Integrated Report2021

Integrity and Innovation

Contents

03
05
09

Business Structure
A Message from the Management
Sumitomo Realty’s Corporate Value Creation
Our Value Creation Model
Examples of Our Value Creation Model

24

History of Value Creation and Our Strengths
Investment Strategies for GrowthInheriting Sumitomo’s Business Philosophy witha history of 430 years“Under no circumstances, shall it pursue easy gains or act imprudently,” “Placing prime
importance on integrity and sound management in the conduct of its business” and“Benefit self and benefit others, private and public interests are one and the same.”
The Sumitomo Realty Group is a comprehensive real estate enterprise of the Sumitomo Group with a historyof over 400 years. Inheriting Sumitomo’s business philosophy, with its origins in the Monjuin Shiigaki(Founder’s Precepts), a document written by the founder of the House of Sumitomo, Masatomo (Monjuin),
and given to its family members to offer guidance on how a merchant should conduct business, we havedeveloped our business by placing top priority on integrity and pursuing creation of new value with
innovative and challenging spirit. Our corporate slogan “Integrity and Innovation” and our fundamental
mission “Create even better social assets for the next generation” reflect this business philosophy.

101

The Earning Base that Underpins Sustainable Growth, the Core of Our Corporate Value
Investment Strategies for Sustainable Growth24

Overview of Consolidated Results, Outlook for the Next Fiscal Year (Fiscal 2021)
and Progress of the Eighth Management Plan

Overview of Each Segment

25
27
33
35
37
38

Overview of the Fiscal 2020
Leasing
Sales
Construction
Brokerage
Group Companies

ESG Management
Promotion of ESG and Contributions to SDGs
ESG Topics
Environment

67[3] Building Renovation

Financial Results for the Fiscal 2020 and Progress of
the Management Plan

Business Segments

39[1] Urban Redevelopment[2] Housing RemodelingBusiness Review

Monjuin Shiigaki (Founder’s Precepts) owned by
Sumitomo Historical Archives

Business
Philosophy

09
11
15
17
19
21

Society
Governance

39
41
43
47
57

Financial Section
Management’s Discussion and Analysis

67
69

Consolidated Financial Statements

71

Notes to Consolidated Financial Statements
Independent Auditor’s Report76
96

Eleven-year Financial Summary

Balance Sheets, Statements of Income, Statements of Comprehensive Income,Statements of Changes in Net Assets, Statements of Cash Flows

Company Information
Corporate Data / Investor Information
History101
102

SloganFundamental Mission

Integrity and Innovation

Create even better social assets
for the next generation

Editorial Policy
This report was compiled based on the disclosure framework of the International Integrated Reporting Council (IIRC). This report has been compiled to deepen theunderstanding among our stakeholders on the ESG management of the Sumitomo Realty Group, which has developed its business inheriting the Sumitomo’s businessphilosophy with a history of 430 years. For details of the initiatives for ESG and the SDGs, please see the Sustainability/ESG page on the Company’s website.
https://www.sumitomo-rd.co.jp/english/sustainability/

Through our businesses closely associated with people’s
daily lives, such as office building leasing, condominium
sales, custom home construction, remodeling, etc. it is our
mission to create assets that live on to the next generation
and we strive for sustainable urban development that is“Disaster Resistant,” “Environmentally Friendly,”“Together with the Community” and “People Friendly.”

Caution Concerning Forward-looking Statements
Forward-looking statements including business forecasts contained in this integrated report represent management’s assumptions and beliefs based on the information
currently available to the Company and contain risks and uncertainties. Furthermore, they do not represent the Company’s guarantee of future performance. Therefore,
stakeholders are warned not to solely rely on these statements in making investment decisions. Important factors that could affect actual results include, but are notlimited to, the environment surrounding the Group’s business areas, such as macroeconomic conditions, the real estate market, and interest rate trends.

Placing top priority on “integrity,” we go beyond simple
development with innovative and challenging spirit,relentlessly pursuing value creation without pursuing easy
gains. This corporate stance as a developer is expressed inour slogan, “Integrity and Innovation.”

Period Covered: April 2020 to March 2021 (Some descriptions on activities and outlook in this report refer to those prior to or after this period.)
Definition of Term: “FY2020,” “FY ’20,” “fiscal 2020” or “fiscal year under review” refer to the fiscal year ended March 31, 2021, and other fiscal years are referred
to in a corresponding manner unless otherwise indicated.
Scope of Report: Sumitomo Realty & Development Co., Ltd. and its Group companies
Published: November 2021 (Japanese edition)

1

Integrated Report 2021

Cover Photo: Sumitomo Fudosan Kojimachi Garden Tower (Completion: May 2020)

Sumitomo Realty & Development Co., Ltd.

2

Business Structure

Sumitomo Realty Group
Property
management
service

Condominium
management
service (after sale)

Sumitomo Fudosan
Tatemono Service Co., Ltd.

Four Highly-profitable Mainstay Segments
The Sumitomo Realty Group comprises the following four mainstay segments: Leasing, the core earnings driver accounting for nearly 70% of
the Company’s operating income and owning more than 230 buildings for lease in central Tokyo: Sales, generating stable profits every year in
the condominium business, and one of the industry’s top suppliers of condominium units; Construction, providing Shinchiku Sokkurisan, theindustry’s No. 1 full-remodeling business, and custom home construction; and Brokerage, boasting a leading network of brokerage offices
nationwide primarily for existing homes. Each business has been steadily increasing their performance with a high level of profitability, andcontributing to improving the corporate value of the Group.

Results for the fiscal 2020

Breakdown of revenue from operations

(Billions of yen)

• Condominium Sales

Revenue fromoperations

917.4

Operating income

219.2

Ordinary profit

209.9

Profit

141.3



 
 
 



■ Leasing■ Sales■ Construction■ Brokerage■ Others

 

Billions of yen
Billions of yen

Billions of yen
Billions of yen 
(Billions of yen)

FY2020YoY

FY2021 (F)YoY

Leasing

398.2

+2.6

400.0

+1.7

Sales

263.3

(61.5)

245.0

Construction

188.7(30.2)

Brokerage

65.7

(5.4)

Operating income(Billions of yen)

FY2020YoY

FY2021 (F)YoY

Leasing

155.2(14.1)

160.0

+4.7

(18.3)

Sales

53.9

+7.4

50.0

(3.9)

200.0

+11.2

Construction

15.5

(5.0)

18.0

+2.4

75.0

+9.2

Brokerage

11.4

(3.1)

16.0

+4.5

ESG Management

Operating income by segment■ Leasing ■ Sales ■ Construction ■ Brokerage• Shinchiku Sokkurisan Remodeling• Custom Homes


Sumitomo Fudosan Syscon Co., Ltd.




Brokerage

Sumitomo Fudosan Villa Fontaine Co., Ltd.
Sumitomo Fudosan Bellesalle Co., Ltd.
Sumitomo Fudosan Retail Management Co., Ltd.

• Real Estate BrokerageS umitomo Real Estate
Sales Co., Ltd.



Financial Section/
Company Information• Office Building • Rental Apartment • Hotels• Multipurpose Halls • Retail Facilities



Others• Fitness

Sumitomo Fudosan Esforta Co., Ltd.

• General insurance and life insurance agency• Restaurant / Catering

Izumi Insurance Service Co., Ltd.

Izumi Restaurant Co., Ltd.

• Financing

Sumitomo Fudosan Finance Co., Ltd.

  (Years ended/ending March 31)

3

Integrated Report 2021

Business Review

Leasing

Revenue
Revenue fromOperating Operating 
 fromOperationsOperations   Income Income

Revenue from operations

Construction

Breakdown of operating income

Sumitomo Realty’s
Corporate Value CreationSales

A Message from the Management

Four Mainstay Businesses Centered on Office Building Leasing

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Sumitomo Realty & Development Co., Ltd.

4

A Message from the Management

Striving for Sustainable Growth
Together with the City,
Innovation

Our Value
Creation Model
P.09-20To secure a stable supply of land in central Tokyo, where large parcels of land are rare, we, as a “Land Maker,” have been
engaged in urban development including redevelopment together with numerous landowners.
Redevelopment business can, in addition to creating an earnings base, contribute to solving various issues of thecommunity. For example, densely built-up areas with low-rise wooden houses in urban cities pose high disaster risks, andredevelopment of such areas will improve disaster preparedness, revitalize the community and realize effective use ofland, enhancing social value of the community. Going forward, we will continue to engage in urban development
focusing on redevelopment, as a developer that generates both economic and social value.

Sumitomo Realty’s
Corporate Value Creation

Creating New Value throughWe have established a sustainable and stable earnings base by steadily developing the real estate leasing businessprimarily involving office buildings in central Tokyo. We have developed numerous office buildings through urban
redevelopment over roughly half a century since the early 1970s. By keeping the ownership of these buildings, rather
than selling them off, we have accumulated stable revenues and the leasing business became a solid business platformthat now accounts for nearly 70% of the overall operating income.

Our strength is the capability of “Land Innovation,” or the capability of development, which has been cultivated over theyears. By taking advantage of this strength and upgrading urban functions, we will continuously strive to create asustainable society as well as to achieve sustainable growth and maximize corporate value through contribution to thecommunity.

President■ Our Materiality

Disasterprevention

Disaster ResistantCorporate
Philosophy▶ P.01

Such corporate stance is expressed in our corporate slogan “Integrity and Innovation,” and we established in our code of
conduct to place top priority on relationships of trust with stakeholders, to always set higher goals and to be a pioneer,
seeking new approaches and challenges, and to create new values. Under this slogan, we have set forth ourfundamental mission as to “Create even better social assets for the next generation,” and our basic management policy
aims to contribute to addressing social issues through each business at the same time maximizing corporate value.
The real estate business has great social significance: the mission of enriching people’s daily lives by creating place andservices for people to work, live and interact. As such, we have identified “Disaster Resistant,” “Environmentally
Friendly,” “Together with the Community” and “People Friendly” as our four material issues and have been practicing“Sustainability Management” offering sustainable social assets to be passed on to future generations.

5Integrated Report 2021

Even bettersocial assets

PeopleTogether with
the Community

Community

Investment strategies for sustainable growth
Going forward, we will continue to invest in the development of office buildings in central Tokyo, which is our growth
driver. We have set our target for the Eighth Management Plan to “steadily advance development plans for total of over
800 thousand tsubo (one tsubo is roughly 3.3 m²) of gross floor area,” and we aim to further expand our earnings baseby achieving the target. These developments are concrete and highly feasible plans, for which land has already beenacquired or where redevelopment projects are already underway. Roughly 190,000 tsubo of these development plans
have been or will been completed and brought to market under the Eighth Management Plan, which will end on March
31, 2022.

Investment
Strategies for
Growth
P.21-23

Sumitomo Realty & Development Co., Ltd.

Financial Section/
Company Information

The Company is a comprehensive real estate enterprise of the Sumitomo Group, which succeeded the Sumitomo Honsha
Ltd. and inherits “Sumitomo’s Business Philosophy” which has a history of 430 years. The Sumitomo Group is one of thelongest-lasting corporate groups in the world, and its business philosophy — “Placing prime importance on integrity,”“Under no circumstances, shall it pursue easy gains,” “Benefit self and benefit others, private and public interests are
one and the same,” etc. — has been handed down as a guiding principle throughout its history. In light of the wisdomof its predecessors, the Sumitomo Realty Group has developed its business based on a philosophy of placing top priority
on integrity, not pursuing easy gains, and creating not only economic value through the pursuit of self-interest, but alsosustainable social value that will be needed for future generations.

Environmentally
FriendlyEnvironment

People Friendly

ESG Management

Management philosophy that inherits “Sumitomo’s Business
Philosophy” with a history of 430 years

Business Review

Kojun Nishima

A Message from the Management

Creating new value and achieving sustainable growth together
with the city

6

A Message from the Management

Business Review
P.24-26

In the fiscal year ended March 31, 2021, the commercial facilities such as hotels and retail facilities were severely
impacted by COVID-19. Nevertheless, as the mainstay office building leasing and condominium sales remained
favorable, and the housing-related business including custom home construction, remodeling and brokerage had
recovered earlier than we had expected, the impact of COVID-19 was limited to around ¥20.0 billion. As a result,despite decreases in revenue from operations, operating income and ordinary profit, we managed to maintainordinary profit at the ¥200.0 billion level, and profit achieved a record high for the eighth consecutive year.

Comparison between the time of the global financial
crisis and the fiscal year under review
FY2009FY2020Comparison

719.6

917.4

1.3 Times

Ordinary profit

100.5

209.9

2.1 Times

Gross floor area
(owned)Shareholders’equity834

1,444

1.7 Times

488.9

1,503.0

3.1 Times

Equity ratio/ROE 15%／11%

26%／10%Interest-bearing
debt

2,892.2

3,601.3

R&I/JCR ratings

BBB+/A

A+/AA-*1 tsubo ≈3.3 m

2Return to record high in 2 years(Billions of yen)

COVID-19
2 yearsProfit increased for 21 years out of 24 years

The Global Financial Crisis
6 years

1.2 Times

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‘22

Progress of
the EighthManagement Plan
P.24

The fiscal year ending March 31, 2022 is the final year of the Eighth Management Plan. We will strive to steadily achieve
the record high ordinary profit of ¥221.0 billion, so that in the three-year cumulative period, we will achieve record highprofits for the third consecutive management plan period since the Sixth Management Plan.

The Company’s basic policy of profit distribution is to ensure prioritization of investment in buildings for leasing in orderto enhance the long-term revenue base and to keep a “Sustainable Dividend Increase” in line with profit growth. Even
when our profit dipped amid the global financial crisis, we maintained our dividend level, and ever since we began topost record profits, we have managed to achieve “Sustainable Dividend Increase” along with the growth in profits. In
the fiscal year ended March 31, 2020, we raised dividend increase from ¥3 per year to ¥5 per year. In the fiscal year
under review, while the effects of COVID-19 remain, our mainstay office building leasing secured increases in bothrevenue and profits and we were able to post a record high profit for the eighth consecutive year. Accordingly, we
maintained a dividend increase of ¥5 per year, the same rate of increase as the previous year.

Integrated Report 2021



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The Global
Financial CrisisProfit reachingrecord highs

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*Profit refers to profit attributable to owners of parent.

As mentioned above, we have carried on Sumitomo’s business philosophy and practiced “Sustainability Management”
for many years.
In redevelopment of our mainstay office buildings and condominiums, we have been contributing to solving social
issues through initiatives such as significant improvement of regional disaster preparedness. In the Shinchiku Sokkurisan
remodeling business, we have actively worked on extending the useful lives of houses as well as enhancing their safety
and security since its launch in 1996, through earthquake-reinforcement included as a standard specification. In
addition, it also contributes to significantly reducing the amount of waste compared to rebuilding.
In 2020, a large-scale renovation project of the Shinjuku Sumitomo Building, one of the early skyscrapers in Japannicknamed as “Sankaku Biru” (triangular building), was completed, creating the “Sankaku Hiroba” (triangular plaza), an
all-weather atrium for various events. The facility not only increases liveliness in the Shinjuku district, a center ofbusiness, commerce and culture, but also contributes to the region as a disaster-prevention base, providing shelter for
stranded commuters in the event of disaster.

ESG Management
P.39-66

For environment, we have achieved a high degree of energy saving over the years. As a real estate developer, we willcontinue to promote energy saving even further by constructing new buildings featuring high environmental
performance, improving environmental performance of existing buildings through renovation as well as raisingawareness during the operations of these properties. By doing so, we will contribute to Japan’s target of achieving net
zero greenhouse gas emissions by 2050.
In fiscal 2020, we have achieved a reductionof per-unit energy consumption by 37% incomparison with fiscal 2009, gaining S class(excellent business operator) certification, whichis the highest ranking given for efforts taken toconserve energy under the Act on Rationalizing
Energy Use, over the last four consecutive years.

Financial Section/
Company Information

Shareholder return with “Sustainable Dividend Increase”

7“Sustainable Dividend Increase” in line with profit growth(Billions of yen)

Our “Sustainability Management”

Historical ordinary profitCash dividend per share (right scale)

ESG Management

Revenue fromoperations

ProfitBusiness Review(Billions of yen/Thousands of tsubo*)

Cash dividend per share and profit*

Sumitomo Realty’s
Corporate Value Creation

As for the outlook for the fiscal year ending March 31, 2022, while the impact of COVID-19 will remain in thecommercial facility business, we expect the profit to increase from full year contribution of new office buildings in theleasing business and strong condominium sales from the sales business. We also expect the housing-related businessincluding custom homes, remodeling and brokerage to turn to profit and contribute to the Group’s overall performance.
We aim for a return to record levels in ordinary profit in two years with the Group’s comprehensive capabilities.
After the global financial crisis, it took us six years to return to record high profits. However, in the past ten years,
ordinary profit has doubled, shareholders’ equity tripled, and our profitability and financial base have improved
markedly. As a result, we can expect to return to record high profits in just two years from the impact of COVID-19
pandemic. This is driven by steady accumulation of stable profit attributable to the 70% increase in gross floor area for
office leasing.

In the next fiscal year, we expect to posta record-high profit for the ninth
consecutive year and increase the annual
dividend to ¥45 per share (including aninterim dividend of ¥22) continuing ourdividend increase of ¥5 per year for the third
consecutive year amid the COVID-19
pandemic.
Going forward, we will further strengthen
our earnings base by advancing ourdevelopment plan of over 800,000 tsubo ingross floor area mainly through theredevelopment in central Tokyo, andcontinue to meet the expectations of ourshareholders with “Sustainable Growth”
and “Sustainable Dividend Increase.”

A Message from the Management

Ordinary profit to return to record levels in two years

We will continue to address various social issues
including environmental issues through ourbusiness activities as well as contributing to theachievement of the Sustainable Development
Goals (SDGs) stipulated by the United Nations.

Sumitomo Realty & Development Co., Ltd.

8

Our Value Creation Model
Our Materiality and Initiatives[2] Housing Remodeling.......................................................P.15[3] Building Renovation........................................................P.17

Together with theCommunity

People Friendly

Create bases for a safe andsecure living environment
by developing disaster resistantbuildings and cities

Create buildings and cities
that are comfortable andhave lower environmental
impactCreate and operate buildings
and cities aiming forsustainable development
together with the community

Create buildings and cities thatare comfortable for everyone
Develop human resources toincrease corporate value•Eliminating densely built-up area ofwooden houses•Widening narrow streets andseparating pedestrians and vehicles•Adoption of seismic isolation anddamping systems•Installation of emergency power
generators•Providing a disaster-prevention base(e.g. shelter for stranded commuters in
the event of disaster)•Adoption of highly-efficient energysaving and water-saving equipment•Promoting and preserving greenery incities to ensure biodiversity•Reducing waste emission•Requesting for supplier cooperation•Urban development that coexists withthe community•Attracting a new population(community revitalization)•Creating liveliness through town
management•Support for the formation ofcommunities including mutual
assistance•Urban development based on universal
design•Protection of human rights•Promoting barrier-free housing•Promoting open and vigorous
workplace•Fostering diverse human resources

Corporate Value of Sumitomo Realty

Economic
value

Socialvalue

Creation ofhigh value-added assets

Creation of “New Value”
Addressing social issues
Creation of sustainable assets

ESG Management

Expansion of a profitable,
stable, and sustainableearnings baseBusiness Review[1] Urban Redevelopment..................................................P.11

Environmentally
Friendly

Disasterprevention
Environment

Even bettersocial assets

PeopleAchieve sustainable growth
together with the city

Financial Section/
Company Information

Community

Sumitomo Realty’s
Corporate Value Creation

Examples of Our Value Creation Model

Disaster Resistant

A Message from the Management

The Sumitomo Realty Group has set forth its
fundamental mission as to “Create even bettersocial assets for the next generation,” based on
Sumitomo’s business philosophy with a historyof 430 years. With our capabilities of “LandInnovation” as the driving force, we have been
contributing to solving social issues througheach business, while at the same time
expanding our businesses to maximize
corporate value.
As such, we have identified the following
material issues that need to be addressed in our
ESG management: “Disaster Resistant,”“Environmentally Friendly,” “Together with
Community” and “People Friendly.” We willaddress these material issues through ourbusiness activities, continue to provide “New
Value” to people’s living and aim to realize
sustainable growth and development together
with the city.

