-3321

Management of Sunshine City and otherbuildings

63.2

Recreational Facilities
Higashinihon Kaihatsu Co., Ltd.

Mitsubishi Estate·Simon Co., Ltd.

Otemachi Financial City South Tower, 9-7,
Otemachi 1-chome, Chiyoda-ku, Tokyo 100-0004+81-3-3275-5252

Management of outlet malls

60.0

MEC Urban Resort Tohoku Co., Ltd.

Yokohama Sky Building Co., Ltd.

19-12, Takashima 2-chome, Nishi-ku, Yokohama,
Kanagawa Prefecture 220-0011+81-45-441-1221

Management of the Sky Building and the
Yokohama Shintoshi Building

54.4

Towa Nasu Resort Co.

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

Marunouchi Nakadori Building, 2-3, Marunouchi
2-chome, Chiyoda-ku, Tokyo 100-0005
Hokkaido Building, 4-1, Kita 2-jou Nishi, Chuo-ku,
Sapporo, Hokkaido 060-0002
7-1, Daiba 1-chome, Minato-ku, Tokyo 135-8707+81-3-3287-4111

100.0

Tenjin MM Building, 7-11, Tenjin 1-chome, Chuo-ku,
Fukuoka, Fukuoka Prefecture 810-0001
Yurakucho Denki Building, 7-1, Yurakucho 1-chome,
Chiyoda-ku, Tokyo 100-0006+81-92-733-2006

Comprehensive building
operation and management
Management and operation of buildings,
residences, and sporting facilities
Operation and management ofcommercial facilities
Operation and management of
the Tenjin MM Building
Operation and management of the
Yurakucho Denki Building

Nihon Building, 6-2, Otemachi 2-chome,
Chiyoda-ku, Tokyo 100-0004
Sanno Grand Building, 14-2, Nagatacho 2-chome,
Chiyoda-ku, Tokyo 100-0014+81-3-3270-5048

Management of the Japan Parking Center

97.0+81-3-3504-0610

Operation and management of building
garages and sale of various gasoline products

54.9

Building Leasing Business
Sunshine City Corporation

Share of
VotingRights (%)

Phone

Business Activities

1442-23, Yosawa Oyamacho, Sunto-gun,Shizuoka Prefecture 410-1326+81-550-78-3211

100.0

1-1, Akedori 1-chome, Izumi-ku, Sendai,
Miyagi Prefecture 981-3206
3376 Osoyama, Takakuotsu, Nasu-machi,
Nasu-gun, Tochigi Prefecture 325-0398+81-22-377-3136

670 Soshiyama, Uchida, Sakura, Chiba Prefecture 285-0077+81-43-498-6630

Management of the Higashi Fuji Country
Club, Fuji International Golf Club, and otherproperties
Operation and management of Izumi Park
Town Golf Club and other properties
Operation of leisure facilities and hotels, realestate sales and management, and engineering
contracting
Management of Asakura Golf ClubMEC Eco LIFE Co., Ltd.

6-1, Otemachi 1-chome, Chiyoda-ku, Tokyo 100-0004+81-3-5222-9671

100.0

100.0

Ryoei Life Service Co., Ltd.

+81-3-3748-2650

100.0

Tsunagu Network Communications, Inc.

Royal Life Okusawa, 33-13, Okusawa 3-chome,
Setagaya-ku, Tokyo 158-0083
Shin-Otemachi Building, 2-1, Otemachi 2-chome,
Chiyoda-ku, Tokyo 100-0004

Research and creation of environmental
design proposals
Management of commercial nursing homes

Mitsubishi Jisho RetailManagement Co., Ltd.
IMS Co., Ltd.

+81-3-4477-2000

Internet connection services for housing
complexes

20.0

Yuden Building Kanri Co., Ltd.

+1-212-282-2000

Real estate operations

100.0+1-212-698-2200

Real estate operations in the United States

100.0

Mitsubishi Estate London Limited

1221 Avenue of the Americas, New York, New York
10020-1095, U.S.A.
1221 Avenue of the Americas, New York, New York
10020-1095, U.S.A.
88 Wood Street, London EC2V 7DA, U.K.