Creating new value
Aiming to maximize corporate value
9

Integrated Report 2021

Sumitomo Realty & Development Co., Ltd.

10

Examples of Our Value Creation Model
Example [1] Urban Redevelopment

Sustainable urban development to improve disaster
preparedness and revitalize the community
Major issues with dense congregations of wooden houses in urban areas• Low earthquake resistance• High disaster risk with narrow streets• Low land utilization

Through
redevelopment:• Diminished community vitality, etc.

Sumitomo Realty’s
Corporate Value Creation

Example Osaki Garden City■ Key points of the Osaki Garden City redevelopment project▪️ Formulation of a complex urban area and the development of urban functions around the station▪ Development of a safe and secure community with enhanced disaster-prevention functions, throughthe elimination of a densely built-up area of wooden houses and widening of narrow streets▪ Realizing universal design by eliminating the large difference in elevation of the site
▪ Spacious green open public spaces covering some 8,000m2 to facilitate community building
and serve as a disaster-prevention base
▪ Widening and improving a transportation route connecting Shinagawa City Hall, which willserve as the disaster control center (roads to be cleared in an emergency)▪ Promoting energy-saving efforts through the adoption of state-of-the-art highly efficient facilities
Block B

Office, retail, etc.

Residence (423 units), office, etc.

Site area (30,080m2)

19,927m2

10,153m2

Gross floor area (219,565m2)

178,141m2

41,424m2

Floor area ratio

Approx. 780％

Approx. 250％

No. of floors

24 above ground, 2 below ground,2 rooftop floors,

22 above ground, 2 below ground,1 rooftop floor

1

C
C

B
Land

A

D

3

D
C

B
Land

A

B

C

D X

Before redevelopment

After redevelopment

ABCD: Rights holders

X: Developer

3 Creating open space for interaction among the community and as adisaster-prevention base
The site used to be an industrial area with little greenery and lacked places for people togather due to a densely built-up area of housing. Through the redevelopment, spacious
green open public spaces covering some 8,000m2 were created, encouraging interaction
among the people and bringing liveliness in the community, as well as serving as adisaster-prevention base in the event of an emergency.

Financial Section/
Company Information

DB

2 Promotion of universal design of the area by eliminating a large

difference in elevation
The site used to have a difference in elevation as large as eight meters and experienced
land collapse. The project created a landscape design with gentle undulations andeliminated the large difference in elevation. It also built stairs and installed elevatorsconnecting the area with the surrounding downtown area and the station to allow
everyone to move easily.

XA

overcrowded with wooden houses and narrow streets
The site used to be a densely built-up area with wooden houses exposed to high risk offire and the streets were narrow, making it difficult for emergency vehicles to enter thearea. The redevelopment realized a safe and secure community through improvement ofroads around the site to ensure safety for the pedestrians and to allow the smooth flowof vehicles as well as fireproofing the buildings.

ESG Management2

Building

Building■ City development to tackle the challenges facing
the community
1 Enhancement of disaster preparedness by eliminating the area

■ Redevelopment under the Urban Renewal Act
The Urban Renewal Act of Japan was enacted in 1969 toensure the effective utilization of land through the
improvement of the densely populated urban areas in an
integrated and comprehensive manner. Through thecommunal use of small parcels of land and thedevelopment of public facilities such as parks and roads,
it enables buildings to be rebuilt into high-rise structures,significantly increasing the floor area. The landowners
acquire floor space in the redeveloped building
commensurate with the value of the land or building prior
to redevelopment and the developer (the Company)
covers the project funds including the construction costs
and acquires the remaining floor space.

Business Review

Unlike other major developers in Japan, we started with a mere three buildings in 1949 following the breakup of the conglomerates and it was only
from the 1970s that we made our full entry into the business of developing office buildings in central Tokyo. Therefore, instead of reconstructing
buildings we owned or purchasing sites through competitive bidding, we focused on a redevelopment method by integrating multiple small parcels ofland into a larger scale through persistent efforts, to maximize the site value. In this way, we continued developing superior assets, expanding ourbusiness platform and increasing our corporate value. In particular, through redevelopment pursuant to the Urban Renewal Act that requires theformation of a consensus among multiple landowners, and consultations with the authorities, we have contributed to improvement of the city
infrastructure including disaster-prevention functions by eliminating densely built-up areas of wooden houses and widening narrow streets, as well as to
the revitalization of the community.

Block A
Principal purpose

A Message from the Management

Improve disaster preparedness of the community
Improve infrastructure (Installing wider roads, eliminating large differences inelevation etc.)
Improve BCP compliance (seismic isolation and damping systems, emergency
power generation equipment etc.)
Make eco-friendly with high-performance, energy-saving equipment
Install highly eco-friendly equipment, greatly reducing CO2 emissions andwater usage per unit
Create new liveliness and strengthen community ties
Multi-purpose uses, fostering diversity and interaction
Provide open spaces for community building and as a disaster-prevention base* There are two types of urban-redevelopment projects: The Type 1 Urban-Redevelopment Project based on the right conversion method without land acquisition and the Type 2 Urban-Redevelopment Project that involves land acquisition.
Type 2 Urban-Redevelopment Projects are permitted in urgent situations such as for areas where disasters are imminent and are executed by local governments, rather than individuals or associations, over a relatively short period of time.

11

Integrated Report 2021

Sumitomo Realty & Development Co., Ltd.

12

Examples of Our Value Creation Model
Example [1] Urban Redevelopment

Our redevelopment projects emphasize the connections with the community even after the completion. We also focus on area management tofurther improve the value of the area and give it a lively atmosphere through various initiatives such as holding events utilizing its public open
spaces to revitalize the community.

Events held in the past
Osaki Garden City

We improved the disaster preparedness of the area by eliminating densely built-up areas of wooden houses and building fireproof and earthquakeresistant buildings. We also took advantage of the intensive land use afforded by the central location and built large-scale buildings with office spaces as
the core of the redevelopment, while also allowing for mixed uses such as residences, retail and multipurpose halls all under one roof. In this way, we
consecutively achieved two redevelopment projects to revitalize the community by attracting new workers, residents and visitors.

Sumitomo Fudosan Iidabashi First Tower

Planting “Satogaeri (homecoming) cherry trees from Washington DC”
which are related to the area

Main building

Sumitomo Fudosan
Iidabashi First Building

Sumitomo Fudosan
Iidabashi First Tower

Completion

March 2000

April 2010

Gross floor area
(approx.)

62,900m2

78,400m2

Purposes

Office, residence, retail

Office, residence, retail, multipurpose hall

Sumitomo Realty’s
Corporate Value Creation

Community building through cherry blossoms viewing

Example Iidabashi Area

Annual disaster drills jointly held with the Koraku Community
Association

IZUMI GARDEN

Cherry Trees IlluminatedBusiness Review

Cherry Blossom Festival

Marche’ Event

Redevelopment under the Urban Renewal Act - Major projects completed and planned
Project area

Integrated Report 2021

Shukugawa Green Town
Chiyoda First Building East
Sumitomo Nakanosakaue Building
Sumitomo Fudosan Iidabashi First Building
Izumi Garden Tower
Sumitomo Fudosan Shinjuku Oak Tower
Chiyoda First Building West
City Tower Azabujuban
Osaki West City Towers
Central Park Tower La Tour Shinjuku
City Tower Sendai Kakyoin
Sumitomo Fudosan Iidabashi First Tower
Southern Sky Tower Hachioji
Sumitomo Fudosan Shinjuku Grand Tower
City Tower Ageo Ekimae
City Tower Kobe Sannomiya
Sumitomo Fudosan Roppongi Grand Tower
City Tower Hiroshima
City Tower Kokubunji The Twin
Sumitomo Fudosan Osaki Garden Tower
City Tower Oimachi
Sumitomo Fudosan Akihabara Ekimae Building
City Tower Tokorozawa Classy
City Tower Musashi-koyama(Tentative name) Tokyo Mita Redevelopment Project(Tentative name) Nishi-shinjuku 5-chome Kita Project(Tentative name) Nakano 2-chome Project

Nishinomiya, Hyogo
Chiyoda Ward, Tokyo
Nakano Ward, Tokyo
Bunkyo Ward, Tokyo
Minato Ward, Tokyo
Shinjuku Ward, Tokyo
Chiyoda Ward, Tokyo
Minato Ward, Tokyo
Shinagawa Ward, Tokyo
Shinjuku Ward, Tokyo
Sendai, Miyagi
Bunkyo Ward, Tokyo
Hachioji, Tokyo
Shinjuku Ward, Tokyo
Ageo, Saitama
Kobe, Hyogo
Minato Ward, Tokyo
Hiroshima, Hiroshima
Kokubunji, Tokyo
Shinagawa Ward, Tokyo
Shinagawa Ward, Tokyo
Chiyoda Ward, Tokyo
Tokorozawa, Saitama
Shinagawa Ward, Tokyo
Minato Ward, Tokyo
Shinjuku Ward, Tokyo
Nakano Ward, Tokyo

33,40038,80036,60062,900208,400
163,100
63,40064,600129,100
153,500
25,40078,40099,800179,800
39,90092,900210,500
125,500
93,200222,000
60,60030,80038,50053,500228,800
137,300
99,000Main purposes

Completion

Residence・Retail・Office
Office・Residence・Retail
Office・Residence・Retail
Office・Residence・Retail
Office・Residence・Retail
Office・Residence・Retail
Office・Residence・RetailResidence
Residence・Office・RetailResidence・Office・Retail・Multipurpose hall
Residence・Retail・Office
Office・Residence・Retail・Multipurpose hall
Residence・Office・Retai
Office・Residence・Retail・Multipurpose hall
Residence・Office・RetailResidence・Hotel・Retail
Office・Residence・Retail・Multipurpose hall
Residence・Retail・Office
Residence・Retail・Office
Office・Residence・RetailResidence・Retail
Office・Residence・RetailResidence・RetailResidence・Retail
Office・Residence・RetailResidence・Office・Retail
Office・Residence・RetailNov 1977
Oct 1998
Apr 1999
Mar 2000
Oct 2002
Nov 2002
Jan 2004
May 2009
Aug 2009
Mar 2010
Mar 2010
Apr 2010
Nov 2010
Dec 2011
Dec 2012
Mar 2013
Oct 2016
Aug 2016
Mar 2018
Aug 2018
Jul 2019
Aug 2019
May 2021
Jun 2021
FY2022(expected)
FY2022(expected)
FY2023(expected)

Example Roppongi Area
We completed the IZUMI GARDEN large urban block consisting of two large-scale, mixed-use developments in the area lying east side and west side of
the Roppongi-itchome Station, connecting the areas from Roppongi to Kamiyacho. It covers an area of approx. 6 hectares and comprises offices,
residences, retail facilities, a hotel, multipurpose halls, a museum, etc. and will become a new base to encourage the development of the local
community.

Main building

Sumitomo Fudosan
Roppongi Grand Tower

Izumi Garden Tower

Completion

October 2016

October 2002

Gross floor area
(approx.)210,500m2

208,400m2

Purposes

Office, residence, retail, multipurpose hall

Office, residence, hotel, retail, museum,multipurpose hall

Financial Section/
Company Information

13

Location(As of March 31, 2021)

ESG Management

Shukugawa Station Front No.1
Nishi-kanda 3-chome North-east
Nakanosakaue Chuo 1-chome West
Koraku 2-chome East
Roppongi 1-chome West
Nishi-shinjuku 6-chome South
Nishi-kanda 3-chome North-west
Mita Koyamacho East
Osaki Station West Gate Central
Nishi-shinjuku 6-chome West No.6
Kakyoin 1-chome No.1
Koraku 2-chome West
Hachioji Station South Gate
Nishi-shinjuku 8-chome Naruko
Ageo Nakasendo East
Asahi-dori 4-chome
Roppongi 3-chome East
Hiroshima Station South Gate B Block
Kokubunji Station North Gate
Nishi-shinagawa 1-chomeOi 1-chome South No.1
Kanda-neribeicho
Tokorozawa Station West Gate North
Musashi-koyama Ekimae-dori
Mita 3- and 4-chome
Nishi-shinjuku 5-chome North
Nakano 2-chome

Main building

Gross floor area
m2 (approx.)

A Message from the Management

Redevelopment together with the community

Sumitomo Realty & Development Co., Ltd.

14

Examples of Our Value Creation Model
Example [2] Housing Remodeling

Renovation of existing houses to extend useful life
by improving functionality
Key issues with the housing stockThrough the Shinchiku• Insufficient earthquake resistance andinsulation

Sokkurisan remodeling:• Mismatches between lifestyles and floor plans• Environmental impact from waste
generated when rebuilding

Although the penetration rate of earthquake resistant houses in Japan is increasing every year, there are still many houses with low earthquake
resistance. Moreover, the lives of houses in Japan are relatively short compared with those in Europe and U.S. and the short rebuilding cycle has emerged
as an issue in contemporary Japan. Waste from the demolition of houses accounts for a large share of waste discharged by the construction industry. It iscalled for that lives of houses should be extended to facilitate the shift to a stock-type society where houses could be used by successive generations.
1 Earthquake-resistance of housing stock

2 International comparison of the averageage of houses*Approx.

Without earthquake
resistance
7 million units*1981 or earlier

The desire for safe and secure housing

Before15

Integrated Report 2021






Building Work/
Renovation
Private Sector Civil
Engineering




Japan

US

UK


Total:



 

Public Sector
Civil EngineeringSources: 1 Ministry of Land, Infrastructure, Transport and Tourism“Progress of Earthquake Proofing of Houses”
2 Ministry of Land, Infrastructure, Transport and Tourism“International Comparison of Average Age of Houses Deregistered in 2018”3 Ministry of Land, Infrastructure, Transport and Tourism “Residential Land Session, Panel on Infrastructure Development (36th) ”■ Shinchiku Sokkurisan initiatives concerning social issues
Extending the useful lives of houses through seismic reinforcement
Shinchiku Sokkurisan offers proposals for improving the house’s functionality to make it earthquake resistant without
rebuilding mainly through seismic reinforcement work based on earthquake resistance diagnosis that meets thegovernment’s safety standards.
Moreover, in the Kumamoto Earthquake of 2016, a series of powerful tremors caused the collapse of houses
previously considered not to need seismic reinforcement under current laws. In view of such circumstances, wedeveloped a proprietary method to counter such a series of powerful tremors. With the addition of this new method,
we now offer seismic reinforcement and damping plans suitable for houses of all ages.
We are promoting houses where people can continue to live in with peace of mind by improving the safetyfunctions through this reinforcement work.

Solution for rapidly
increasing disused houses
The high number of disused
detached houses has become asocial issue in Japan. Throughremodeling, turning them intosocial welfare centers, sharehouses, travelers’ inns, etc., wecontribute to utilization of existinghouse stocks and support safe andsustainable city.

Contributing to the reduction of the environmental impact
Shinchiku Sokkurisan remodeling contributes to the reduction of the environmental
burden by extending the life of the house through earthquake reinforcement while theprincipal structural elements of the house are retained, thus minimizing industrial
waste discharge, CO2 emission, and waste of resources, compared to the demolition
involved in building a new house.

Home interior stripped down to its
main structural elements

After

Revised floor plans to suit changing lifestyles
In addition to seismic reinforcement, Shinchiku Sokkurisan offers remodeling thatmakes living comfortable, with thermal insulation, waterproofing, barrier-free design,
etc. Furthermore, in response to changes in family structures and aging population, weoffer solutions customized for the lifestyles without rebuilding, such as layout changes,
extensions, downsizing, transformation of a two-story house to a one-story house, or a
two-family house.

Financial Section/
Company Information

After

Many houses were destroyed and many precious lives were lost in the Great Hanshin
Awaji Earthquake of 1995. Subsequent research revealed that many old houses wereleft without rebuilding, despite having structural problems, due to various reasons
including costs.
The Shinchiku Sokkurisan remodeling was bornfrom the desire to “find a way to make suchhouses earthquake-resistant at a reasonable
price without rebuilding in order to save
precious lives.” As such, it offers a full lineup from“full remodeling” to “partial reform” to transforma house into a safe and earthquake-resistant one,
A house destroyed in the Great Hanshin
according to the customers’ various needs andAwaji Earthquake, photographed bybudget, at about 50-70% of the cost of rebuilding. Professor Kenji Miyazawa

From 1982 onward
With earthquake
resistance
40.5 million units*

Demolition
House: 7,750(51% of thedischarged waste
through demolition)



ESG Management

The Shinchiku Sokkurisan remodeling business was launched after the Great Hanshin Awaji Earthquake of 1995 with the desire to renovate
existing houses to make them earthquake resistant without the high cost of rebuilding. Based on our concept of safe and secure housing, it boasts
the industry’s foremost track record for full remodeling featuring earthquake reinforcement work and a clear fixed-price system. It marked its 25th
anniversary this year, since its launch in 1996, and the cumulative total of units contracted exceeded 150,000 units (as of June 30, 2021). Today,
the Shinchiku Sokkurisan has become so popular across the nation that it is a brand synonymous with full remodeling. By leaving main structuralcomponents intact and improving housing functionality without rebuilding, the Shinchiku Sokkurisan remodeling contributes to not only
extending the useful lives of existing houses, but also to addressing the social issues concerning houses in Japan by being environmentallyfriendly, i.e., minimizing industrial waste, CO2 emissions, and waste of resources.

Repair 




From 1982
onward(Unit: thousand tons)

Business Review

With earthquake
resistance
6.1 million units*(Years)

3 Breakdown of construction waste

Sumitomo Realty’s
Corporate Value Creation■ Social issues concerning houses in JapanA Message from the Management

Extended useful life through improved functionality
Earthquake-proofing and seismic retrofitting
Revised floor plans to suit changing lifestyles
Reduced environmental impact
Reduced waste by leaving main structural components intact to lower
CO2 emissions and improve energy-saving functionality
Renovation of traditional-style houses harmonizes thecityscapeTraditional-style house exteriors left in place, harmonizing with otherhomes in the community; interiors modernized to match current
lifestyles• Shorter life cycle than houses in Europe
and the U.S.

BeforeSumitomo Realty & Development Co., Ltd.

16

Examples of Our Value Creation Model
Example [3] Building Renovation

Renovating an urban high-rise building without
rebuilding and strengthening community functions
Key issues for Nishi-shinjuku, an urban business area

concentrated in the area. However, large
subdivisions and double-layered
roadways obstruct continuity andmovement and disperse interaction.

Upgraded facilities
to the same level
as those of a newbuilding

Serves as a local disaster preparedness center in emergencies
Serves as a temporary evacuation facility for around 2,800 people unable toreturn to their homes
A model for sustainability of a high-rise building without
rebuilding• Enhanced BCP functionality (damping reinforcement, emergency power
generator)• Reduced environmental impact (installed energy-saving equipment
equivalent to new-building standards)• Eliminated uneven flooring (facilitating barrier-free movement)

A view of an event held at Sankaku Hiroba

Business Review

The Nishi-shinjuku district, where Shinjuku Sumitomo Building is located, was designated a subcenterof Tokyo in 1958. Since then, it is not only a business center where approximately 200,000 people
work but also an area where there is a high concentration of a variety of functions, including large
hotels, commercial facilities, universities, hospitals and residences. On the other hand, as the district
was developed on a former water purification plant, it faced some issues such as open spaces
representing 80% of the district’s areas and a two-layered structure of roads obstructing the continuity
and movement of the cityscape and dispersing vibrancy. The Sankaku Hiroba project is a major publicprivate project to enhance the function of the district as a whole, beyond a single building. It is
expected to bring about a new vibrancy to the district by hosting a variety of events in one of thelargest all-weather event spaces in Japan with a capacity of about 2,000 people and taking advantageof the adjoining Shinjuku Sumitomo Hall, which is equipped to host international conferences.

Sumitomo Realty’s
Corporate Value Creation■ Shinjuku’s new hub for liveliness■ Counter-disaster facility for the district
In 2011, while the project was underway, the Great East Japan Earthquake inflicted unprecedented
damage to areas across Japan. As the damage highlighted the importance of disaster prevention in
urban areas, we designed Sankaku Hiroba so that it can shelter temporarily up to about 2,800
stranded commuters in the event of an emergency. Furthermore, in the remodeling work to the mainbuilding, we enhanced measures for business continuity planning (BCP) for the further safety oftenants including seismic reinforcement and expansion of oil tanks and generators.