+81-11-242-7411+81-3-5579-6671+81-3-3211-7833+44-20-7776-6900 Real estate operations in the United Kingdom

100.0

Mitsubishi Estate Asia Pte. Ltd.

6 Battery Road, Singapore 049909+65-6576-5790

Real estate operations in Asia

100.0

Mitsubishi Estate (Shanghai) Ltd.

Raffles City, 268 Xizang Middle Road,
Shanghai 200001, P.R.C.

+21-6340-3000

Real estate business in China

100.0

Specialist real estate investment management
services (real estate investment advisory andother services)
Investment corporation asset management

100.0

Construction and civil engineering
design administration
Interior design administration and construction, manufacture, and sale of furniture andhousehold items

100.0

100.0

+81-45-221-1111

Comprehensive management andmanagement support of hotels
Operation of Yokohama Royal Park Hotel+81-22-377-1111

Operation of Sendai Royal Park Hotel

100.0+81-3-5224-6200

Operation of “THE series” brand of hotels

100.0+81-3-3667-1111

Management of Royal Park Hotels

55.7

Corporate brokerage, office leasing brokerageand management, real estate appraisal, andparking business
Purchase, sales, and leasing brokerage ofhomes for individuals, leasing management

100.0

92.0
62.5

Parking BusinessGrand Parking Center Co., Ltd.
Tokyo Garage Co., Ltd.

+81-3-3287-2288

World Import Mart Building, Sunshine City 1,
Higashi-Ikebukuro 3-chome, Toshima-ku,
Tokyo 170-8630
OAP Tower, 8-30, Tenmabashi 1-chome, Kita-ku, Osaka,
Osaka Prefecture 530-6004
1-45, Sakuragicho 1-chome, Naka-ku, Yokohama,
Kanagawa Prefecture 231-0062+81-3-3988-6771

Marunouchi Direct Access Limited

Shin-Tokyo Building, 3-1, Marunouchi 3-chome,
Chiyoda-ku, Tokyo 100-0005+81-3-3214-4881

Marunouchi Hotel Co., Ltd.

6-3, Marunouchi 1-chome, Chiyoda-ku,
Tokyo 100-0005+81-3-3217-1111

O.A.P. D.H.C. Supply Co., Ltd.
Minato Mirai 21 D.H.C. Co., Ltd.

+81-6-6881-5170+81-45-221-0321

Cooling and heating supply business in the
Marunouchi, Otemachi, Yurakucho, andother districts
Cooling and heating supply business in the
Higashi-Ikebukuro district

64.2

Cooling and heating supply business in the
Osaka OAP district
Cooling and heating supply business in the
Yokohama Minato Mirai district

35.0

Dark fiber leasing and data center housingbusinesses in the Marunouchi and Otemachi
districts
Management of the Marunouchi Hotel

51.0

50.7

29.6

Mitsubishi Jisho Investment Advisors, Inc.

Marunouchi 2-chome Building, 5-1, Marunouchi
2-chome, Chiyoda-ku, Tokyo 100-0005+81-3-3218-0031

Japan Real Estate AssetManagement Co., Ltd.

Shin-Tokyo Building, 3-1, Marunouchi 3-chome,
Chiyoda-ku, Tokyo 100-0005+81-3-3211-7921

MEC Design International Corporation

Royal Park Hotels and Resorts Co., Ltd.
Yokohama Royal Park Hotel Co., Ltd.
+81-3-3287-8800

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

Mitsubishi Estate Housing
Components Co., Ltd.
Prime Truss Co., Ltd.