Completed Construction of Shinjuku Sumitomo Building

2016

Designated as a national strategic special zone; city planning of specified district changed

2020

Started Large-scale renovation – certified private-sector city revitalization project plan
Completed Large-scale renovation work – Opened “Sankaku Hiroba”
Gross floor area: 180,195m2 Atrium area: 6,500m2* (Sankaku Hiroba: 3,250m2*)

17Integrated Report 2021

BeforeCross-section of Sankaku Hiroba
Shinjuku Sumitomo
Building*Approx.

1974
2017

■ A model embodying sustainability of office buildings

25m

Sankaku Hiroba
Shinjuku Sumitomo Hall

(22 m effective height)

Shop & Restaurant

Shinjuku Sumitomo Building has been adored by the public and nicknamed “Sankaku Biru” (triangularbuilding) for its shape for nearly half a century since 1974 in a period when skyscrapers started to bebuilt in Japan. Instead of tearing down the Sankaku Biru, the project created a sophisticated interior
space as fresh as a newly constructed building through extensive remodeling work, which introduced
cutting-edge equipment and designs but left the triangular outward appearance intact. By choosing
not to tear down and reconstruct the building, we significantly reduced the amount of industrial waste,such as construction materials, and by introducing energy-saving equipment on a par with those fornew buildings, we reduced the environmental load. Furthermore, the remodeled building entrancesenhance the barrier-free feature of the region by designing pedestrian routes that resolve height gaps
in surrounding areas.

■ CTBUH* Awards: The first in Japan to win the “Award of Excellence” for the Renovation Category
This renovation project of Shinjuku Sumitomo Building was recognized for its innovative approach and excellence as well as its applicability to other projects and thehigh quality attained in the following areas: ”Environment” – it minimize effects on the natural environment, ”People” – it has a positive effect on the inhabitants
and the quality of human lives, ”Community” – it demonstrates relevance to the contemporary and future needs of the community in which it is located, and”Economic” – adds economic vitality to its occupants, owner and community. The project became the first to be awarded the “Award of Excellence” in the CTBUH
Awards 2021/Renovation Category by the CTBUH.

Financial Section/
Company Information

Chronology

Sankaku Hiroba, one of the largest all-weather event spaces in Japan

ESG Management

We implemented an extensive renovation of Shinjuku Sumitomo
Building, an office-use skyscraper originally completed in 1974, andin July 2020, we completed the “Sankaku Hiroba” (triangular plaza),a large space for public events. Sankaku Hiroba is an all-weather
atrium of approximately 3,250m2 created by building a gigantic glass
roof over an open public space incorporated into the building’s
design. The facility not just adds to the vibrancy of the Shinjuku
district, where wide-ranging functions are highly concentrated, but
provides a disaster prevention function as an emergency shelter incase of large-scale disasters. Having been renovated instead of
rebuilding, it serves as a model embodying how an office building canachieve sustainability.

A Message from the Management

Wide-ranging functions are highly

Created “Sankaku
Hiroba,” one of thelargest atrium
spaces in Japan*The CTBUH (Council on Tall Buildings and Urban Habitat) was founded in 1969. Its goal is to increase global understanding of tall buildings and sustainable urban housing and develop expertise through international
interchange between experts, in order to create healthy urban environments.

Sumitomo Realty & Development Co., Ltd.

18

History of Value Creation and Our Strengths
The Earnings Base that Underpins Sustainable Growth, the Core of Our Corporate Value

The basis for our value creation model

Capabilities of “Land Innovation”“Redevelopment” for the Community

Acquisition of development sites is the most important aspect ofthe development of buildings. We have been redeveloping sites bypurchasing and assembling small parcels of subdivided land incentral Tokyo where large parcels of land are rare, and coordinating
the rights and interests of landowners. Today, these capabilities of“Land Innovation” have become our greatest strength and thesource of corporate value creation. Capitalizing on the capabilities
of “Land Innovation” as well as the management foundation andother strengths we have cultivated so far, we intend to further
expand our profitability and increase corporate value.

Through redevelopment, we have been addressing issues facing thecommunity by improving the disaster preparedness of areas that are
at risk such as densely built-up areas of wooden houses still seen inTokyo’s urban areas and providing safe transportation
infrastructure. Our track record of development has resulted indeepened relationship of trust with landowners and local
government officials, ensuring our constant participation in
redevelopment projects. Thus, redevelopment is the basis of ourvalue creation model that expands profits and increases our
corporate value.

1998
Shibuya Infoss Tower

1998
Chiyoda First Building
East

2000
Sumitomo Fudosan
Iidabashi First Building

2000
Sumitomo Fudosan
Shibakoen First Building

2002
Izumi Garden Tower(Billions of yen)

5,000

250

4,000

200

3,000

150

2,000

100

1,000

50

0

0

The Tokyo office market: the world’s largest
market backed by a pool of diverse tenants
A comparison of the office stock of the world’s business centers
indicates that Tokyo, with approximately 18 million tsubo in grossfloor area, boasts the largest office market, compared to London
with approximately 6 million tsubo and New York withapproximately 13 million tsubo. Additionally, Tokyo’s market is
unique among the world’s market in that the major domestic
companies of all industries are headquartered in Tokyo and that it isbacked by a pool of diverse tenants. We have consistently expanded
our office building leasing business for the past 50 years, achieving
sustainable growth, and establishing a competitive advantage witha wide-ranging portfolio of over 230 buildings in the major
business areas of central Tokyo.

Business Review

1974
Shinjuku Sumitomo
Building(1,000 m2)

Sumitomo Realty’s
Corporate Value Creation

The source of our corporate value creation

Ordinary
ProfitA Message from the Management

The real estate leasing business primarily involving office buildings in central Tokyo has been the driving force of our growth to date. Accounting
for nearly 70% of the Company’s operating income overall, the leasing business is clearly the main pillar of the Company’s operation and thecore of its corporate value.
We have been expanding our business platform by promoting the development of office buildings with a specific focus on central Tokyo overroughly half a century since the early 1970s. Despite various changes in the business environment, we have consistently persisted with respect tounwaveringly adhering to the management policies based on a long-term perspective, namely that the Company does not pursue temporary
gains by selling assets; the Company holds ownerships of the buildings constructed on sites it has developed; and that the Company generates
stable leasing over the long term by owning and leasing such buildings. As a result, we have established a solid earnings base that is resistant to
the fluctuation of economic trends.

Gross
Floor Area

2003
Sumitomo Fudosan
Shinjuku Oak Tower

ESG Management

Ordinary Profit / Gross Floor Area
Ordinary Profit

Gross Floor Area

(Years ended / ending March 31)*Non-consolidated figures until 1977

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

(Forecast)

Major Building Development Projects

2004
Chiyoda First Building
West

19

2004
Shiodome Sumitomo
Building

Integrated Report 2021

2005
Tokyo Shiodome
Building

2006
Sumitomo
FudosanMita Twin Building
West

2009
Sumitomo
FudosanAobadai Tower

2010
Shinjuku Central Park City

2010
Sumitomo Fudosan
Iidabashi First Tower

2011
Sumitomo Fudosan
Shinjuku Grand Tower

Financial Section/
Company Information

8th Plan1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996

2012
Sumitomo Fudosan
Shibuya Garden Tower

2015
Tokyo Nihombashi
Tower

2016
Sumitomo Fudosan
Roppongi Grand
Tower

2016
Sumitomo Fudosan
Shinjuku Garden Tower

2018
Sumitomo Fudosan
Osaki Garden Tower

2019
Sumitomo Fudosan
Shinjuku Central Park
Tower

2019
Sumitomo Fudosan
Akihabara First
Building

2020
Sumitomo Fudosan
Kojimachi Garden
Tower

Sumitomo Realty & Development Co., Ltd.

20

Investment Strategies for Growth
Investment Strategies for Sustainable Growth
The Investment Plan in Leasing Office Assets from the Eighth Management Plan (Originally announced on May 16, 2019)sustainable increase of our corporate value, and aim for further progress.
Tokyo continues to develop not only as a business area but also as the center of Japan in all respects including living, food, wellness, andculture, while the number of office workers also continues to increase. Meanwhile, in many of the office stock built up over the years, insufficient

Gross floor area
(Thousands of tsubo)
3,000*1 tsubo ≈ 3.3 m2(Thousands of tsubo)

earthquake resistance and inadequate BCP-compliance such as electrical facilities are still common, and office buildings equipped with state-ofthe-art structures and facilities are lacking.
Although the COVID-19 pandemic has triggered diversified workstyles and the widespread utilization of remote work, it also brought with it a

2,500

Gross
Floor
Area

5th Plan

6th Plan

7th Plan

8th Plan

+150

+110

+210

+230

More than+800

A Message from the Management

We will continue to promote the development of office buildings in central Tokyo, which has been the major driver for growth to support athousands of tsubo

reevaluation of the importance of offices in central Tokyo. We have projected for the Eighth Management Plan to steadily advance development
as of March 31, 2019) in central Tokyo. By successively completing such developments and putting them into operation, we aim to further expand
our earnings base and increase our corporate value.

Sumitomo Realty’s
Corporate Value Creationplans for total of over 800,000 tsubo of gross floor area (which constitutes more than 50% of the 1,520,000 tsubo in gross floor area for leasing

+230

2,000

1,524

thousandsof tsubo

thousandsof tsubo

1,500

1,000

Consolidated operating income and gross floor area for leasing(Billions of yen)







500

0





Business Review(Thousands of tsubo)
1 tsubo≈3.3㎡

2001
1st Plan

2004
2nd(Years ended/ending March 31)

2007
3rd

2010
4th

2013
5th

2016
6th

2019
7th

2022
8th

2025 –
9th

Tokyo Mita Redevelopment Project
Expected Completion: Jan 2023

Principal New Building Development Projects

Completion

Sumitomo Fudosan Shinjuku Central Park Tower

Shinjuku Ward

18,200Aug 2019

Sumitomo Fudosan Akihabara Ekimae Building

Chiyoda Ward

7,800

Aug 2019

Sumitomo Fudosan Ikebukuro Higashi Building

Toshima Ward

5,000

Sep 2019

Sumitomo Fudosan Akihabara First Building

Chiyoda Ward

8,200

Oct 2019





Haneda Airport Garden (Commercial Complex)

Ota Ward

27,700Mar 2020

Ariake Garden (Commercial Complex)

Koto Ward

60,100

Segment information has been disclosed
since the March 1991 fiscal yearMar 2020

Sumitomo Fudosan Kojimachi Garden Tower

Chiyoda Ward

14,400

May 2020

Sumitomo Fudosan Ochanomizu Building

Chiyoda Ward

3,900

Jan 2021



Sumitomo Fudosan Tamachi Building East

Minato Ward

3,900

Apr 2021

Sumitomo Fudosan Kanda Izumicho Building

Chiyoda Ward

3,000

Gross floor area forleasing (right scale)Operating income fromoffice building businessSep 2021

Sumitomo Fudosan Osaki Twin Building East

Shinagawa Ward

14,400Jan 2022 (Expected)

Others26,500

8th Plan Total










(Years ended/ending March 31)







































(Forecast)Financial Section/
Company Information

Gross floor area(tsubo*)Project name

ESG Management

Location(Tokyo CBD)




(As of March 31, 2021)

193,100

Tokyo Mita Redevelopment Project (Mita 3- and 4-chome Project)

Minato Ward

60,400Jan 2023 (Expected)

Nishi-shinjuku 5-chome Kita Project

Shinjuku Ward

41,300Mar 2023 (Expected)

Nakano 2-chome Project

Nakano Ward

30,000Feb 2024 (Expected)* 1 tsubo ≈ 3.3m2

21

Integrated Report 2021

Sumitomo Realty & Development Co., Ltd.

22

Investment Strategies for GrowthBusiness Review
Financial Results for the Fiscal 2020 and Progress of the Management Plan

Principal New Building Development Projects■ Record-high profit for the eighth consecutive year
The financial results for the fiscal 2020 is as shown in the table below. Although revenue from operations, operating income and ordinary profit declined from theprevious year, profit attributable to owners of parent increased for the tenth consecutive year, achieving record-high results for the eighth consecutive year.
■ Increased revenue and profit in office building business, double-digit profit growth in condominium sales
By segment, in the leasing business, the commercial facilities such as hotels and event halls were significantly affected by the new coronavirus disease (COVID-19).
However, the mainstay office building business recorded increases in both revenue and profit by maintaining low vacancy rates and underpinned the performance asa whole. Further, due to reduced advertising and selling expenses and improvements in gross profit margin, the sales business, focusing on condominium sales,
recorded double-digit growth in profit, contributing to the overall result. As a result, revenue from operations for the fiscal 2020 was ¥917.4 billion (9.5% decrease
year on year) and operating income was ¥219.2 billion (6.4% decrease year on year).

Sumitomo Fudosan
Akihabara Ekimae Building
Completion: Aug 2019

Sumitomo Fudosan
Ikebukuro Higashi Building
Completion: Sep 2019

Sumitomo Fudosan
Akihabara First Building
Completion: Oct 2019

(Billions of yen)
FY2020(Apr 1, 2020 - Mar 31, 2021)

Revenue from operations
Operating income
Ordinary profit
Profit attributable to owners of parent

917.4
219.2
209.9
141.3

YoY

(96.0)(15.0)(10.5)+0.3

Sumitomo Realty’s
Corporate Value Creation

Sumitomo Fudosan
Shinjuku Central Park Tower
Completion: Aug 2019■ Non-operating gains/losses continued to improve,
contributing to the increase in profit
Non-operating loss recorded ¥9.2 billion yen (an improvement of ¥4.5 billion
year on year), mainly due to an increase in dividend income and a decrease ininterest expense. Extraordinary income recorded ¥11.8 billion after transferring
all of its equity interest in the condominium development joint venture company
in Dalian City, China. As a result, ordinary profit was ¥209.9 billion (4.8%
decrease year on year) and profit attributable to owners of parent reached¥141.3 billion (0.3% increase year on year).

A Message from the Management

1｜ Overview of Consolidated Results2｜ Outlook for the Next Fiscal Year (Fiscal 2021) (Announced on May 13, 2021)

Sumitomo Fudosan
Osaki Twin Building East
Expected Completion: Jan 2022

Nishi-shinjuku 5-chome Kita Project
Expected Completion: Mar 2023

Nakano 2-chome Project
Expected Completion: Feb 2024

3｜ Progress of the Eighth Management Plan

7th Plan Results(Apr 1, 2016 – Mar 31, 2019)

Revenue from operations
Operating income
Ariake Garden
Completion: Mar 2020

Haneda Airport Garden
Completion: Mar 2020

Ordinary profit

2,885.8
613.2
557.8

8th Plan Forecasts
FY2019FY2020

FY2021 (F)1,013.5
234.3
220.5

917.4
219.2
209.9

920.0
228.0
221.0

(Three-year cumulative)

2,851.0
681.6
651.5

Vs. 7th Plan

(34.8)+68.4+93.7

8th Plan Targets*

Financial Section/
Company Information

The Company has been operating under the Eighth Management Plan since April 2019. Despite the record-high results for the seventh consecutive year in theprevious fiscal year (fiscal 2019), the initial year of the plan, declines in revenue and profit were unavoidable due to the impact of COVID-19 in the fiscal year underreview (fiscal 2020), the second year of the plan, as described in the above overview of consolidated results. The table below shows the cumulative performance forthe three year period, including the forecasts for the next fiscal year (fiscal 2021). Although it will be difficult to achieve the initial targets, which were formulated
before the COVID-19 pandemic, operating income and ordinary profit are expected to exceed by 10–20% compared to the Seventh Management Plan, which marked
a record-high results..
With no immediate prospects for the end of the COVID-19 situation, the future outlook remains uncertain, we will strive to steadily achieve our forecasts for the
next fiscal year so that we will be able to reach record-high profits for the third consecutive management plan, from the Sixth Management Plan through to theEighth.
(Billions of yen)

ESG Management

Sumitomo Fudosan
Kojimachi Garden Tower
Completion: May 2020

Business Review

Forecasts for the next fiscal year (fiscal 2021) are as shown below. The underlying assumptions of these forecasts are that there will not be a full recovery before theend of the fiscal year from the decline in the commercial facilities such as hotels and event halls of the leasing business due to the impact of COVID-19 and that thebusiness environment will remain at the same level as the previous year.
The mainstay office building business will underpin performance with an(Billions of yen)increase in profit due to factors such as full-year contribution of new buildings
FY2021(F)and decline in temporary expenses. In addition, the construction and brokerage
YoY(Apr 1, 2021 - Mar 31, 2022)
businesses are expected to turn to increase in profit, due to recovered orders
Revenue from operations
920.0
+2.5
and contracts, contributing to business performance.
As a result, revenue from operations, operating income, ordinary profit andOperating income
228.0
+8.7
profit attributable to owners of parent will all increase from the previous year.
Ordinary profit
221.0
+11.0
We intend to achieve a record-high ordinary profit after a two-year dip, and theProfit attributable to owners of parent
ninth consecutive year of record-high in profit.
150.0
+8.6

(Apr 1, 2019 – Mar 31, 2022)

3,100.0740.0
700.0*Announced on May 16, 201923

Integrated Report 2021

Sumitomo Realty & Development Co., Ltd.

24

Business Review
Overview of Each Segment
Operating income(Billions of yen)

FY2020YoY

FY2021 (F)YoY

Leasing

398.2

+2.6

400.0

+1.7

Sales

263.3

(61.5)

245.0

Construction

188.7(30.2)

Brokerage

65.7

(5.4)

(Billions of yen)

Overview of the Fiscal 2020

FY2020YoY

FY2021 (F)YoY

Leasing

155.2(14.1)

160.0

+4.7

(18.3)

Sales

53.9

+7.4

50.0

(3.9)

year contribution from Sumitomo Fudosan Shinjuku Central Park Tower, Sumitomo Fudosan Akihabara First Building and other new buildings that were completed in

200.0

+11.2

Construction

15.5

(5.0)

18.0

+2.4

On the other hand, the commercial facilities such as hotels and event halls were impacted by the two state-of-emergency declarations, ending the fiscal year with

75.0

+9.2

Brokerage

11.4

(3.1)

16.0

+4.5

Leasing
In the fiscal year ended March 31, 2021, revenue and profit in the office building business increased due to the effects of higher rent in existing buildings and fullthe previous fiscal year.
a significant decline in revenue (¥13.4 billion decrease year on year). Operation of Ariake Garden, the large commercial complex completed in March 2020, is
progressively starting, but the opening of Haneda Airport Garden is being postponed.

Percentage of revenue from operations Percentage of operating income

Revenue from operations

Operating income/operating margin(Billions of yen)(Billions of yen)








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Sales



In the fiscal year ended March 31, 2021, a total of 4,164 condominium units, detached houses and land lots were delivered (1,267 units decrease year on year),owing to the start of delivery of units in City Tower Oimachi, City Terrace Machida Station Court, etc. Although the segment’s revenue decreased due to the decline in(F)

the number of units delivered, operating income successfully increased to a record high with reduced advertising and selling expenses and improved gross profit
margin.













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(Billions of yen)(Billions of yen)



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






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









(Billions of yen)

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
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

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(F)





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Construction
In the fiscal year ended March 31, 2021, the number of units contracted fell significantly in the first quarter due to restrictions on large-scale events for attracting
customers and face-to-face sales activities under the state-of-emergency declarations. However, the second quarter onward saw an upward trend of recovery, with

As a result, both revenue and profit declined, as the number of units delivered fell for both businesses, partly due to the decline in orders in the previous fiscal
year, when the consumption tax increase was implemented.

Brokerage
In the fiscal year ended March 31, 2021, the number of transactions (contract basis) fell significantly in the first quarter (April – June) to 6,362 (2,771 decrease year
on year), due to the impact of self-restraint in sales and marketing activities under the state-of-emergency declarations. However, it subsequently recovered primarily(F)in existing condominiums, recording 29,568 transactions in second to fourth quarters (July – March) (1,950 increase year on year) to achieve year-on-year increases
for three consecutive quarters.
As a result, the number of transactions (delivery basis) fell to 35,122 (2,593 decrease year on year), resulting in a decline in revenue and profit.






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

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(%)







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



（億円）(Billions of yen)







Operating income/operating margin

Revenue from operations




(F)





80% of the 3,800 units planned to be delivered in the next fiscal year were sold (approximately 80% in the previous year), indicating sufficient progress.

businesses.
(%)





The number of condominium units sold totalled 3,047 units (1,818 units decrease year on year), a significant decline compared with the previous year, partly due
to the self-restraint practiced in sales and marketing activities under the state-of-emergency declarations. However, at the beginning of the fiscal year, approximately

the number of units contracted increasing year on year for three consecutive quarters in both the Shinchiku Sokkurisan remodeling and custom home construction

Operating income/operating margin





(F)

Revenue from operations

Integrated Report 2021







Tamachi Building East.



(%)







25













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fully occupied, and favorable progress is being made in tenant-seeking activities for buildings to be completed in the next fiscal year, such as Sumitomo Fudosan

The total number of directly operated offices was 269 nationwide as of the end of the fiscal year under review (down by seven from the end of the previous fiscal
year), as a result of closing offices that were unprofitable with overlapping sales areas and opening new offices in central Tokyo specialized in condominium
brokerage.

Financial Section/
Company Information

Percentage of revenue from operations Percentage of operating income(Billions of yen)






(Billions of yen)Brokerage





Operating income/operating margin











buildings newly completed in the fiscal year under review, such as Sumitomo Fudosan Kojimachi Garden Tower and Sumitomo Fudosan Ochanomizu Building, are

ESG Management

Percentage of revenue from operations Percentage of operating income





Revenue from operations

Construction



(F)












Business Review

Percentage of revenue from operations Percentage of operating income









Sales



(%)





Although the vacancy rate in existing buildings rose slightly to 2.8% (1.4% at end of the previous fiscal year), it maintained historically low levels. In addition, all

Sumitomo Realty’s
Corporate Value Creation

As a result, while this segment secured an increase in revenue compared to the previous fiscal year, operating income declined.

Leasing

A Message from the Management

Revenue from operations






















(F)

Sumitomo Realty & Development Co., Ltd.

26

Leasing
Office Building/Rental Apartment/

High degree of functionality, comfort and environmental performance

Multipurpose Halls/

The standard floors of our buildings feature large spaces free of pillars orcolumns, providing highly efficient office spaces with layout flexibility tomeet the needs of each tenant company, such as consolidating multiple
offices onto a single floor or creating open space that facilitates internal
communication and enhances employee creativity.
Our buildings also feature equipment that blends functionality andcomfort with environmental friendliness, including energy-saving features
such as fully-independent HVAC that allows temperature control by zone
and Low-e double glazing glass that increases the insulation of apertures.

Retail Facilities

A Message from the Management

Hotels/

Office layout image

The Company strives to create office buildings that continue to function and secure the safety and peace of mind of our tenants even attimes of disaster. Our entire portfolio meets or exceeds the new earthquake resistance standards adopted in 1981, and approximately 80%of the buildings we own are structured with a seismic isolation and/or damping system, while emergency power generators are installed inabout 70% of them (100% of those completed in or after 2001). We directly manage the buildings 24 hours a day, 365 days a year, making
it possible to respond swiftly to emergencies. There are still many older office buildings in Tokyo that have fallen behind in this kind of BCP
compliance. The Company will continue to supply state-of-the-art buildings that offer enhanced disaster preparedness and BCP compliance.

Competitive Advantages• Office buildings in prime locations in Tokyo, the seven wards of the central business districts, offering
excellent transportation as a base for business• An extensive lineup of buildings in various scales and locations to meet diverse office needs• Advanced exteriors and state-of-the-art facilities, offering high degree of functionality, comfort andenvironmental performance• Safe and secure office environments (seismic isolation and damping systems, BCP compliance)

No. 1 in Tokyo
with Over 230
Office Buildings

Office stock in Tokyo’s 23 wards (Total floor space by year of completion)(Thousands of tsubo*)Former earthquake-resistancestandards period






Floor space
Share
Ueno










New Quake-resistant*1 Structure





~1950s

1960s

1970s

1980s

1990s

2000~

















Total




20%

Chiyoda

11%

Chuo

8%

Shibuya7%

Tokyo 23 Wards 95%

Shinagawa7%

CBD 7 Wards* 84%

Bunkyo3%

Other wards
in Tokyo

11%

Others5%* CBD 7 Wards: Chiyoda, Minato, Chuo, Shinjuku,
Shibuya, Shinagawa and Bunkyo

27

Integrated Report 2021

※1981年6月から施行された新耐震基準

Sumitomo Fudosan
Osaki Twin Building East
(Expected completion: Jan 2022)
Shinagawa Ward, Tokyo
19 above / 2 below ground
Gross floor area: 14,400 tsubo

Sumitomo Fudosan
Kanda Izumicho Building

Mita

Sumitomo Fudosan Ochanomizu Building

Osaki



*1. New standards that took effect in 1981 *2. Approx.

(Completion: Apr 2021)
Minato Ward, Tokyo
8 above ground
Gross floor area: 3,900 tsubo

Shiodome

Shinagawa
Station

Sumitomo Fudosan
Tamachi Building East

Nihombashi

Roppongi
Shibuya

Major flagshipbuildings

Large-scalebuildings

Otherbuildings

Buildings
developmentin progress*	Only office buildings owned by the Company
are shown on this map.
(As of March 31, 2021)(Completion: Jan 2021)
Chiyoda Ward, Tokyo
12 above / 1 below ground
Gross floor area: 3,900 tsubo

Financial Section/
Company Information

28%

Shinjuku

Emergency
Power
Generators

Major new office buildings completed in FY2020 and FY2021

Tokyo Station

MinatoSeismic Isolation
and/or Damping System(Compiled from “Tokyo no Tochi,” a publicly available data on land in Tokyo, provided by Tokyo Metropolitan Government)

Akihabara

約

ESG Management

Tokyo is Japan’s economic center, where companies from all industry sectors congregate,
creating a superior market that offers long-term stability. Our leasing portfolio
emphasizes locations in central Tokyo; 95% of our portfolio is in Tokyo’s 23 wards, and
84% is in seven wards of the Tokyo CBD (Central Business District). Many of ourbuildings are located in proximityof major railway and subway
stations, offering excellent
accessibility favored for a business
Ikebukurobase, thus being one of ourcompetitive strengths.
The Company will continue tobuild a stable earnings baseTakadanobaba
through supplying highly
NakanoIidabashicompetitive office buildings,
mainly in the Tokyo CBD, where
demand is expected to remain
Kojimachi
Shinjuku
stable into the future.

* 1 tsubo ≈ 3.3 ㎡

The Company’s portfolio (Owned buildings)

Business Review

Portfolio of office buildings that meets diverse office needs

Sumitomo Realty’s
Corporate Value Creation

Safe, secure and highly disaster resistant offices with seismic isolation/damping systems and enhanced BCP(Completion: Sep 2021)
Chiyoda Ward, Tokyo
8 above / 1 below ground
Gross floor area: 3,000 tsubo

Sumitomo Fudosan Kojimachi Garden Tower(Completion: May 2020)
Chiyoda Ward, Tokyo
22 above ground
Gross floor area: 14,400 tsubo

Sumitomo Realty & Development Co., Ltd.

28

Leasing
★★★★★

★★★★☆

Properties with exceptionallyhigh environmental & social
awareness★★★☆☆

Properties withexcellent environmental& social awarenessIzumi Garden Tower

Sumitomo Fudosan
Mita Twin Building West

Sumitomo Fudosan
Iidabashi First Tower

Sumitomo Fudosan
Shibakoen First Building

Chiyoda First Building West

Sumitomo Fudosan
Iidabashi First Building
Sumitomo Fudosan
Shinjuku Grand Tower

Sumitomo Realty’s
Corporate Value Creation

Sumitomo Fudosan
Roppongi Grand Tower(4 Stars from 2018 Edition)

A Message from the Management

Properties with the best classenvironmental & social
awareness

Sumitomo Fudosan
Osaki Garden Tower

Sumitomo Fudosan
Shinjuku Oak Tower

Sumitomo Fudosan
Shinjuku Central Park Tower

Sumitomo Fudosan
Shibuya Garden Tower

Sumitomo Fudosan
Iidabashi Building No.3

Business Review

Shinjuku Sumitomo Building

Sumitomo Fudosan
Shibuya First Tower
Sumitomo Fudosan
Aobadai Tower

ESG Management

Sumitomo Fudosan
Shinjuku Garden Tower

Tokyo Nihombashi Tower

Sumitomo Fudosan
Azabujuban Building

Sumitomo Fudosan
Shinjuku Central Park Building

Shiodome Sumitomo Building

26 office buildings in Tokyo acquired certification totaling
approx. 770,000 tsubo*2, the largest*3 gross floor area heldamong the enterprises in the Office Building Category
29

Integrated Report 2021

Sumitomo Fudosan Shibuya Tower

Sumitomo Fudosan
Onarimon Tower

Sumitomo Fudosan
Akihabara Ekimae Building

Sumitomo Fudosan
Shiodome Hamarikyu Building

As an objective means of ascertaining the performance of the properties it has developed, the Company acquired DBJ Green Building Certification,
which recognizes buildings’ “environmental and social awareness,” for all of its owned buildings of over 50,000 m2. A total of 26 buildings withgross floor area of 770,000 tsubo have acquired the certification, the largest gross floor area held among the owners of buildings in the Office
Building Category of the DBJ Green Building Certification. Shinjuku Sumitomo Building, completed in 1974, has also obtained a four-starcertification after undergoing extensive renovations. Going forward, the Company will further contribute to realizing a sustainable society bycreating high-value social assets that are not only profitable, but also give proper care to environment and society, as represented by these 26
buildings.

Financial Section/
Company Information

DBJ Green Building Certification*1
Sustainable office buildings recognized for theirenvironmental and social awareness

Sumitomo Fudosan
Kojimachi Garden Tower*1. DBJ Green Building Certification is a certification system established by Development Bank of Japan Inc. (DBJ) in 2011 that evaluates real estate for its performanceand initiatives regarding “environmental and social awareness” beyond its “profitability.” The program is drawing attention for recognizing the long-term value ofbuildings not just from the environmental viewpoint, but also from the perspective of social significance, such as disaster-prevention capacity and proper care for thesurrounding communities. The certification is granted to approximately the top 20% of all domestic commercial properties, and the highest ranking of five stars
awarded to the top 10%.
*2. 1 tsubo ≈ 3.3m2*3. As of October 31, 2020, researched by the Company

Sumitomo Realty & Development Co., Ltd.

30

Leasing

La Tour Series

Retail Facilities

Sumitomo Fudosan Retail Management Co., Ltd.

We own and operate over 5,400 condominium units for leasing
primarily in major metropolitan areas. Of these, the “La Tour”
series at its core offer premium residences with great views, highgrade specifications and facilities, hotel-style bilingual concierge
services and advanced security systems. As of March 31, 2021, weoperate 25 La Tour buildings with approx. 3,400 units in areas suchas Daikanyama, Roppongi, Shibuya and Shinjuku, as well as Kyoto
and Sapporo.

Sumitomo Fudosan Retail Management Co., Ltd. manages Ariake
Garden, which was completed on a vast 10.7 hectare tract inMarch 2020, and Haneda Airport Garden, which is connected
directly to Haneda Airport.
Ariake Garden is a commercial complex featuring a wide varietyof shops catering to diverse needs both for every day and special
occasions. It has been well received as it proposes a new lifestylefor Tokyo while contributing to the revitalization of the community.

A Message from the Management

Condominium Leasing

Sumitomo Realty’s
Corporate Value Creation

Major facilities managed by Sumitomo Fudosan Retail Management Co., Ltd.

HotelsSumitomo Fudosan Villa Fontaine Co., Ltd.
*Opening postponed

Tokyo’s largest*1 large-scale mixed-use development project
covering a site of approx. 10.7 hectares
A new leisure spot for the Tokyo Bay area

Directly connected to Haneda Airport Terminal 3
One of the largest*2 airport hotels in Japan with 1,717 rooms,
and approx. 90 shops offering selected items of Japan

RetailLarge-scale retail facility with over 200 shops, enriching a bayside
lifestyle

RetailApprox. 90 shops, including shops for travel goods and souvenirs
and a variety of restaurants

Hotel
749 rooms, with excellent access to central Tokyo
A wide variety of stay plans catering to everyone from solo guests
to groups

Hotel
Hotel directly connected to the airport, with two grades, luxury
and high grade, catering to diverse needs

Sumitomo Fudosan Bellesalle Co., Ltd.

Hall
Theater-style hall with a capacity of 8,000 people
Fully equipped to accommodate a wide range of events, fromlarge-scale live concerts to international conferences
Spa
Spacious, approx. 2,500 m2 spa with natural hot springs*1. A total development area of approximately 10.7 hectares, which is the largest
mixed-use commercial development in Tokyo conducted by a single private-sector
company between January 2001 and April 2017 (researched by MRC, May 2017).
The size equivalent to 2.3 times that of Tokyo Dome (a baseball stadium).

Integrated Report 2021

Multipurpose hall/Conference rooms
1,140 m2 hall, 10 conference rooms and the foyer located on one
floor
Spa
Natural hot springs offering views of the aircraft from the open-air
bathFinancial Section/
Company Information

Sumitomo Fudosan Bellesalle Co., Ltd. operates 30 multipurpose
halls mainly in central Tokyo. Easily accessible and featuring anarray of equipment and fixtures, our venues are used for a wide
range of events, including exhibitions, large-scale entertainment
events, sales events such as family sales, and seminars such as
academic conferences and lectures.The Company also operates
eight shared office spaces “Bellesalle Lounges,” offering wellequipped private rooms and small meeting rooms suitable forremote work and web conferences. (As of March 31, 2021)

31[Haneda Airport Garden]

ESG Management

Multipurpose Halls[Ariake Garden]

Business Review

The Villa Fontaine series is our high grade business hotels at prime
locations that offer larger guest rooms with spacious beds andbathrooms, and stylish interiors. We operate a total of 17 hotels /3,420 rooms, including 14 Villa Fontaine hotels in central Tokyoand one in Kobe, and 2 Village series hotels in Izukogen and Kyoto
targeting resort customers and tourists. (As of March 31, 2021)*2. The number of rooms, 1,717 rooms, is the largest among hotels located within
airport sites in Japan (researched by the Company, December 2019).

Sumitomo Realty & Development Co., Ltd.

32

SalesCondominiums/
Residential Lots

Under the themes, “consultation, selection andexperience,” this is a general exhibition hall that
responds to various requests related to condominium
selection, encompassing everything from support inselecting specific properties to consultation on all
things related to housing. The facilities are located atnine conveniently accessible terminal stations (as ofMarch 2021), primarily in the Tokyo metropolitan
area. Potential customers can view all available
properties at a single location.

Ikebukuro

Ueno Sta.

Shinjuku

Akihabara

Tokyo Sta.

Shibuya
Shinagawa Sta.

Yokohama

Higashi-Ginza

トップメ
ッthe
セー
ジ
A Message
fromManagement

Grand Mansion Gallery — an information center
pursuing the satisfaction of the customers* In addition to those above, there are galleries in Umeda
and Tennozu (Osaka) and Sakae (Nagoya).

City Terrace Kanamachi(Completion: 2021)•Operating in major cities throughout Japan — stable supply with 80% of the portfolio in the Tokyo metropolitan area
•Condominiums that pass on their asset value for the future with stylish exteriors, extensive common areas, disaster-resilience and high-spec equipment•Grand Mansion Gallery where customers can review all of our available properties at a single location

Katsushika Ward, Tokyo
No. of units for sale: 610
No. of floors: 19 above ground

Sumitomo
Realty’s
価値創造モデ
ルCorporate Value Creation

Major condominium projects

Competitive Advantages

Condominiums that pass on their asset value for the future
事業概況
Business
Review

We provide condominiums that will retain their asset value and appeal as time passes. They are characterized by enhanced product planningwith stylish exteriors that make them landmarks, elegant entrances, extensive common areas, disaster-resilient and high-spec basic
performance, latest housing equipment, etc. A number of our condominiums have garnered the Good Design Award sponsored by theJapan Institute of Design Promotion.

Grand Hills Minami Aoyama(Expected completion: 2022)
Minato Ward, Tokyo
No. of units for sale: 105
No. of floors: 18 above / 2 below groundＥ
ＳManagement
Ｇ経営
ESG

Garden Hills Yotsuya Geihin-no-mori(Completion: 2016)
Good Design Award 2017

City Terrace Yokohama (Expected completion: 2022)
Yokohama, Kanagawa
No. of units for sale: 313
No. of floors: North-10 / South-15 above ground

City House Futako-tamagawa

City Tower Musashi-koyama(Completion: 2021)
Shinagawa Ward, Tokyo No. of units for sale: 320
No. of floors: 41 above / 2 below ground

Section/
財務デFinancial
ータ／会社情報Company Information(Completion: 2015)
Good Design Award 2015

Remote Condominium Sales
World City Towers(Completion: 2007)
Good Design Award 2007

City Terrace Saitama Shintoshin(Completion: 2007)
Good Design Award 200833

Integrated Report 2021

Grand Hills Motoazabu(Completion: 2018)
Good Design Award 2020

We have introduced “Remote Condominium Sales” service for the newly built
condominiums that we supply nationwide*1, a method that permits customers to complete
the entire process—from property viewing to delivery—without the need for meeting inperson. Since its launch in June 2020, our online tour has been well received by manycustomers, allowing them to tour model rooms and discuss housing loans with sales staff
online from the comfort of their homes. In addition, since January 2021, we have expanded
the support provided by our sales representatives by launching the “Online-Tour-Delivery”
service*2, where we deliver devices necessary for online tour to customers’ homes.
*1. All properties in Japan, except for joint venture properties, etc.
*2. Available in Tokyo, Kanagawa, Chiba and Saitama Prefectures (excluding remote islands)

Sumitomo Realty & Development Co., Ltd.

34

Construction
Shinchiku Sokkurisan Remodeling/
Custom Homes“Full remodeling” system instead of rebuilding marked its 25th anniversary, and exceeded 150,000 units contracted!
Making use of the old house’s foundations and pillars, the Shinchiku Sokkurisan renovates the entire house, reinforcing its earthquake
resistance, changing the kitchen and bathroom, floor plans, interiors and exteriors to meet the customer’s preferences. Since its launch in
1996, the number of units contracted has steadily grown to exceed a cumulative total of 150,000 (as of June 30, 2021). As a pioneer in thefull remodeling business, we have also engaged ourselves in the full remodeling of condominium units nationwide, establishing a new genre
in an industry that until then had offered only complete rebuilding or partial remodeling.
*2021 ranking for number of large-scale renovation (contracted units) researched by The Japan Journal of Remodeling

トップメ
ッthe
セー
ジ
A Message
fromManagement

Shinchiku Sokkurisan Remodeling — No.1* in the Industry

Shinchiku Sokkurisan RemodelingCompetitive Advantages — Custom Homes

Shinchiku Sokkurisan Remodeling• Custom homes that combine innovativeness and functionality withattractive design• Model home exhibitions in 115 locations around Japan, mainly inthe major metropolitan areas• High-grade interiors as a standard specification at reasonable prices• P roprietary earthquake-proofing technology, and product planning forenhanced safety• No.1 in the industry with an innovative “full remodeling package” system• Worry-free fixed pricing system at 50-70% of the rebuilding cost• Seismic reinforcement for houses of all ages
• Featuring a system in which a dedicated sales engineer manages the entire
project while a dedicated master carpenter oversees the construction• No.1 for eight consecutive years in the industry of “full remodeling” forcondominium units nationwide

We offer custom homes with advanced, functional and attractive design nationwide, using our expertise in developing office buildings andcondominiums. Our product lineup has received many Good Design Awards from the Japan Institute of Design Promotion.

Premium·J Komazawa

Premium·J Yokohama No.1

Good Design Award 2020

Good Design Award 2018

Good Design Award 2016

Earthquake-proof measures forsafety and security

We have adopted high-grade room interiors and facilities foundin condominiums as standard for detached houses at areasonable price.

•”Seismic Control System” reduces
earthquake-induced vibrations byapproximately 50%•”Power Panel” —Strong bearing
walls with high magnification(patented)

Integrated Report 2021

Estimates are based on a cost estimation
system and prices are unclear

Clear fixed-price system

Additional charges incurred due
to unforeseen circumstances

No additional charges afterwork commences

Cumulative total of units contracted for Shinchiku Sokkurisan

Lower cost than rebuilding
Shinchiku Sokkurisan remodeling realizes housing
renovation for about 50-70% of cost of rebuilding,responding to customers’ various needs, lifestyles andbudgets. In addition to conventional “partial reform,” itoffers “full-remodeling,” which transforms the houseinto an earthquake resistant one while utilizing theexisting structural elements and “renovation,” which
completely refurbishes both the interior and exterior
and enables flexible layout changes.