228-4, Shinminato, Mihama-ku, Chiba,
Chiba Prefecture 261-0002
15-12, Kiba 2-chome, Koto-ku, Tokyo 135-0042+81-43-242-9031

Real estate development, sales,
leasing, and management

100.0

Design and construction of single-unit homes
and housing complexes, renovation of homes
and retail shops
Manufacture, processing, and sale ofconstruction materials
Manufacture and sale of housing
construction materials

100.0

Comprehensive managementof Izumi Park Town
Business management and operations related
to the condominium management businessOverall condominium and building management, renovations, and related businesses
Condominium management
and real estate businesses
Property management operations and associatedtraining operations for condominiums and otherproperties
Condominium management business, real estateagency, and leasing

100.0

Tohoku Royal Park Hotel Co., Ltd.

Custom-Built Housing+81-3-3643-3310

Royal Park Hotel Management Co., Ltd.
Royal Park Hotel Co., Ltd.

91.7
18.3

78

+81-3-3287-5555

Otemachi Building, 6-1, Otemachi 1-chome,
Chiyoda-ku, Tokyo 100-0004
Yokohama Landmark Tower, 2-1-3, Minato Mirai 2-chome,
Nishi-ku, Yokohama, Kanagawa Prefecture 220-8173
2-1, Teraoka 6-chome, Izumi-ku, Sendai,
Miyagi Prefecture 981-3204
Otemachi Building, 6-1, Otemachi 1-chome,
Chiyoda-ku, Tokyo 100-0004
1-1, Kakigaracho 2-chome, Nihonbashi,
Chuo-ku, Tokyo 103-8520+81-3-3211-6180+81-3-6704-0100

100.0

7-2, Takamori, Izumi-ku, Sendai,
Miyagi Prefecture 981-3203
Otemachi Building, 6-1, Otemachi 1-chome,
Chiyoda-ku, Tokyo 100-0004
Mitsubishi Jisho Community Headquarters Building,
3-13, Yaesu 2-chome, Chuo-ku, Tokyo 104-0028
Shiba 520 Building, 20-6, Shiba 5-chome,
Minato-ku, Tokyo 108-0014
Kyobashi Park Building, 7-4, Hatchobori 3-chome,
Chuo-ku, Tokyo 104-0032+81-22-378-0022

4F Odori Bus Center Building, 5-1, Minami 1-jouHigashi 1-chome, Chuo-ku, Sapporo,
Hokkaido 060-0051+81-11-212-2114+81-3-5208-5740+81-3-6895-3800

Mitsubishi Real Estate Services Co., Ltd.

Shin-Otemachi Building, 2-1, Otemachi 2-chome,
Chiyoda-ku, Tokyo 100-8113+81-3-3510-8011

Mitsubishi Jisho House Net Co., Ltd.

Shinjuku Front Tower, 21-1, Kita-Shinjuku 2-chome,
Shinjuku-ku, Tokyo 169-0074+81-3-6908-5560+81-3-5418-7233

Otemachi Building, 6-1, Otemachi 1-chome,
Chiyoda-ku, Tokyo 100-0004
Otemachi Building, 6-1, Otemachi 1-chome,
Chiyoda-ku, Tokyo 100-0004
Shin-Tokyo Building, 3-1, Marunouchi 3-chome,
Chiyoda-ku, Tokyo 100-0005
1-1, Heiwajima 6-chome, Ota-ku, Tokyo 143-0006+81-3-3212-8674

Human resource-related services

100.0+81-3-6222-7127+81-3-3214-9300

Development and management of
information systems and software
Management of the Minoria Inage Kaigan
commercial facility
Leasing and operating management oflogistics and office buildings

100.0

71.5*
71.5*

100.0

OTHERS
MEC Human Resources, Inc.

71.5*

MEC Information Development Co., Ltd.
71.5*

Keiyo Tochi Kaihatsu Co., Ltd.
71.5*

100.0

REAL ESTATE SERVICES BUSINESS

Residence Management BusinessHokkaido Benny Estate Co., Ltd.

63.0

HOTEL BUSINESS

Otemachi Building, 6-1, Otemachi 1-chome,
Chiyoda-ku, Tokyo 100-8189

Mitsubishi Jisho Marubeni
Residence Services Co., Ltd.
MT Community Staff Co., Ltd.