50%

60%

70%

(Thousand units)





June 2021 Contracts exceeded 150,000 units

September 2015 Contracts exceeded 100,000 unitsRenovation
Full
remodeling0%Partial reform

Rebuilding

100%



                         
(Years ended/ending March 31)(F)

Types of remodeling Shinchiku Sokkurisan covers
Resolve all your problems
with your current houseYour dream comes true as if building
a custom-built house

Condominium
remodeling — No.1*
in theFull remodeling
Renovation
Transform the house into an
Complete renovation of both the interiorindustryfor eight
consecutive
years
earthquake-resistant
one with
peace ofand the exterior
with great flexibility inmind while utilizing the existing structural

terms of change of the layout

elements
as muchas possible
Since 2000,
we
havepioneered the industry’s skeletonrenovation business for condominium units. The entire
exclusively-owned area is dismantled and removed,
leaving only the structural frame. Everything else—fromthe equipment, interior, base materials to the wiring to
the plumbing—is completely renewed to allow flexible
layout change and make the exclusively-owned area
look like new.

*A ccording to data collected by The Japan Journal of Remodeling, FY2013–2020

35

Seismic reinforcement forpeace of mind

Section/
財務デFinancial
ータ／会社情報Company Information

The “Residential Style” incorporating high-end facilities
used for condominiums

Seismic reinforcement byremodeling not consideredＥ
ＳManagement
Ｇ経営
ESG

J·Residence Mito

Full remodeling with a price50-70% of rebuilding

事業概況
Business
Review

Custom Homes
Innovative exterior design and specifications that only a developer could deliver

Principally remodeling certain
parts of the house

After

BeforeNew system: neither conventional
remodeling nor rebuilding

Sumitomo
Realty’s
価値創造モデ
ルCorporate Value Creation

Conventional remodeling

BeforeAfter

Skeleton image

Sumitomo Realty & Development Co., Ltd.

36

BrokerageGroup Companies

トップメ
ッthe
セー
ジ
A Message
fromManagement

Sumitomo Fudosan Tatemono Service Co., Ltd.
Sumitomo Fudosan Tatemono Service Co., Ltd. conducts property management for
about 170,000 condominium units nationwide centering on Sumitomo Realty’s
condominiums after delivery. In pursuit of comfortable, safe and secure living
environments for customers, it offers services ranging from daily building
management to concierge services (consultancy for minor repair of rooms andequipment replacement, introduction of special benefits available from theSumitomo Group’s businesses, etc.) to respond to various customers’ needs basedon abundant know-how and solid technological capabilities. Its service includes
provision of useful lifestyle-related services such as professional housecleaning.

Sumitomo
Realty’s
価値創造モデ
ルCorporate Value Creation

Sumitomo Fudosan Syscon Co., Ltd.

Competitive Advantages•269 directly operated brokerage offices nationwide, boasting an industry-leading network•Sales system rooted in the community based on the “Customer-First” principle•Operating Mansion Plaza brokerage offices specialized in premium condominiums, taking initiatives to catch new needs(As of March 31, 2021)

Izumi Restaurant Co., Ltd.
Izumi Restaurant Co., Ltd. provides catering services for social gatherings andvarious parties. It also runs several restaurants such as Azabu Tansumachi Tenryoan(Japanese restaurant) and DELTAZURE (a café).
In addition, it runs Rieven House convenience stores within Sumitomo Realty’s
office buildings in Tokyo, offering a product mix geared to the needs of office
workers.

9 offices• Tohoku area

5 offices• Capital area

152 offices• Tokai area

18 offices• Kansai area

72 offices• Chugoku area

7 offices

Sumitomo Realty & Development CA., Inc. Hotel ownership and management

6 offices

Sumitomo Fudosan Finance Co., Ltd.

Financing■ Sumitomo Fudosan Bellesalle Co., Ltd.

Izumi Insurance Service Co., Ltd.

General insurance and life insurance agency■ Sumitomo Fudosan Retail Management Co., Ltd. ▶ Page 32

Izumi Country Club

Section/
財務デFinancial
ータ／会社情報Company Information

Integrated Report 2021

Since June 2019, the Company has opened
Mansion Plaza brokerage offices focused onpremium condominiums. The number ofMansion Plazas grew from three locations incentral Tokyo to 24 in various cities in the
Capital area, the Kansai area and the
Hokkaido area (as of March 31, 2021).
These offices are staffed by professionals
with the Mansion Expert in-house
qualification for their excellent track recordand experience in premium condominiumtransactions and superior knowledge ofcondominium structures, equipment, market
and transactions. They have been trained toacquire thorough knowledge of areas andproperties so that they can offer brokerage
services based on precise assessment of asset
value of properties.

Sumitomo Fudosan Esforta Co., Ltd. directly manages six ésforta fitness clubs,
primarily in Tokyo. Based on the concept of “assigned instructor system,” at eachoutlet, instructors propose comprehensive fitness menus according to the member’s
needs by combining gym, pool, studio and nutritional programs, and provide
support. The company also operates a golf academy and fitness studios, primarily
offering yoga and dance programs. In addition, utilizing the know-how cultivatedthrough operation of a wide range of facilities, the company is contracted by eightorganizations including municipalities to operate and manage their sports facilities(as of March 31, 2021).

• Hokkaido area

• Kyushu area37

Mansion PlazaＥ
ＳManagement
Ｇ経営
ESG

269

directly operated
brokerage offices

Sumitomo Fudosan Esforta Co., Ltd.
事業概況
Business
Review

As one of the leading brands in the industry, we have built a network of
269 directly operated brokerage offices across Japan, focusing on thebrokerage of existing condominiums, detached houses and land lots. The
business has built up a community-based sales structure under a principleof “Customer-First” and boasted a successful brokerage record of some
35,000 units in fiscal year 2020, making it one of the leading companies in
the industry.
As an initiative to catch new needs, we are also operating Mansion Plaza
brokerage offices, which exclusively handle premium condominiums thathave high asset value.

Sumitomo Fudosan Syscon Co., Ltd. sells interiors to mainly Sumitomo Realty’s
customers of their condominiums, custom homes and remodeling. The company’s
interior concierges propose interiors according to customers’ requests from among
the products of over 300 manufacturers in Japan and overseas. The company also
carries out the construction work contract business, which engages in theconstruction of Mansion Gallery, as well as offers proposals for effective land use,such as car park operation.

Izumi Country Club is a golf club with convenient access, located about 50 km, or a
one-hour drive, away from central Tokyo. Taking advantage of the flat landscape, therefined layout with effectively placed ponds and greens as well as the scenery
replete with seasonal plants and flowers are enjoyed by players.

■ Sumitomo Fudosan Villa Fontaine Co., Ltd. ▶︎ Page 31▶︎ Page 31

Sumitomo Realty & Development Co., Ltd.

38

ESG Management

A Message from the Management

Promotion of ESG andContributions to SDGs

Sumitomo Realty’s
Corporate Value Creation

ESG Management Contents

41
43

The Sumitomo Realty Group has been practicing
Sustainability Management that inherits
Sumitomo’s Business Philosophy. We have set
forth our material issues as “Disaster Resistant,”

ESG Topics
Environment
4345
Biodiversity
45
Reducing Waste and Curbing Environmental Pollution 46
Addressing Climate Change“Environmentally Friendly,” “Together with theConservation of Water Resources

Community” and “People Friendly.” We aim to47

same time maximizing our corporate value by
promoting ESG through our business activities.

Society
For Disaster-Resistant Community Development 47

We will also contribute to the achievement of

Urban Development that Contributes to the Community 50

UN’s Sustainable Development Goals (SDGs).

Respect for Human Rights
Promoting Diversity
Working Environment
Product Safety & Quality and Stakeholders

In order to promote sustainability across the Group, Sumitomo Realty has established the Sustainability Committee
chaired by the Company’s President and its subordinate organization, the Sustainability Council, to manage issues
and status related to ESG including climate change, human rights and governance. It has also established the Risk
Management Committee chaired by the Company’s President to manage risks related to ESG such as climate change,
human rights and labor standards. Important issues are reported to the Board of Directors as necessary, thereby
establishing a supervisory system by the Board of Directors.
System Diagram (As of July 2021)
Chairman: President
Administrative Office: ESG Promotion Office(Corporate Planning Department)

Risk Management Committee
Chairman: President

Governance57
59
Corporate Governance System
59
Initiatives to Strengthen Corporate Governance 60
Board of Directors and Corporate Auditors
Basic Views of Corporate Governance

Policies for Appointment of Directors andCorporate Auditors
Compensation of Corporate Officers
Initiatives for Promoting Diversity
Compliance
Risk Management

Sustainability Council
Each Department

BCP Subcommittee

Internal Control Meeting

Hosted by General
Affairs Department

Hosted by Internal
Audit Department

For more detail about Risk Management System, please refer to page 64.

39

Integrated Report 2021

Takeover Defense Measures

61
61
62
63
64
65

Financial Section/
Company Information

Sustainability Committee

57

COVID-19 Prevention Measures

ESG Management

Sustainability Promotion System

52
53
54
55
56

Business Review

contribute to addressing social issues, at theTimely and Appropriate Information Disclosure and66
Communication with Shareholders and Investors

Sumitomo Realty & Development Co., Ltd.

40

ESG Management

Please refer to the press release on the Company website for details.
https://www.sumitomo-rd.co.jp/english/sustainability/news

ESG

E Environment■

Joined the
UN Global Compact
The Company has signed the “UN Global
Compact,” and has joined “Global Compact
Network Japan,” which is a local network in Japan.

E

Endorsed Task Force on
Climate-related Financial
Disclosures (TCFD)

Sumitomo Fudosan
Onarimon Tower
received the Minato-ku
Green Urban
Development Award

The Company endorsed therecommendations of the TCFD.

5

6

G

G

S

E
S

★★★★★
Properties with the best classenvironmental & social awareness

★★★★☆

S
Held a community
disaster awarenessevent, Disaster
Prevention and First-Aid
Fair at Ariake Garden

41

Integrated Report 2021

Properties with exceptionally highenvironmental & social awareness★★★☆☆
Properties with excellent environmental &social awareness

Excess electricity charges

E

Construction of custom homes
Promoting the introduction of “SUMIFU x ENEKARI”

10

11

2021

12

Property Name

Sumitomo Fudosan Shinjuku Grand Tower
Sumitomo Fudosan Osaki Garden Tower
Sumitomo Fudosan Shinjuku Garden Tower
Tokyo Nihombashi Tower
Sumitomo Fudosan Azabujuban Building
Sumitomo Fudosan Roppongi Grand Tower
Izumi Garden Tower
Shinjuku Sumitomo Building
Sumitomo Fudosan Shinjuku Oak Tower
Sumitomo Fudosan Shinjuku Central Park Building etc.
Sumitomo Fudosan Iidabashi First Building
Sumitomo Fudosan Aobadai Tower
Sumitomo Fudosan Shiodome Hamarikyu Building

Cooperation for achieving adecarbonized society

S

Homes across the country

The Company has joined the Kanosei Art Project, promoted by
Toppan Printing. It showcases works by artists with disabilities
through exhibitions and various products. As the first project of
our involvement, we began displaying artists’ works on thewalls of a temporary enclosure surrounding the construction
site of Sumitomo Fudosan Osaki Twin Building East.

9

General transmission anddistribution operators

Electricity
surplus

Decarbonization Lead
Project Agreement

Provision of “SUMIFU x ENEKARI”
TEPCO Group

Providing environmental value
TEPCO HomeTech, Inc.
(Consumption of self-generated electricity)

1

2

3

4

5

6

7

8

9

10

Introduced RE100 compliant electricity (100% renewable power) derived fromtenant’s own solar power plant on a per-tenant basis, the first initiative in Japan(Collaboration with Fuyo General Lease Co., Ltd.)The Company with the collaboration of Fuyo General Lease Co., Ltd. has developed a scheme for a corporate tenant to be able to substantially use
renewable energy in a leased office space by using its own renewable energy source for the first time in Japan. The scheme was introduced in
Sumitomo Fudosan Kojimachi Garden Tower from April 2021. It creates a new option for companies that consider introduction of renewable energy intheir tenant-space, to contribute decarbonizaition by utilizing their own assets.
— Flow of environmental value— Flow of electric power

No. of Properties

5

18

E

Environmental value(zero carbon dioxide
emissions)*JEPX: Japan Electric Power Exchange
Non-fossil energy certificates are sold through JEPX.
These certificates can only be purchased by retail power companies.

RE100 compliant electricity(used by Fuyo Lease)

JEPX*(non-fossil fuel energy value trading market)
FIT non-fossil fuel energy
certificate with tracking

Fuyo Lease Group“Namie Sakai Solar Power Plant 1”(Namie, Fukushima)

3

Floors 16-22

TEPCO Energy
Partner,
Incorporated

General electric power

General electric power

Building’s common area

Financial Section/
Company Information

Completed “Sankaku
Hiroba (triangular
plaza),” a large atrium
in Shinjuku Sumitomo
Building

Evaluation Rank (5 Grade Evaluation)* A first in the industry of solar power generation equipment installation where a major infrastructure group supports equipment repairs and upgrades
for the entire period of residency (based on our own research).

* Operated jointly by the Ministry of
Economy, Trade and Industry and
the Nippon Kenko Kaigi (Japan
Health Council)

The Company acquired DBJ Green Building Certification, which for all of its owned buildings over 50,000 m2.
A total of 26 buildings with gross floor area of 770,000 tsubo (one tsubo is roughly 3.3m2) have acquired thecertification, the largest* gross floor area held among the owners of buildings in the Office Building categoryof the DBJ Green Building Certification. Shinjuku Sumitomo Building, completed in 1974, has also obtained a* As of October 31, 2020, researched by the Company
four-star certification after undergoing extensive renovations.

Established theSustainable
Procurement Guidelines

E

8

Recognized in the 2021
Certified Health &Productivity Management
Outstanding Organizations
Recognition Program*(large enterprise
category)

ESG Management

S

7

The Company has commenced an industry-first* “SUMIFU x ENEKARI” service jointly developed with TEPCOEnergy Partner, Inc. With this service, we install solar power generation systems to detached houses at a “zeroinitial cost,” and provide support semi-permanently with a fixed monthly service fee. In conventional services,
after the contract term of about ten years expires, ownership of the system is transferred to the customer, whichmeans that the customer must maintain and manage the equipment themselves. In our service, the customer canenjoy the benefits of power generation effortlessly and with peace of mind for the entire time they are living inthat house. Through this initiative, we will promote more widespread installation of solar power generation
systems in detached houses to contribute to the expansion of carbon-free power in Japan.

S

Acquired DBJ Green Building Certification for 26
buildings in total, covering approximately 770,000
tsubo, the largest* gross floor area in the Office
Building Category

Introduced an executive
officer system

E

S

Held an earthquake
disaster reconstruction
event at Ariake Garden

Business Review

4(Collaboration with Toppan Printing Co., Ltd.)

Commenced “SUMIFU x ENEKARI” - residential solar power generation service
An industry first* delivering “Peace of Mind” for the entire period of residency

Sumitomo Realty’s
Corporate Value Creation

Exhibited art by artists with disabilities
at the Company’s project site

At Ariake Garden, which opened in June
2020, we are engaged in creating new
liveliness by bringing culture and art
through various events. At the first ofsuch events, “It’s Summer Vacation!
Let’s Have Fun at Ariake Garden!,” weheld interactive events in collaboration
with Komogomo Exhibition sponsoredby Tokyo University of the Arts.

2020

G Governance■E

Held a culture and art support event,
Komogomo Exhibition
at Ariake Garden
S

S Society■S

A Message from the Management

ESG Topics

Other tenants
Sumitomo Fudosan
Kojimachi Garden Tower(Chiyoda Ward, Tokyo)

Other power plants

Sumitomo Realty & Development Co., Ltd.

42

ESG Management

Installation of energy-saving equipment
We have introduced state-of-the-art energy-saving equipment that is environmentally friendly and highly efficient in the buildings supplied ineach business.
Office Buildings· LED lighting & brightness sensors · Low-e double glazing glass (heat insulation and shielding)· Floor vents (natural ventilation) · Decentralized HVAC system· BEMS (Building Energy Management System) for efficient use of energy etc.
Examples of energy-saving
equipment in each businessCondominiums· Low-e double glazing glass (heat insulation and shielding)· Latent-heat-recovery-type gas-powered hot water supply systems (Eco-Cute systems) · Thermo bath bathtubs etc.

etc.

Example of the office building in the Tokyo Mita Redevelopment ProjectAir conditioning can easily be adjusted, turned on andoff or switched between heating and cooling in different
zones. This allows precise zoning based on the layout.

❷ Floor vents

Vents can be opened and closed manually, making it
easy to maintain natural ventilation in the event of apower outage and helping save energy in the spring
and fall.

❸ Low-e double glazing
glass

The windows reduce heat from the sun in the summer
and heat loss in the winter, increasing HVAC efficiency.

❹ Electric blinds

The blinds can be opened and closed electrically to let injust the right amount of light.

View of virgin forest from the entrance lobby of La Tour Sapporo Ito Garden

Addressing Climate Change
In recent years, countries around the world have been working together to reduce greenhouse gas (GHG) emissions based on therecognition that climate change is a global issue. Japan has also gained momentum in its progress toward a steady reduction of GHG,
having declared the target of carbon neutrality by 2050. The Sumitomo Realty Group recognizes that climate change has the potential tohave a significant impact on our business activities not only as a risk but also as an opportunity. With this in mind, we are working toaddress climate change issues in conjunction with our respective stakeholders including suppliers, business partners, tenants, and industry
organizations. We also recognize and support the importance of the Paris Agreement and other agreements related to global warming
countermeasures. We are working to significantly reduce GHG emissions through a range of measures, including renovating existingbuildings so that high-efficiency equipment can be installed.

* S class business operator: Certified as having reduced the five-year average for unit energy consumption by 1% or more annually or otherwise achieve specified benchmark levels

Results of energy consumption and greenhouse gas (GHG) emissions volumes
Unit

Reduction target

FY2018FY2019FY2020

2,283

3,617

3,824

3,946

Reduction rate

1%

Energy consumption

Thousand GJ

4,562

5,245

5,300

4,982

Base year

2019

Energy consumption

Thousand kL

Target year

118

135

137

129

0.05156

0.037420.03576

0.03258

Per-unit volume after reduction

2020

Physicalrisks

FY2009FY2018FY2019FY2020t-CO215,302

18,916

21,831

20,485

Reduction rate

1%

GHG emissions (SCOPE2)

t-CO2

144,812235,360

233,271

210,454

Base year

2019

GHG emissions (SCOPE1&2)

t-CO2

160,114254,276

255,102

230,939

Target year

t-CO2/m2

0.070140.070310.06672

0.05853

Per-unit volume after reduction

Per-unit GHG emissions (SCOPE1&2)

Single year

2020
0.06605(0.0082)* The scope of data collected for calculating for energy consumption and GHG emissions encompasses all the properties owned, managed, used, by the Sumitomo Realty or leased to it as office,etc. for which report is required under the Act on Rationalizing Energy Use. In addition, all GHG emissions are calculated using adjusted GHG emission coefficients.

43

Integrated Report 2021

Opportunities

Correspondence (mitigation and adaptation)/Strategies

The introduction of a carbon tax could lead to concerns of rising costs We closely monitor related systems and regulations and will be preparedfor various building materials. This has given rise to concerns that an to respond when necessary. We also assume the offset price per t-CO2
as the carbon price, and we are conducting various related studies.
increase in construction costs could affect our business plans.

Increasing occurrence of
natural disasters due toabnormal weather

If central Tokyo was to experience frequent extreme winds, floods,
In preparation for major weather hazards such as large typhoons, weand other disasters, the concentration and severity of damage and set each property’s estimated flooding depth based on hazard maps,
the resulting increase in repair costs could affect our business plans. etc. and installed tide boards where necessary.