Marunouchi 2-chome Building, 5-1, Marunouchi
2-chome, Chiyoda-ku, Tokyo 100-0005
Inui Building Kachidoki, 13-1, Kachidoki 1-chome,
Chuo-ku, Tokyo 104-0054

31.4

Real Estate Sales

Mitsubishi Jisho Community
Holdings Co., Ltd.
Mitsubishi Jisho Community Co., Ltd.

85.0

ARCHITECTURAL DESIGN & ENGINEERING BUSINESS
Mitsubishi Jisho Sekkei Inc.

RESIDENTIAL BUSINESS

Izumi Park Town Service Co., Ltd.

49.0

INVESTMENT MANAGEMENT BUSINESSOthersMitsubishi Jisho Residence Co., Ltd.

Rockefeller Group, Inc. (RGI)(Outside the scope of consolidation)

Kishimoto Building, 2-1, Marunouchi 2-chome,
Chiyoda-ku, Tokyo 100-0005

Ikebukuro District Heating
and Cooling Co., Ltd.

100.0

INTERNATIONAL BUSINESS

Mitsubishi Estate New York Inc.

District Heating and Cooling Business
Marunouchi Heat Supply Co., Ltd.

Sakura Golf Development Co., Ltd.

+81-287-78-2700

100.0

OthersBuilding Management Business
Mitsubishi Jisho Property
Management Co., Ltd.
Hokuryo City Service Co., Ltd.

Share of
VotingRights (%)

Address

Tokyo Ryutsu Center Inc.

+81-3-3212-0555+81-3-3767-2111

55.3
29.3

Note: Percentage of voting rights held is as of March 31, 2014; figures denoted by an asterisk are as of July 1, 2014.
MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2014

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C orporate D ata

Corporate History

Organization

Business Development, Consulting & Solutions Group
Business Development, Consulting & Solutions Department

As of April 1, 2014
History

Major Properties

The Marunouchi site purchased by Mitsubishi Company fromthe Japanese government.

1890

Mitsubishi Goshi Kaisha (limited partnership) established. Achieved further expansionof business.

1893
1894

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, transferred from
Mitsubishi Goshi Kaisha.
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.
Akasaka Park House offered for sale in lots, marking the launch of
the Condominium Business.
Mitsubishi Estate New York Inc. established. Began expansion of business overseas.

1923
1937

Project Consulting & Solutions Department

Office Building Group(Asset Management)
Office Building Planning Department
Office Building Management Department

Building Safety Management Office

Marunouchi Building completed in front of Tokyo Station.

Area Brand Management Department

Tokyo Client Business Development Office

Museum Management Office(Development)

1952
1953

Office Building Development Department 1

Shin-Marunouchi Building completed.

Marunouchi Development Department
Tokiwabashi Development Office

1959
Strategic Planning Committee

1962
1969

Hokkaido Building completed.

1972

The first phase of the Izumi Park Town Project launched.

MEC UK Limited established.

Strategic Investment Committee

Yokohama Office established (reorganized as Yokohama Branch in April 2000).
Hiroshima Branch (renamed Chugoku Branch in April 2000) andKyushu Branch established.

1989

Tenjin MM Building (IMS) opened in Fukuoka City.
Royal Park Hotel in Hakozaki, Tokyo, opened.
Hiroshima Park Building completed.

Participation in the City of London’s Paternoster Square Project announced.

1990

Capital investment in Rockefeller Group, Inc., initiated.
Reconstruction of Marunouchi Building announced.

Mitsubishi Jisho Investment Advisors, Inc., established.
Properties and equipment revaluated in accordance with the Law Concerning
Revaluation of Land and other relevant laws and regulations.
Head Office relocated to Otemachi Building.

1993
1995
1996
1998
2000
2001
2002

Yokohama Landmark Tower completed. Yokohama Royal Park Hotel opened.

2003

Mitsubishi Trust and Banking Building completed (renamed Mitsubishi UFJ
Trust and Banking Building in October 2005).

Retail & Logistics Property Group
Retail & Logistics Property Planning Department

Retail Property Development Department
Retail Property Leasing Department
Logistics Facilities Development Department

Residential Business Group

Residential Land & Recreational Facilities Management OfficeOsaka Amenity Park (OAP) completed.

Apartment Development Department

GOTEMBA PREMIUM OUTLETS opened.
Marunouchi Building opened.

CSR Committee

Compliance Subcommittee

Tokyo Building opened.

Corporate Group
Corporate Planning Department

Statutory Auditors

Mitsubishi Jisho Residence Co., Ltd., established.

2010
2011

Office of Statutory Auditors

Business Creation OfficeFinance & Accounting Department

Marunouchi Park Building and Mitsubishi Ichigokan completed.
Mitsubishi Ichigokan Museum opened.
Risk Management Committee

Keiji Kimura and Hirotaka Sugiyama appointed chairman and president, respectively.

2012

Marunouchi Eiraku Building completed.

Risk Management Subcommittee

Otemachi Financial City opened.
Mitsubishi Estate (Shanghai) Ltd. established.

2013

Corporate Communications Department

Investor Relations Office

Human Resources Development

Human Resource Compliance Office

General Affairs Department

Secretary Office

Legal & Compliance Department
CSR & Environmental Sustainability Department

Tohoku Branch
Yokohama BranchGrand Front Osaka opened.

Minato Mirai 21 Office

Nagoya Branch

Construction commenced on the Dai Nagoya Building.

Osaka Branch

MARK IS minatomirai opened.

80

Structured Finance Office

Sapporo Branch

MARK IS Shizuoka opened.
Shisui Premium Outlets opened.

Integrated Mitsubishi Estate Building Management and Mitsubishi Estate
Property Management.

Corporate Planning Department Affiliated Group Office
Research & Strategy Office

2008
2009

Investment Management Group

Board of Statutory Auditors

Shin-Marunouchi Building opened.

Shanghai Representative OfficeAmericas & Europe Business Department

Investment Management Business Department

Mitsubishi Estate Asia Pte. Ltd. commenced operations.
Chelsea Japan Co., Ltd., becomes a Mitsubishi Estate consolidated subsidiary(renamed Mitsubishi Estate·Simon Co., Ltd., in February 2013).

International Business GroupInternational Business Planning Department

Asia Business Department
CSR & Environmental Sustainability
Subcommittee

Marunouchi OAZO opened.

The Peninsula Tokyo opened.
Sunshine City Corporation becomes a Mitsubishi Estate consolidated subsidiary.

Retail Property Improvements
Management Office

Retail Property Management Department

Paternoster Square completed in the City of London.

2004
2005
2007

Relocation Management Office
Master Lease Planning and Management Office

Residential Business Planning Department

Internal Audit Office

Began first stage of Marunouchi redevelopment.

Office Leasing and Tenant Relations
Department

Tenant Improvements Management Office

President & Chief Executive Officer

1983
1984
1986

(Leasing)

Executive Committee

Chairman of the Board

Nagoya Dai-Ichi Hotel opened (Hotel Business launched).

Urban Planning Office
Value Creation Office

Board of Directors

1973

Urban Development Promotion Department

Urban Coordination Office

Meeting of Shareholders

Branches established in Sapporo, Sendai, Nagoya, and Osaka. Strengthened businessin major Japanese cities.

Toyosu Development Office

Office Building Development Department 2

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

Mitsubishi Estate Home Co., Ltd., established.

Group Companies Management OfficeCompleted Mitsubishi Ichigokan, the first Western-style office architecture in
Marunouchi.

GRAND FRONT OSAKA Office

Chugoku Branch

2014

Kyushu Branch

MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2014

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C orporate D ata

Corporate Information

Three Principles

As of March 31, 2014


Stock Information
Stock Details

Number of authorized shares: 1,980,000,000 shares
Number of shares issued and outstanding: 1,390,397,097(No change from the end of the previous fiscal year)
Number of shareholders: 	64,417(Decrease of 3,221 shareholders compared withthe end of the previous fiscal year)

Shareholder Composition (Shareholding Percentage)
Individuals and other

7.40%

Government and local public authorities

0.00%


Company Name
Mitsubishi Estate Co., Ltd.