Lower prices due to the spread It is assumed that this will provide an opportunity for lower building
costs as the high-efficiency equipment that is currently installed willof high environmental
become less expensive.
performance products

0.03540

GHG emissions (SCOPE1)

Details

Introduction of a carbon tax
Single year

(0.0032)
Unit

Scenarios

Increasing demand for Net Zero If there is a strong demand for the adoption of ZEB and ZEH specifications, In order to promptly respond to the social demands, we consider
Energy Building (ZEB), Net Zero the environmental performance of the equipment to be installed will need to installing equipment with high environmental performance at the
be further enhanced. This could lead to concerns of higher construction costs. appropriate time, and participate in “HEAT20” as a regular member.
Energy House (ZEH), etc.

We decide on the equipment to be installed each time we develop aproperty after considering the costs and performance. This ensuresthat we are ready to respond to fluctuations in costs.

Increasing interest in disasterprevention features

Demand for properties with high disaster prevention features will also
We are working to further improve the disaster prevention features
increase, and this is expected to create business opportunities, as ourof our portfolio by realizing high disaster prevention features in new
office buildings are highly evaluated for their disaster prevention features. properties while implementing renovations of existing properties.

Increasing interest inenvironmental performance

We have been continuously striving to improve the environmental
We continue to improve the environmental performance of aged properties
performance of our overall portfolio. It is assumed that the reputation through renovation, and promote the acquisition of various Green Buildingof our properties will increase further.
Certifications as objective indicators of high environmental performance.

Financial Section/
Company Information

FY2009Thousand m2

kL/m2

Classifications

Transition
risks

Target area (standardized coefficient − per-unit denominator)

Per-unit energy consumption

Risks and opportunities associated with climate changeWith regard to climate change risks, in addition to examining the impact of related systems and regulations on our business activities, wehave identified specific risks that may affect our business based on the 2°C and 4°C scenarios. We are currently examining business strategies
we have developed that incorporate the magnitude of the financial impact along with measures for mitigation and adaptation. With respect
to important matters among the identified risks, a system has been established in which such matters are discussed at important meetings,
including the Board of Directors and Executive Committee meetings, and supervised by the Board of Directors.

ESG Management

Reducing greenhouse gas (GHG) emissions and energy consumption
Through constructing new buildings featuring substantial environmental performance and continuously improving environmental
performance by renovating existing buildings after they reach a certain age, Sumitomo Realty has achieved reduction of per-unit energy
consumption by more than 1% per year over the last seven consecutive years, and a 37% reduction in comparison with 2009 when we
initially disclosed such information. As a result, over the last four consecutive years we have gained S class (excellent business operator)*
certification, which is the highest ranking given for efforts taken to conserve energy under the Act on Rationalizing Energy Use.
In fiscal 2020, we cut our per-unit energy consumption and our per-unit GHG emissions by 8.9% and 12.3%, respectively, in comparison
with the previous fiscal year, substantially exceeding the reduction target of 1% for both.
We will keep striving to reduce its energy consumption going forward as a “S class business operator,” with the target of reducing perunit energy consumption and per-unit GHG emissions by 1% annually.

Business Review❶ Fully-independent
HVAC

Sumitomo Realty’s
Corporate Value Creation

Detached Houses· Solar power generation facilities and storage batteries · Home Energy Management System (HEMS)

A Message from the Management

Environment* Transition risks were assumed based on the 2°C scenario (the Sustainable Development Scenario (SDS) in the IEA World Energy Outlook 2018 and other scenarios). Physical risks were assumed
based on the 4°C scenario (the Reference Technology Scenario (RTS) in the IEA World Energy Outlook 2018 and other scenarios).

Sumitomo Realty & Development Co., Ltd.

44

ESG Management
Environment
Reducing Waste and Curbing Environmental Pollution

Shortages of water resources have become a major problem throughout the world due to increasing demand for water as the population
grows, coupled with droughts caused by climate change. We deem that problems stemming from the shortage of water expose to businessrisk, given that water resources are an indispensable resource for the entire business of the Sumitomo Realty Group. As such, we will takeaction to conserve water resources, working in conjunction with our respective stakeholders.

The Sumitomo Realty Group recognizes that environmental pollution, high-volume discharge of waste material and squandering ofresources constitute substantial social issues that must be given due consideration when conducting business activities. As such, we willtake action geared toward curbing environmental pollution, reducing waste and making effective use of resources, working in conjunction
with our respective stakeholders including suppliers and tenants.

Installing water-saving equipment and facilities
Reducing wastage that occurs when water is left running by equipping washbasin faucets with water-saving devices at all office buildings it develops
Adopting design standards specifying use of ultra-water-saving toilets in order to promote installation of water-saving equipment at all properties it develops
Installing ultra-water-saving toilets, flush volume of 6 liters — significantly less compared with 13 liters used by previous model, to all new buildings as well as
existing properties through renovation
S etting up sewage and rainwater reclamation facilities that purify the water, and using the greywater to flush toilets and water plants, mainly in large buildings* The Sumitomo Realty Group has not earned any revenue from its business activities in areas where water stress is a concern as of September 2021, based on the Aqueduct Survey
conducted by the World Resource Institute (WRI). Japan, where our main business activities are based, has been certified as a “Low-Medium” water risk area.

Water withdrawal and discharge volumes
Unit

Thousand m2

Water withdrawal

Thousand m3

Per-unit water withdrawal

Thousand L/m2

FY2018FY2019FY2020Wastewater

Unit

3,513

3,731

3,851

Target area (standardized coefficient)Thousand m2

2,589

2,735

1,983

Wastewater

Thousand m3

0.73710.73320.5151Per-unit wastewater

Thousand L/m* All of the abovementioned withdrawals are from tap water. No withdrawals are fromsurface water, groundwater, external wastewater or seawater.
* The scope of data collected for calculation for water withdrawal encompasses all theoffice buildings owned and managed by Sumitomo Realty for which report is required
under the Act on Rationalizing Energy Use.

2

FY2018FY2019FY2020

3,513

3,731

3,851

2,459

2,657

1,843

0.70000.71220.4787* All of the abovementioned wastewater is discharged through the sewer system to an
external water treatment plant. No wastewater is discharged to marine waters, surface
water or groundwater.
* The scope of data collected for calculation for wastewater encompasses all the officebuildings owned and managed by Sumitomo Realty for which report is required underthe Act on Rationalizing Energy Use.

Waste discharge

Volume of recycled waste
Unit

Target area
(standardized coefficient − per-unit denominator)

Total waste volume
Industrial waste
General waste
Units

FY2018FY2019FY2020Unit

FY2018FY2019FY2020Thousand m2

3,456

3,681

3,751

Volume of recycled waste

t

9,289

9,383

6,438

t
t
t
t/m2

17,721

17,272

14,397

13,20912,635

11,262

Total waste volumet

17,721

17,272

14,397

4,512

4,637

3,135

Percentage of waste recycled

%

52.4

54.3

44.7

0.00510.00470.0038* The scope of data collected for calculation for waste discharge volumes encompasses
some portions of office buildings owned, managed, and used by Sumitomo Realty forwhich report is required under the Act on Rationalizing Energy Use.

* Figures for volume of recycled waste include thermal recycling only if they are noncombustible materials.
* The scope of data collected for calculation for volume of recycled waste encompasses
some portions of office buildings owned, managed, and used by Sumitomo Realty forwhich report is required under the Act on Rationalizing Energy Use.

Reducing waste in Shinchiku Sokkurisan remodeling business
Sumitomo Realty’s Shinchiku Sokkurisan remodeling business is arevolutionary system that involves extending the life of existing houses
through earthquake-reinforcement work while retaining the main
structural elements, thereby reducing the waste of resources and curb thegeneration of industrial waste in comparison with rebuilding. (▶Page 15)

BeforeInterior stripped down to its
main frames

Business Review

Water withdrawal

Target area (standardized coefficient)

Process-based targets for reducing waste and making effective use of resources
The Sumitomo Realty Group aims to reduce waste and promote the effective use of resources in its business activities. In addition to
fulfilling the responsibilities of a business operator as stipulated in the Tokyo Metropolitan Waste Management Ordinance and otherregulations, we promote various activities, such as educating the tenants of our office buildings, to further reduce waste and use resources
effectively.

After

The Sumitomo Realty Group maintains significant influence on biodiversity integrally rooted in land, particularly given the nature ofdevelopment business involving office buildings, condominiums and other such properties. As biodiversity is intimately relevant to allenvironmental issues, including climate change, conservation of water resources and environmental pollution, we make it our principle toconsider not only the comfort of our customers and community members, but also our surrounding environments and ecosystems, andwork to preserve biodiversity in conjunction with our respective stakeholders.

Reducing waste in the office building development business
Extending the life of buildings through architectural design that ensures long-term use with minimal deterioration will contribute greatly to
reduction of environmental load by minimizing resources wasted and industrial waste generated through rebuilding. In conjunction with superior
earthquake resistance and fire resistance, Sumitomo Realty’s office buildings are designed to respond to various changes in work styles, officelayouts and IT evolution, in terms of both function and space. For example, the “ceiling grid system” incorporates ceiling equipment into lighting
panels to make relocation of the equipment easy, enabling it to respond flexibly to a change in office layout and minimize waste generation.

Curbing Environmental Pollution
Process-based targets for curbing environmental pollution
The Sumitomo Realty Group aims to curb environmental pollution associated with its business activities as much as possible byimplementing measures related to environmental pollution in accordance with the relevant laws and regulations. In addition to complying
with laws and regulations, we enhance the effectiveness of our measures by regularly checking their control status from a third-party
perspective, mainly through the Internal Audit Department.
Appropriate management and disposal of CFCs

45

Integrated Report 2021

Open green space at City Tower Kanamachi

La Tour Sapporo Ito Garden

A beetle found in the grounds ofSumitomo Fudosan Shinjuku Garden Tower

Measures regarding nitrogen oxide and sulfur oxide
Sumitomo Realty regularly measures and analyzes soot and smoke emitted
by boilers and hot-cold water generators to ensure that they comply withenvironmental standards stipulated by the Air Pollution Control Act. The
investigation is conducted by third parties, and we conduct operations after
confirming the absence of abnormalities in the concentrations of air
pollutants, such as particulate matter, nitrogen oxide and sulfur oxide.

Tokyo Nihombashi Tower nitrogen oxide (NOX) andsulfur oxide (SOX) emissions* The Sumitomo Realty Group does not own or manage any facilities (such as drying and other facilities
for the manufacture of chemical products) that are subject to legal restrictions due to their high VOCemissions under the VOC emission control system stipulated by the Air Pollution Control Act.

* The annual emissions from four hot-cold water generators in Tokyo
Nihombashi Tower. They are calculated based on the concentrations of sootand smoke measured and the operating hours of the equipment.

Unit

FY2019FY2020NOX emissionst

0.07800.0370SOX emissions

t

0

0

Sumitomo Realty & Development Co., Ltd.

Financial Section/
Company Information

Measures regarding asbestos and formaldehyde
Soil contamination countermeasures

Osaki Garden City

ESG Management

Biodiversity

Reducing waste in custom home business
In Sumitomo Realty’s custom home business, we use specification standards under the “long-life quality housing” certification standard(measures against deterioration grade 3, thermal insulation performance grade 4, upkeep grade 3, earthquake resistance grade 3). We will
help reduce industrial waste by extending the rebuilding cycle as a result of supplying this highly durable housing.

Redevelopment business and biodiversity: Sumitomo Realty’s redevelopment business contribute to biodiversity. By the completion of Osaki Garden City(▶Page 12) which involved redevelopment of a densely built-up district of wooden housing with little greenery, the overall location’s green coverage increased to
35% including its roof greening, Through Osaki Garden City and other redevelopment business, we aim to create green areas in numerous areas, thereby
providing spaces for community members to encounter natural surroundings and for nurturing rich biodiversity.
Development that protects and makes the most of natural forests: Sumitomo Realty seeks to preserve mature trees that are already on sites
earmarked for development, so that they can be utilized as greenery to accomplish attractive urban development in harmony with nature.
Endorsement of “Declaration of Biodiversity by Keidanren”: Sumitomo Realty conducts business activities that consider biodiversity.
Use of Rainforest Alliance certified products: The Rieven House convenience stores which Sumitomo Realty Group operates, uses environmentallycertified coffee beans.

Sumitomo Realty’s
Corporate Value Creation

Collaboration with external parties
In addition to its own initiatives, the Sumitomo Realty Group is also committed to working more broadly with the Japanese real estateindustry to promote environmental conservation measures, such as reducing water consumption. We are a regular member of theEnvironmental Committee of The Real Estate Companies Association of Japan. The Environmental Committee formulated the Real Estate
Industry Environmental Action Plan, which includes the introduction of high-efficiency, water-saving fixtures, automatic faucets andautomatic flushing devices as specific action goals, and the entire industry is working together to reduce water consumption.

Reducing Waste and Making Effective Use of Resources

A Message from the Management

Conservation of Water Resources

46

ESG Management

Society

A Message from the Management■ Support for commuters stranded after disasters
In central Tokyo, there is a shortage of temporary evacuation spaces
and shelter for people unable to return home in the event ofdisaster. Sumitomo Realty’s office buildings are equipped withfacilities, such as entrance hall, multipurpose halls and open space,to shelter people unable to return home, taking advantage of theirhighly disaster-resistant features and large spaces incorporated intheir designs.
Sankaku Hiroba (Shinjuku Sumitomo Building) that canshelter approx. 2,800 stranded commuters

Joint disaster drills with the Koraku Community Association at Sumitomo Fudosan Iidabashi First Tower

Sumitomo Realty’s
Corporate Value Creation■ Joint hosting of disaster prevention events to boost community disaster preparedness
Through our redevelopment business, we have contributed to local disaster preparedness, developing safe and secure communities,
including reinforcing the disaster resistance of buildings, improving surrounding roads and developing public spaces. Even after thecompletion of the development, as boosting local disaster preparedness in conjunction with the community is key to sustainable
development of the city, we are working to raise awareness of disaster prevention and strengthen collaboration with the local community by
hosting evacuation drills and disaster drills jointly with the community. By holding such drills with workers and residents of buildings inredeveloped sites, alongside many other relevant groups such as fire stations, the police, local residents and volunteer fire brigades, we areforming a community of mutual assistance in preparation for an actual disaster.

For Disaster-Resistant Community Development
Business Review

As a comprehensive developer that provides social assets such as office buildings, condominiums and detached houses, it is a vital mission
for the Sumitomo Realty Group to create safe and secure communities with disaster preparedness functions, protecting human life andlimiting the damage to buildings from the risks of an earthquake striking directly beneath the Tokyo metropolitan area and from the impactsof climate change. In office buildings and condominiums, we are actively working to introduce advanced earthquake resistance performancethrough technologies such as seismic isolation and damping systems. We are also working to enhance our BCP. In addition, we areTheseismic base-isolation
structure
absorbs theshaking
contributing to disaster prevention in detached wooden houses with our
Shinchiku
Sokkurisan
remodelingandcustom homes.

Earthquake simulation vehicle

Fire hose demonstrations with a machikado disaster drill vehicle

Smoke house

AED practice area

Disaster Prevention for Office Buildings
Business Continuity Planning (BCP) support through multiple safety measures■ Uninterrupted power supply
Risk of power outages is mitigated by a three-layer backup system,
using a 2-line power receiving system (❶), as well as gas and oil
tanks (❷ and ❸). The Company further strengthens measures foruninterrupted power supply, such as installing emergency power
Width of earthquake swaygenerators for both common areas and tenant areas. Currently,
about 70% of the buildings owned by the Company haveemergency power generators.

The seismic base-isolation structure absorbs the shaking

Main Line
Break in Accident
power
transmission
Auxiliary Line

Width of sway of seismicbase-isolation structure
Medium-pressure gas
Municipal
gas facility

Power generation

Width of earthquake sway
(Example: Sumitomo Fudosan Osaki Garden Tower)

3,000 k×VA 2 units

Dual-fuel gas
turbineFuel oil
72-hour supply
oil tank forgenerator(Example: Sumitomo Fudosan Osaki Garden Tower)

47

Integrated Report 2021

■ Fire and disaster drills conducted remotely
Due to the prolonged COVID-19 pandemic, with many people
working from home, it is difficult to hold the usual disaster drills
in office buildings. In response to such situation, we held
disaster drill events remotely in August 2021. The first of such
event took place at Sumitomo Fudosan Shibuya Garden Tower in
conjunction with the Shibuya Fire Station. In addition to holding
conventional drills with a small group, we produced an
instructional video for tenant employees working from homeand posted it online so that they can learn the kinds of
responses required of tenants in an emergency, such as initialfire extinguishing, reporting and guiding people to evacuate.

Financial Section/
Company Information

Electrical power transmission Transformer
substation

Sumitomo Fudosan Iidabashi First Tower

ESG Management■ Seismic isolation and damping systems
Sumitomo Realty was an early adopter of earthquake-resistantfeatures, promptly introducing the seismic isolation structure in its
office buildings after the Great Hanshin Awaji Earthquake of
1995. Approximately 80% of the buildings we own are structured
with a seismic isolation system and/or a damping system. Highly
safe structures, which can protect people working in offices andassets by reducing tremors, increase the feeling of safety among
tenants.

Width of sway of seismicbase-isolation structure■ Other disaster countermeasures• Monitoring by Sumitomo Realty’s employees around the clock throughout the year
• Spaces for installing additional emergency power generators serving tenant-occupied areas• Elevators that can automatically assess the situation after an earthquake and temporarily return to operation• All new buildings in areas of flooding risk equipped with tide boards
Sumitomo Realty & Development Co., Ltd.

48

ESG Management
Society
Disaster Prevention for Condominiums
Sumitomo Realty’s condominiums feature seismic isolation/damping
structures to prevent deformation of buildings and alleviate shaking
during an earthquake. In addition, various disaster countermeasures are
implemented, such as installation of emergency power generators,
elevator safety functions, storerooms for emergency supplies andemergency wells.
Key disaster countermeasures (City Towers Tokyo Bay)
Basic structure
City Towers Tokyo Bay

StrongshakingSlowshaking

Disaster Prevention for Detached Houses
In its custom home construction and Shinchiku Sokkurisan
remodeling businesses, Sumitomo Realty proposes proprietaryseismic reinforcement and damping systems as disastercountermeasures for detached houses, as well as disasterreadiness plans that will allow home owners to live securely
in their homes after a disaster until lifelines are restored.
“Sumitomo-Fudosan-no-Miraino-Ie”“Sumitomo-Fudosan-no-Miraino-Ie” (Sumitomo Realty’s next
generation home) is a new custom home product launched in
September 2021. A package that includes solar power
generation, storage batteries and rainwater tank, it ensuresenough power, drinking water, and water for daily use forabout three days in the event that power and water supplies
are disrupted due to a disaster.
 olar power generation and•S

The business of developing and operating real estate properties can only be possible through cooperation with people in the local
community. In order to build solid, lasting relationships with local communities and contribute to the development of regions, the Sumitomo
Realty Group engages in a variety of activities that contribute to local communities and society through its business activities.

Contributing to the Society and Community through Redevelopment
The Sumitomo Realty Group invests in local communities focusing on redevelopment,
working to address local issues such as disaster prevention, the environment and theliveliness of the community. Our current medium-term management plan targets thepromotion of the development of leasing office assets of over 800 thousand tsubo in grossfloor area, mainly through redevelopment. By building solid relationships with local
residents, we will contribute to achieving sustainable local communities.
IZUMI GARDEN redevelopment project, which comprises two redevelopment areas, one
surrounding Izumi Garden Tower and the other surrounding Sumitomo Fudosan RoppongiGrand Tower, is a typical example. This project realized flexible land use that takes accountof characteristics of each urban block and harmony with the surrounding areas under theconcept of an “Open Town Development,” achieved through discussions with about 100
landowners and administrative officials from Tokyo metropolitan and Minato Wardgovernments.

Sumitomo Realty’s
Corporate Value Creation

Seismic energy absorbed
Conventional structure

Urban Development that Contributes to the Community

storage batteries

Lighting equipment
tends to fall
Glass tends toshatter and fall

Deformation ofdoor frames tends
not to occur

Concrete tends
to fracture andfall

Sashes tend
to come off

Crackingof pillars
and beams

Violent horizontal vibration
is caused. Higher floors shake
more strongly.