Date of Establishment“Shoki Hoko”

May 7, 1937

Paid-in Capital

Corporate Responsibility to Society

Integrity and Fairness

Strive to enrich society, both materiallyand spiritually, while contributing towards
the preservation of the global environment.

Maintain principles of transparency andopenness, conducting business withintegrity and fairness.

Development of real estate for investment purposes andasset management

The Mission of the Mitsubishi Estate Group

Development and sale of land for housing, research, andother facility use

We contribute to society through urban development

46.26%

1.88%

The Mitsubishi Estate Group Code of Corporate Conduct

URL

11.30%

Head Office
Otemachi Building, 6-1, Otemachi 1-chome, Chiyoda-ku,
Tokyo 100-8133
Phone: +81-3-3287-5100
Number of
Shares Held(Thousands of shares)

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

http://www.mec.co.jp/index_e.html
Operating and other companies

Major Shareholders

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.


Number of Employees (Excluding temporary staff)
Non-consolidated: 690
Consolidated: 7,952
Financial instruments
business operators

Foreign individuals
and companies

Percentage
Shareholding(%)

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

84,680

6.09

Meiji Yasuda Life Insurance Company

46,882

3.37

Japan Trustee Service Bank, Ltd.
(Trust Account)

46,568

3.34

State Street Bank and Trust Company

43,076

3.09

CBLDN- STICHTING PGGM DEPOSITARY- LISTED REAL ESTATE PF FUND

30,2092.17

Tokio Marine & Nichido Fire InsuranceCo., Ltd.

26,865

1.93

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

25,963

1.86

The Bank of New York, Treaty JASDAQ
Account

25,131

1.80

Asahi Glass Co., Ltd.

22,714

1.63

State Street Bank and Trust Company 505223

19,5191.40

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

Business Activities
Development, leasing, and management of office buildings,
commercial, and other facilities

Sale and brokerage of real estate and related consulting services

33.16%“Ritsugyo Boeki”¥141,373 million

Management of leisure and other facilities
Financial institutions“Shoji Komei”

Sapporo 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

1


We will act with integrity

We will base our conduct on laws andethics and always reflect with humility
upon our behavior, valuing our communication with society and placing priority in
our corporate activities on earning trust
through fairness and transparency.

Yokohama Branch
Yokohama Landmark Tower, 2-1, Minato Mirai 2-chome, Nishi-ku,
Yokohama, Kanagawa Prefecture 220-8115
Phone: +81-45-224-2211

2


We will strive to earn
the trust of our clients

We will approach all objectives from ourclients’ point of view, providing safe andreliable products and services, and makeinformation available as appropriate.

3

We will strive to createa vibrant workplace

While aiming at personal growth, we will
respect the human rights and diversity ofopinions of others and increase our creativity
and professionalism, while displaying ourcollective strengths as a team.

For details on the Mitsubishi Estate Group Guidelines for Conduct:

Nagoya Branch
Nagoya Hirokoji Building, 3-1, Sakae 2-chome, Naka-ku,
Nagoya, Aichi Prefecture 460-0008
Phone: +81-52-218-7755

http://www.mec.co.jp/e/company/charter/index.html

Osaka Branch
OAP Tower, 8-30, Tenmabashi 1-chome, Kita-ku,
Osaka, Osaka Prefecture 530-6033
Phone: +81-6-6881-5160(Formulated December 1, 1997; revised on August 1, 2002, and January 1, 2006)

Chugoku 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

http://www.mec.co.jp/e/investor/index.html
In addition to financial information and quarterly earnings highlights,
a range of investor relations (IR) materials are available for downloading on the
Mitsubishi Estate Group’s IR website.

82

MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2014

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