Earthquake motion(horizontal vibration)• Cracking of pillars and beams• Deformation of door frames tends to occur

Lighting
equipment
shakes less
Frame tends
not tofracture

Seismic
isolation
devices

Because seismic isolation devices absorb
seismic energy, the building shakes
slowly and less deformation occurs.

• Frame tends not to fracture• Deformation of door frames tends not to occur• Furniture tends not to topple over
• Lighting equipment shakes lessRobust pillars to increase earthquake resistance

110 piles installed

Welded closed hoops
Disaster countermeasures

Emergency power generator
Useful for extinguishing fireFire cistern

Emergency wells

Useful in the event of a disaster

Automatically stop at the closest floor in the eventof an earthquake

Elevator safety device

Water supply available even if the pump stops

Water supply measures
Available even in power outage

Disaster-ready vending machines

Emergency toilets
connectable to a manhole

For emergency rescue

In the event of an emergency, such as an earthquake

Provided to each household

Emergency supplies

Helicopter hovering space
Emergency backpack■ Izumi Garden Tower
Challenges facing the community
How to achieve coexistence of areas with two distinct characteristics, on theridge and the valley side
A lack of geographical continuity due to a height gap reaching up to 20 meters
impeding business use
Old wooden houses crowded on sloped and terraced land; improvement neededfrom the perspectives of living environment and disaster prevention

Integrated Report 2021

An urban space that combine the “green and culture” area on the verdant
ridge side with the “working, living and liveliness” area on the valley side
directly connected to the subway station
A spacious square, underground but full of light, connected to the subway
station by developing the area together with the Roppongi-itchome station
A terrace square utilizing the difference in elevation and placing characteristic
shops, where people can feel liveliness of the city

■ Sumitomo Fudosan Roppongi Grand Tower
Challenges facing the community• New Power Column
This construction method increases theearthquake resistance of platform woodframe construction by about 30% byinstalling a column in each of the four
corners of a structure to reinforce them. The
method was developed by Sumitomo Realty
with cooperation from Kogakuin University
professor emeritus Kenji Miyazawa, Dr. Eng.,and Arup, a comprehensive engineering
consultancy. (Patent No.4875721)• Shinchiku Sokkurisan Proprietary Seismic Reinforcement Method
In the Shinchiku Sokkurisan business, we offer a seismic retrofitting method suitablefor wooden houses of all ages. This construction method incorporates a proprietarysystem jointly developed with Sumitomo Rubber Industries to cover houses built under
the new earthquake resistance standards applicable since 2000 without changing theposition of existing bearing walls, creating aframework to offer seismic reinforcement
for houses of all ages.
MAMORY, the small seismic control
device developed by Sumitomo Rubber
Industries, absorbs seismic energy instantly
through the use of special high-damping
rubber to curtail deformation of thebuilding. It makes homes particularly
resistant to a series of powerful tremors.

Key points of the Redevelopment

A lack of good access to the Roppongi-itchome station making the area
inconvenient

Pedestrian flows in the area improved by redeveloping the district and the areain front of the station together, and creating a west exit to the station

Little surrounding greenery

Convenience enhanced through a new station square measuring 1,280m2 andthe introduction of a commercial complex

Had pedestrian safety concern due to narrow roads

A new 2,400m2 square rich in greenery created with a walkway allowing
pedestrians to enjoy greenery even in central Tokyo

Local community divided into east and west by the Metropolitan Expressway

Widening the sidewalks from 6m to 12m, and underground installation of powertransmission cables, to ensure that pedestrians can walk safely and comfortably
Free walkway built to connect the east and the west sides of the subway
station, to form a well-balanced urban area

■ Town management of the IZUMI GARDEN district
Sumitomo Realty manages “IZUMI GARDEN,” an approx. 6 hectare large urban block consisting of two redevelopment areas; “Izumi Garden
Tower” and “Sumitomo Fudosan Roppongi Grand Tower” at their core respectively.
We are working on town management to make the district attractive to workers, residents and visitors in each season to increase thevalue of the district and give it a lively atmosphere. The initiatives include events held jointly with local communities and our tenants.
Example of past events

Cherry blossom Festival

49

Key points of the Redevelopment

Cherry blossom Festival

Christmas Illumination

Disaster-Prevention Fair

Summer Festival

Financial Section/
Company Information

Securing water for domestic use, such as for a toilet

and rainwater

In order to prepare for water outages,
potable water is stored in the water pipes
underfloor and is always clean as it isconstantly replaced with fresh tap water
through daily water use. In addition,
rainwater is stored to secure water for dailyuse, such as for laundry and toilet.

Earthquake-resistant Technologies

Firm ground and piles

For power supply in the event of power outage

 ecuring drinking water•S

IZUMI GARDEN (left: Sumitomo Fudosan Roppongi Grand
Tower, right: Izumi Garden Tower)

ESG Management• Glass tends to shatter and fall
• Concrete tends to fracture and fall
• Lighting equipment tends to fall
• Sashes tend to come off

Furnituretends not totopple overBusiness Review

Deformation ofdoor frames
tends to occur

The introduction of a solar power
generation system for “energy creation”
and storage batteries for “energy saving”
ensures necessary power for daily life, suchas for refrigerator, lighting and smartphonecharging, for a certain period.

A Message from the Management

For Disaster-Resistant Community Development

Marche’ Event

Sumitomo Realty & Development Co., Ltd.

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ESG Management
Society
Respect for Human Rights

Community Revitalization

The Sumitomo Realty Group recognizes that respect for human rights is one of the most important issues as it conducts its businesses. We
protect the universality and inviolability of liberty rights, social rights and related rights under the International Bill of Human Rights andother human rights covenants. We also promote our business activities together with our suppliers and other stakeholders while ensuring
compliance with labor standards and realizing diversity.
Moreover, we have established a basic policy regarding human right that applies to all employees of the Group and are thoroughly
implementing it. For our suppliers, we request cooperation with our policy through our Sustainable Procurement Guidelines.

Basic Policy on Human Rights
Dinosaur exhibition held in Sankaku Hiroba

Creating Opportunities to Appreciate Art and Culture

KOMOGOMO
Exhibition poster

People waiting to enter Ariake Minna no KOMOGOMO Concert 2021

The Sumitomo Realty Group identifies human rights risks that could have an impact on its business based on consideration of the industry’s
characteristics. Due to the nature of our business in the real estate industry, we view the improvement of the working environment,
including measures to prevent occupational accidents at contracted construction sites, as one of the most important human rights issues.
We work to mitigate these risks that need to be prioritized and addressed through dialogue and training with suppliers and other business
partners.
■ Human rights training
The Sumitomo Realty Group works to raise awareness of human rights as it promotes its business activities. We provide
all employees with training on human rights and other issues when they join the Company and then once every year.
Human rights training including harassment prevention is provided separately for managerial personnel who require thisfor roles overseeing business operations.
In addition, a compliance handbook is distributed to employees when they join the Company to inform them of thelaws and regulations and the need to respect human rights.
Compliance handbook■ LGBT considerations
In its Basic Policy of Human Rights, the Sumitomo Realty Group prohibits any discrimination based on sexual orientation or gender identity.
In order to prepare for potential incidents of discrimination, we have built a system that enables prompt action by establishing an anonymous
harassment consultation desk.
Kanosei Art Project — The artworks displayed on temporary
enclosures at construction sites■ Whistleblowing system
The Sumitomo Realty Group has a structure in which violation of compliance including human rights issues is detected and addressed
promptly through an internal consultation desk and two whistleblowing desks operated by the Internal Audit Department and an external
attorney-at-law. If a violation is reported, it is investigated promptly, and fair and strict measures are taken, while keeping the personal
information of the whistleblower confidential under strict legal protections.
Should a compliance violation be identified, we take appropriate action and then work to prevent a similar situation from reoccurring by
providing instructions on our website to employees and other measures. In addition, remedial measures are provided for victims.

Financial Section/
Company Information

Integrated Report 2021

Human Rights Issues Based on Business Characteristics

ESG Management

51

Step Concert -A conducting experience for the audience•	We comply with social norms, rules, decrees, international treaties, etc. of the country or region where thebusiness is conducted.
•	We endorse and respect international standards regarding human rights and labor, including theInternational Human Rights Charter, the International Labour Organization Declaration on Fundamental
Principles and Rights in Labor at Work, the Guiding Principles on Business and Human Rights, etc.
•	We prohibit discrimination or harassment based on any of the following aspects and respect rights:
race, nationality, religion, gender, sexual orientation/identity, disability, social status, age or medical history.
•	We do not engage in child labor or forced labor.
•	We manage working hours within appropriate limits to prevent overwork and reduce excessive working
hours.
•	We respect the freedom of association and rights to collective bargaining.
•	We pay wages above the minimum wage standard set by each country and work to stabilize employees’ lives.
•	We take measures and raise employee awareness to prevent occupational accidents.

Business Review

The Sumitomo Realty Group is engaged in a variety of activities aimed at supporting artistic
and cultural activities and creating opportunities to appreciate art and culture.
■ Charity concert
Sumitomo Real Estate Sales Co., Ltd. has been hosting Step Concert, a series of classicalconcerts for families, since 1987, as part of its charity/volunteer activities. The concert, which
has invited a cumulative total of about 230,000 people, has been designated a child welfare
cultural asset recommended by the Social Security Council of the Ministry of Health, Labourand Welfare since 1996, which recognized it as particularly outstanding as a series of concerts
for improving children’s welfare.
The concert also runs fundraising drives at its venues from which donations have been
made to the Japanese Red Cross Society to support earthquake-affected regions across Japanand the Japan Service Dog Association to raise service dogs. Since starting donations in 1995,
we have donated more than ¥16 million to NPOs and other organizations.
■ Collaboration with the KOMOGOMO Exhibition at Ariake Garden
Ariake Garden is a large complex we developed and manage as a hub of liveliness for Tokyo
Bay and Ariake area. It comprises residential and commercial space as well as a multipurpose
hall, a theater exclusive for the Shiki Theatre Company and several event spaces.
As an initiative to create liveliness by bringing new culture, we hosted the KOMOGOMO
Exhibition, an art event organized by young graduates from Tokyo University of the Arts,
providing a place of creative expression for young artists with their art works and musicalperformances. These activities also create a new forum for lifelong learning in which artists
and visitors can interact and learn from each other.
■ Participating in the Kanosei Art Project
Sumitomo Realty is participating in the Kanosei Art Project, which Toppan Printing Co., Ltd.
has been promoting since 2018. It aims to showcase works by artists with disabilities invarious products. As we endorse Toppan Printing’s approach of “going beyond offering
support for people with disabilities to create sustainable initiatives with them as business
partners,” we are displaying artists’ works in our buildings or project sites visited by a large
number of people.
■ Shinjuku Creators’ Festa
Shinjuku Creators’ Festa is an initiative by the Shinjuku Ward office with the goal of making
the ward more attractive through art, adding liveliness and revitalizing it. Each year, many
artists showcase their work in public and privately owned spaces surrounding Shinjuku
Station. Since 2016, the Company has supported the event as a member of its executive
committee.
■ STEP Photo Contest
Sumitomo Real Estate Sales Co., Ltd. has been holding the STEP Photo Contest since 2014 forthe advancement of the culture of photography. Focusing on the theme of Japanese scenary,
the contest gathers entries from both professionals and amateurs and supports talented
young artists while providing an opportunity for people all over Japan to experience art
through the contest.

Scope of application : All employees of the Sumitomo Realty Group

Sumitomo Realty’s
Corporate Value Creation

The Sumitomo Realty Group is implementing a variety of activities designed to bring“liveliness” to the communities where its buildings are located, through collaborations withthe local communities and tenants.
Shinjuku Sumitomo Building (Sankaku Biru) was a harbinger of a commercial complex — aproperty that is not designed exclusively for offices but that also incorporates multifaceted
functions, such as restaurants, retail shops, culture and sports. Since its opening, it has been acenter of liveliness, welcoming various events in its open public space. In 2010, the Shinjuku
Subcenter Area Environmental Improvement Commission was created. As a member of thecommission, Sumitomo Realty has been contributing to the revitalization of the Nishi-shinjuku
area. With opening of Sankaku Hiroba in June 2020, we will further contribute to theliveliness of Shinjuku. (About Sankaku Hiroba ▶Page 17)

A Message from the Management

Urban Development that Contributes to the Community

Kanosei Art Project — Art exhibition in an office building
entrance lobby

Sumitomo Realty & Development Co., Ltd.

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ESG Management
Society
Sumitomo Realty Group has been actively promoting diversity since before, based on the awareness that the existence of diverse
perspectives and values reflecting a variety of experiences, skills and characteristics within the Company is a strength that supports thesustainable growth of the Company. For more than 20 years, we have been actively hiring people with diverse careers at other companies as
individuals who can be immediately effective in the Company. Today, mid-career hires with work experience at other companies account for
90% of our employees, and are the source of the Company’s growth. In addition, we believe that equal opportunity in promoting
employees to management positions is the most important factor for increasing their motivation, so we promote employees based solely on
their enthusiasm, ability and achievements, regardless of gender or whether they were hired as new graduates or as mid-career hires. As aresult, mid-career hires account for more than 60% of managerial personnel, thus ensuring diversity at the management level.

The Sumitomo Realty Group believes it is important for a company’s sustainable growth to achieve the following two goals in its working
environment, and takes the following initiatives to realize them.

■ Female participation and career advancement
Sumitomo Realty Group is also actively working on the promotion of female participation and career advancement. Firstly, we haveannounced a numerical target* for the ratio of female employees in sales and engineering positions that support our front line operations.
By further increasing the ratio of female in our employees and working on their career development to expand the pool of our humanresources, we will increase the number of female employees for future promotion and gradually promote them to managerial positions.

The Industrial Safety and Health Act requires a workplace with 50 employees or more to set up a safety and health committee. The
Sumitomo Realty Group has a stricter standard than this statutory standard, requiring each workplace with smaller numbers of employees to
set up a safety and health committee. The committee conducts surveys and deliberations on safety and health in a process attended bymembers recommended by employee representatives.

*Target of female employees in new hires: 25% in sales and 13% in engineering positions by March 2026

Number of employees

Percentage of female employees in new hires
FY2018FY2019FY2020

Male

4,298

4,345

4,248

Female

1,543

1,615

1,629

Total

5,841

5,960

5,877

Percentage of nonregular employees

18.0%

20.8%

20.8%

FY2016FY2017FY2018FY2019FY2020Sales
positions

20.7%

23.7%

26.5%

24.6%

23.5%

Engineering
positions

8.2%

9.2%

9.2%

11.3%

12.5%

*Non-consolidated figures (As of the end of fiscal years)*Non-consolidated figures (As of the end of fiscal years)

Female employees

27.7% (As of March 31, 2021)

Female managers

4.5% (As of March 31, 2021)

Female member of the Board

7.1%*Non-consolidated figures

Example of our initiatives

Number of employees working shorter hours

49

Personal boxes or small lockers for women to keep personal
belongings, installed at women’s bathrooms in new office buildings

Number of employees who took nursing care leave

0

Number of employees who took childcare leave

56

Barrier-free facilities such as slopes and multipurpose bathrooms incompliance with Act on Promotion of Smooth Transportation, etc. ofElderly Persons, Disable Persons, etc. in all properties we develop

Integrated Report 2021

100%

Day care facilities set up in some offices to support balancing childcare
and work
Floor maps and guides shown in multiple languages at large officebuildings and hotels
Announcements on intercoms are delivered in multiple languages■ The Sumitomo Realty Group Challenge System
The Sumitomo Realty Group provides a system in which its employees
can volunteer to take up the challenge of a new job. The systemprovides opportunities for growth to highly motivated employees andhelps assign the right individuals to the right positions.
■ Support for obtaining certifications and attending
external seminars
The Sumitomo Realty Group helps employees improve
professional skills by subsidizing the costs of obtaining
qualifications that are relevant to their duties, including real estatetransaction agent, architect, urban renewal planner and energy
efficiency manager licenses, or participating in external seminars.

FY2018FY2019FY2020Targets

Percentage of employees who
received health checkup

100%

100%

100%

(Including comprehensive
medical examination)

Percentage of employees
who received stress checks*

89.5%

89.4%

90.0%

100%

*Verified and monitored by SB Atwork Corp.

■ Training
We work to expand the knowledge of employees by conducting
training programs in a variety of fields and inform them of thecode of conduct suitable for employees of the Sumitomo Realty
Group and ensure their compliance.
Data on training conducted in FY2020

Total company-wide training hours

78,216

Training hours per person (days per year)
Total training costs

13.3 (1.5 days)¥24,448 thousand*Downward trend compared to the previous year due to the COVID-19 pandemic

Example of training programs held in FY2020

Human resources training Industrial hygiene, harassment
Managerial position training Harassment, labor management, complianceOccupational safety
training
New employee
training

Technology guidance, risk assessment

Engineer training

Technology guidance, risk assessment, construction methods

Financial Section/
Company Information

Data on childcare and nursing care support■ Hiring and performance evaluation systems for diverse
human resources
The Sumitomo Realty Group hires diverse human resources withvarious distinctive strengths, through recruitment of new graduates
as well as mid-career professionals with emphasis on their expertiseand experience. Bonus assessment is conducted on a uniform basis
regardless of age and position, promotion is not in accordance with
the number of years of service so as to give young employees
opportunities, and the progressive performance-linked pay withhigh-percentage commissions, which is among the highest in theindustry. Within the framework of a flexible personnel system focusedon job descriptions and roles, we are working to create a workplaceenvironment where all employees can display their full potential.

Health and productivity indicators

ESG Management■ Expanding opportunities for elderly employees
Sumitomo Realty is expanding opportunities for elderly employees
to put their rich experience to work by hiring new employees aged
60 or older and rehiring retirees.
■ Promoting diversity in each business
The Sumitomo Realty Group takes various measures to promote
diversity not just in its own organization but also in its businesses
such as office building, hotel, event hall and others.

*Non-consolidated figures (As of March 31, 2021)

53

Enhancing Human Resources■ Childcare, nursing care support
Sumitomo Realty has various support programs to realize aworkplace environment that makes it easy to work for people
who have family circumstances, such as the need for childcare or
nursing care of family members, etc.

Percentage of employees who returned to work after
taking childcare leave

Realizing Healthy Workplaces■ Employees’ health
Sumitomo Realty Group takes following initiatives for employees’ health management andpromotion:• Conduct an annual health checkup or comprehensive medical examination (expense subsidies)for all our employees;• Free-of-charge influenza vaccination at our affiliated clinic;• Employees can seek advice from medical specialists about mental and physical health free ofcharge;• Sumitomo Realty is a corporate member of fitness clubs operated by Sumitomo Fudosan
Esforta to support employees’ health promotion;• Conduct medical checks and interviews by industrial physicians for employees who work overtime more than a certain amount;• In order to ensure that our employees have peace of mind as they work during the COVID-19 pandemic, we have established a systemfor providing PCR testing exclusively for our employees and conducted workplace COVID-19 vaccinations for employees and theirfamilies.
■ Health and productivity performance management
Sumitomo Realty manages employee health using third-party
verification and monitoring.
We manage performance using quantitative indicators and takemeasures such as having employees found to have issues throughstress checks receive interviews with industrial physicians. In fiscal
2020, we achieved our numerical targets for health management.

(As of June 30, 2021)■ Employment of people with disabilities
Sumitomo Realty Group actively hires people with disabilities. Asof March 2021, 2.4% of employees of Sumitomo Realty werepeople with disabilities, exceeding the 2.2% required under thesystem on employment rate of persons with disabilities. We
conduct hiring without discriminating age, gender or region. In
order to make workplaces comfortable for people with disabilities,
we have installed multipurpose bathrooms and barrier-freeelevators.

Setting Up Safety and Health Committees

Business Review

Percentage of female employees and female managers① Create an environment where employees can stay healthy, safe and lively, as well as maximize their potential② Enhance human resources, which form the foundation for a company’s growth by actively working to develop employee skills

Sumitomo Realty’s
Corporate Value Creation

Working Environment

A Message from the Management

Promoting Diversity* Conducted jointly with Group companies and business partners

Company history, business manners, human rights,
compliance, industrial health and hygiene

Certifications training Support on acquisition of certifications

Sumitomo Realty & Development Co., Ltd.

54

ESG Management
Society
COVID-19 Prevention Measures

The Sumitomo Realty Group engages in business that is closely related to people’s daily lives encompassing office building leasing, sales andleasing of condominiums, real estate brokerage, custom homes and remodeling. We recognize that product safety and quality is one of themost important aspects of our business in terms of how it directly affects people’s lives and property. We have thus far maintained highlevels of product safety and quality underpinned by its fundamental mission to “Create even better social assets for the next generation”
under the corporate slogan, “Integrity and Innovation.” With the aim of further enhancing the levels of product safety and quality, we takeon business initiatives that entail cooperation with its suppliers, design and construction companies and business partners involved inbuilding management.

At the Sumitomo Realty Group, we prioritize health and safety of customers, business partners and employees, and operate business only
after we take measures according to government policies and industry guidelines in each of our businesses to ensure that customers can use
our service without worries.

Architectural Quality

Updating product lists in conjunction with suppliers, using products and componentsthat align with the Company’s product safety and quality standards as a general ruleEngaging in construction quality control at each phase of work and inspection uponcompletion, on the basis of construction standards for each projects
Instructing design and construction contractors to take corrective action as necessary■ For our customers’ safety
In order to ensure that customers can feel safe while using our service, we take basic measures, such as requiring face masks and handsanitizers in all of our businesses. In addition, we take the following infection prevention measures designed to suit characteristics of eachbusiness area.

Performing periodic follow-up inspections after completion
Holding periodic meetings to share technology among all construction managers
Implementing periodic technical training involving construction
contractors for the respective construction jobs etc.

■ Measures taken by each business

Verifying initiatives involving quality control of design and construction
companies

Front-loading* of design and construction for each phase of work,
based on past experience.

Ensuring that design and construction companies are familiar with andhave a shared understanding of the Company’s quality standards* F ront-loading refers to the task of meticulously ensuring quality by verifying tasks
involved at each phase of work extending up to completion, in conjunction with designand construction companies at the initial phase of construction.

■ Gaining third-party certifications for architectural quality
In its condominium sales, Sumitomo Realty acquires housing performance evaluation reports whereby a third-party organization registeredby the Minister of Land, Infrastructure and Transport objectively evaluates housing performance.

Management Quality

Advertising Quality

Appointment of an advertising compliance officer independent of theadvertising creators to audit and supervise the advertising of all Group
companies

Customer Feedback

Advertising compliance training and comprehension confirmation testing
conducted for all employees involved in advertising several times a year
Records of number of incidences of warnings and corrective actions
from compliance officers are kept and fed back to public relations
personnel in each department as quantitative indicators

In managing and operating its buildings and condominiums, the Sumitomo Realty Group incorporates opinions received from its customers
and opinions obtained through its customer center in its product planning and renovation work.

55

Integrated Report 2021

Building Leasing• Urging users to maintain social distance in the elevators using posters• Suspending the use of air hand-dryers in bathrooms• Regular checks on ventilation efficiency and improvement, using results of air environment measurement

Condominium Sales
Housing Construction
Real Estate Brokerage• Introducing reservation-only system• Use of acrylic panels to prevent droplet infection at sales offices• Introducing of online customer service

Hotel• Sanitization of rooms using ozone sterilizers and air purifiers set up in all rooms• Requiring guests to fill out a medical questionnaire form at check-in

Multipurpose Hall

• Providing rental of thermographic cameras• Proposal of layouts that maintain a certain distance between visitors• Measures to minimize contact between visitors at venues, including use of dedicated elevators and reserving of entire floors

Fitness Club

• Installing temperature measurement device with facial recognition• Limiting the number of lockers used and increasing the frequency of ventilation of each area
• Providing remote studio lessons“Remote Condominium Sales” Service
As a new way of selling newly built condominium units during and after the COVID-19
pandemic, we introduced a “Remote Condominium Sales” service for our sales business from
June 1, 2020, in which the entire purchase process is completed without having to directly
face sales staff, from a tour of the unit to its delivery.
The service allows
customers to purchase
Example of services
condominiums safely, at theiroffered online
request, by avoiding directly
facing sales staff in all phases
Introduction of unit; information on
surrounding environmentof purchase, from the initial
step of collecting information
Video of the model rooms
about a unit, tour of the model
Route from nearest station to theroom, submission ofbuilding (video)
application/signing of the
Detailed financing plans; housing loan
contract, briefing on importantconsultation
matters to delivery.
Questions and answers, etc.

Flow of Remote Condominium Sales
Web brochure and video presentation
Online tour
Application submitted (web)
Briefing on important matters using IT(web)*
Contract signed (by postal mail)Financial Section/
Company Information■ Responsible advertising activities
The Sumitomo Realty Group conducts its public relations activities in compliance with the Act against Unjustifiable Premiums and Misleading
Representations and other relevant laws.

Measures

ESG Management■ Quality control of building management
Sumitomo Realty practices high-quality building management by leveraging the expertise it has accumulated as Tokyo’s No.1 office building
owner with more than 230 buildings in central Tokyo. Employees of Sumitomo Realty directly control management tasks and keep issues incheck by performing periodic maintenance and preventative repairs on structures and facilities. The Company also develops frameworks foruniformly improving management quality whereby information regarding incidents occurring with respect to individual buildings is shared
amongst all of the employees for other buildings.
When it comes to cleaning, managers of each building and cleaning staff from the Company conduct cleaning inspections several times
annually. The Company takes concrete action to improve quality which involves precisely scoring inspection results using an itemized pointsbased approach, clearly stating areas subject to improvement using quantitative benchmarks, and revising cleaning plans accordingly.

Business

Business Review■ Managing architectural quality in the condominium sales businessIn the condominium sales business, we aim to offer premium condominiums by engaging in the following initiatives:

Making and promoting guidelines for advertising material creation

Sumitomo Realty’s
Corporate Value Creation■ Managing architectural quality in the contracting businessIn the housing construction business (custom homes and Shinchiku Sokkurisan remodeling) and other contracting businesses such as tenantconstruction, Sumitomo Realty, as a lead contractor, implements the following initiatives to enhance the quality of design and construction.

■ For our employees’ safety
In order to protect our employees from infections while
continuing our operations, we take the following measures.
• Requiring to wear face masks at all times and measuretemperature every morning• Requiring to refrain from taking business trips where
possible, and actively use online conferencing• Requiring to adopt staggered working hours or
telecommuting• Ensuring social distancing in workplaces• Establishing a system for providing PCR testing exclusively forour employees and conducting workplace COVID-19 vaccinations for employees and their families, in order to ensure that our employees
have peace of mind as they work during the COVID-19 pandemic

A Message from the Management

Product Safety & Quality and Stakeholders

Delivery (by postal mail)*

A pilot experiment by the Ministry of Land,
Infrastructure, Transport and Tourism forbriefing on important matters using IT(started from October 1, 2019).

Sumitomo Realty & Development Co., Ltd.

56

ESG Management

Yoshiyuki Odai

Koji ItoApr 1985 Joined the Company
Jun 2011 Director (present)
Nov 2019 Head of Corporate Planning
Division (present)
Apr 2020 Senior Managing Executive Officer(present)

Apr 1984 Joined the Company
Jun 2013 Director (present)
Apr 2019 Representative Director - President of
Sumitomo Real Estate Sales Co., Ltd.
(present)
Apr 2020 Senior Managing Executive Officer of
the Company (present)

Outside Director

Outside Director

Yozo Izuhara

Nobumasa Kemori

Apr
Jun
Jun
Jun
Jun
Jun
Jun

Sep 1980 Joined Sumitomo Metal Mining Co.,Ltd.
Jun 2007 Representative Director - President
Jun 2013 Representative Director - Chairman
Jun 2017 Executive Advisor
Jun 2019 Director of the Company (present)
Jun 2021 Honorable Advisor of Sumitomo Metal
Mining Co., Ltd. (present)

1962 Joined Nippon Sheet Glass Co., Ltd.
1998 Representative Director - President
2004 Representative Director - Chairman
2010 Executive Advisor
2012 Honorary Senior Advisor (present)2014 Corporate Auditor of the Company
2019 Director of the Company (present)*Representative Director

Directors

Corporate Auditors
Corporate Auditor

Corporate Auditor

Kenichi Onodera

Kojun Nishima*

Yoshifumi Nakamura

Toshikazu Tanaka

Apr
Jun
Jun
Jun
Sep

Apr 1984 Joined the Company
Jun 2009 Director
Jun 2010 Representative Director (present)
Jun 2013 Director - President (present)
May 2017 Head of Building Development
Division (present)

Apr
Jun
Jun
Jun

Apr 1983 Joined the Company
Jun 2013 Director		
Representative Director - President of
Sumitomo Real Estate Sales Co., Ltd.
Jun 2019 Corporate Auditor of the Company(present)

Deputy President

Deputy President

Outside Corporate Auditor

Outside Corporate Auditor

Nobuaki Takemura*

Masato Kobayashi*

Yoshiyuki Norihisa

Chiyono Terada

Apr 1981 Joined the Company
Jun 2008 Director
Jun 2010 Representative Director (present)
Jun 2013 Director - Deputy President (present)
Mar 2016 Head of Management Division(present)

Apr
Jun
Jun
Jun
Nov

Apr 1969 Joined Sumitomo Construction Co., Ltd.
Apr 2003 Managing Director of Sumitomo
Mitsui Construction Co., Ltd.
Apr 2010 Representative Director - President & CEO
Apr 2015 Representative Director - Chairman
Jun 2018 Executive Advisor (present)
Jun 2019 Corporate Auditor of the Company(present)

Director/Senior Managing Executive Officer

Director/Senior Managing Executive Officer

Jun 1976 Founded Art Hikkoshi Center
Jun 1977 Established Art Hikkoshi Center
Co., Ltd.
President and CEO
Apr 2018 President and CEO of Art Group
Holdings (present)
Dec 2019 Chairperson Emeritus of Art
Corporation (present)
Jun 2020 Corporate Auditor of the Company(present)

Hiroshi Kato

Hisatoshi Katayama

Executive Officers

Apr 1984 Joined the Company
Jun 2013 Director (present)
Sep 2016 Head of Shinchiku Sokkurisan
Remodeling Division (present)
Apr 2020 Senior Managing Executive Officer(present)

Apr 1985 Joined the Company
Sep 2016 Head of Urban Property Development
Division (present)
Jun 2018 Director (present)
Apr 2020 Senior Managing Executive Officer(present)

Managing Executive Officer

Executive Officer

Executive Officer

Executive Officer

Ryuzo Amemiya

Ichiro Wada

Hiroyuki Hashizume

Makoto Nakano

Executive Officer

Executive Officer

Takuji Iba

Kenichi Kawai

1970 Joined the Company
1998 Director
2005 Representative Director
2007 Director - President
2019 Director - Chairman of the Board(present)

1983 Joined the Company
2009 Director
2010 Representative Director (present)2013 Director - Deputy President (present)2017 Head of Residential Business Division(present)

1973 Joined the Company
2002 Director
2007 Executive Managing Director
2011 Corporate Auditor (present)

Note: For more detail of each director, please refer to “Notice of convocation of the 88th ordinary general meeting of shareholders.” (Available on our website: https://english.sumitomo-rd.
co.jp/ir/ir_news)

Integrated Report 2021

Sumitomo Realty & Development Co., Ltd.

Financial Section/
Company Information

President

ESG Management

Chairman of the Board

Business Review

57

Director/Senior Managing Executive Officer

Sumitomo Realty’s
Corporate Value Creation

Board of Directors and Corporate Auditors (As of September 30, 2021)

Director/Senior Managing Executive Officer

A Message from the Management

Governance58

ESG Management
GovernanceCorporate Governance System

Role and structure of the Board of Corporate Auditors
Corporate auditors are responsible to supervise whether directors are performing their duties properly by using the powerful authority
endorsed by law.
The Board of Corporate Auditors consists of four corporate auditors, half of whom are the two outside corporate auditors.
Cooperation among Internal Audit Department, independent auditor and corporate auditors
We have established the Internal Audit Department (16 persons) to check the business execution status of each department of the Groupand the operational status of internal controls, to prevent fraud and errors, and to make proposals for operational improvement. In addition
to reporting the audit results of the independent auditor, the Internal Audit Department reports directly to the corporate auditors to enhanceand improve the efficiency of audits by the corporate auditors.

59

Integrated Report 2021

Board of Corporate
Auditors
Independent
AuditorCommittee of
Outside Directors
and Auditors

President

Executive
Committee
Internal Audit
Department

Departments,
Divisions, etc.

Initiatives to Strengthen Corporate Governance
Steps taken to strengthen corporate governance
June 2002 Appointed two outside corporate auditors, making half of the four corporate auditors outside members
April 2004 Reformed the management system, reducing the number of directors from 23 to nine
June 2004 Introduced a fully performance-based compensation system for directors
Abolished the retirement benefit and bonus schemes for directors
June 2015 Appointed two outside directors
Established a Committee of Outside Directors and Auditors and began holding briefings for outside directors on a regularbasis, to strengthen the supervision function of outside directors and outside corporate auditors
April 2020 Introduced an executive officer system
June 2020 Appointed one female corporate officer (outside corporate auditor)
Roles of outside directors and outside corporate auditors
As part of its initiatives to strengthen corporate governance, the Company appointed two outside corporate auditors in 2002 and two outside
directors in 2015.
Corporate Auditor is a system that has taken root in Japan for a long time. Corporate auditors use the strong investigative power grantedby the law to audit whether the directors are conducting their duties appropriately. Although full-time corporate auditors from within the
Company are familiar with the company’s internal affairs and have excellent information-gathering skills, they might become somewhat
lenient, albeit unconsciously, when it comes to auditing their colleagues. Therefore, the Company ensures that at least half of the corporate
auditors are outside members to add an objective perspective and thereby ensure the effectiveness of audits.
Likewise, it is undeniable that the Board of Directors may become narrow-minded if it consists only of people from within the Company,
and it is possible that the Board may find itself left behind by the changes in the world. Therefore, the Company has appointed outside
directors who have excellent character and insight, who understand its management philosophy, and who have experience as a chairman orpresident of listed companies, in order to have them advise the management team and monitor the directors by utilizing their wide range ofknowledge and insight based on their experience in corporate management.
Efforts to strengthen the supervision function
The Company has two outside directors and four corporate auditors, a total of six persons, which accounts for over 40% of the 14 attendeesof the Board of Directors meeting, responsible for the management supervision function. To ensure that outside directors and outside
corporate auditors can fully perform their roles, in fiscal 2020 the Company (i) held eight briefings for outside directors in which they werebriefed on the agendas for the Board of Directors meetings, the content of discussions at the Executive Committee, and other matters; and(ii) convened 13 meetings of the Board of Corporate Auditors wherein they received reports from the independent auditor and the Internal
Audit Department and conducted interviews about the operating situation with the heads of each department.
In addition, (iii) we have established a Committee of Outside Directors and Auditors with only four members, comprised of outside
directors and outside corporate auditors. The Committee of Outside Directors and Auditors directly hears from each officer about theexecution status of the duties of which he or she is in charge and the issues they are aware of, as well as giving appropriate advice. In theevent of whistle-blowing report toward officers, outside corporate auditors receive a report directly to share at the Committee of Outside
Directors and Auditors.
We believe that the Company’s corporate governance is sufficiently functioning, as its effectiveness is being reflected in our businessresults.
Sumitomo Realty & Development Co., Ltd.

Financial Section/
Company Information

Executive officer system
Due to the limited number of directors, we have introduced an executive officer system comparable with directors so that we can appoint
officers necessary for business expansion, and we have appointed six executive officers who do not concurrently serve as directors.
Compensation for executive officers who are non-concurrent directors is to be paid from the total compensation for directors, which isclearly based on the Company’s performance set at 1% of consolidated ordinary profit for the previous consolidated fiscal year, because they
are considered to be comparable with directors.

Board ofDirectors

ESG Management

Role and structure of the Board of Directors
The Board of Directors promotes the sustainable growth of the Company and the enhancement of corporate value over the medium- tolong-term, improves profitability and business efficiency, and prevents fraud before it occurs. In order to do so, it is responsible fordeliberating and deciding important matters for the Company such as basic management policy and management strategy, as well as
supervising the execution of duties by each director.
The maximum number of directors in the Board stipulated in the Articles of Incorporation is 12. The Board of Directors is comprised ofeight directors from within the Company who are in charge of business execution as they are deeply familiar with the significance of always
looking resolutely forward and continuing to invest for sustainable growth, and two outside directors with experience as chairman andpresident of listed companies, who have superior character and insight and understand the Company’s management principles.

General Meeting of Shareholders

Business Review

Reasons for adopting an organizational structure of a company with corporate auditors
Under the Companies Act of Japan, companies may adopt one of the following three forms of organizational structure: (i) a company withcorporate auditors, in which the board of directors assumes executive responsibility, while corporate auditors are in charge of the monitoringof management; (ii) a company with a nominating committee, etc., wherein the board of directors is tasked with the managementmonitoring function and the board of executive officers assumes executive responsibility; and (iii) a company with an audit and supervisorycommittee, in which the management monitoring function of corporate auditors is incorporated into the functions of the board of directors.
In this way, companies may select the optimum governance structure that best suits their circumstances.
As stated in the basic views above, in order for the Company to continue growing, we believe that people from within the Company who
are deeply familiar with the significance of continuing to invest, always looking resolutely forward even in difficult times, should be the core
members of management and execution; hence we have a structure as a company with corporate auditors, where the Board of Directors
bears responsibility for execution.
Eight directors from within the Company, who are deeply familiar with the business content, are in charge of management and execution,
while two outside directors and four corporate auditors for a total of six persons, which accounts for over 40% of the 14 attendees of theBoard of Directors meeting, are responsible for the management supervision function. In order to fully demonstrate the supervisory function,
we have built a system to accurately grasp the management condition and issues and to cooperate with each other as follows. We believethat the Company’s corporate governance is sufficiently functioning, as its effectiveness is being reflected in our business results.

At meetings and by means of communications with theindependent auditor as necessary, the corporate auditors receive
information about audits and reports on the audit plan, audit
results, etc. from and exchange opinions and necessary information
with the independent auditor in an effort to achieve smooth andeffective audits. The corporate auditors also monitor and examine
whether the independent auditor is maintaining independence,and is executing appropriate audits.
The independent auditor examines the effectiveness of internal
control over financial reporting through the audit of financial
statements as well as the audit of internal control reports as
stipulated in the Financial Instruments and Exchange Act.
The Internal Audit Department reports the results of its internal
audits to, and exchanges views as appropriate with, corporate
auditors and the independent auditor in an effort to forge closer
collaboration between the three parties and increase the quality
and efficiency of individual audits. Also, the Internal Audit
Department provides advice, guidance, and other support to eachdepartment in collaboration with corporate auditors.

Sumitomo Realty’s
Corporate Value Creation

Sumitomo Realty is a comprehensive real estate enterprise of the Sumitomo Group which has a history of 430 years and inherits Sumitomo’s businessphilosophy of “Placing prime importance on integrity and sound management in the conduct of its business” and “Under no circumstances, shall it
pursue easy gains.” The Company’s slogan, “Integrity and Innovation” expresses its corporate stance to all stakeholders including its employees,
customers, business partners, creditors and shareholders. This includes the pride as a developer which values “Integrity” above all, and creates new
corporate value with a pioneering spirit, without pursuing easy gains under any circumstances.
Under this slogan, we have set forth our fundamental mission as to “Create even better social assets for the next generation,” and our basic
management policy aims to contribute to addressing various social issues such as the environment, while at the same time maximizing corporate
value through each business.
This fundamental mission also includes a reminder “Do not rest on seniors’ laurels and make the best efforts for a better company for the next
generation.” At this point in time, we believe that the management of the Company should continue to be carried out by people mainly fromwithin the Company who have inherited the strong will to sow the seeds of growth for the sake of the next generation. In doing so, we believe that
employees will be able to maintain a high level of motivation to eventually participate in management.
In consideration of this basic stance, we are working to further strengthen and enhance corporate governance so as to contribute to theenhancement of the Company’s corporate value over the medium- to long-term, by working on collaboration and dialogue with all stakeholders
including shareholders, improving the efficiency of decision-making, appropriate supervision of execution, and proper disclosure of information.

A Message from the Management

Basic Views of Corporate Governance60

ESG Management
Governance
Basic policy
Regarding nomination of candidates for directors and executive officers, persons with a wealth of experience, high-level insight andsophisticated expertise who will contribute to the Company’s sustainable growth and medium- to long-term enhancement of corporate
value are selected as candidates at the Executive Committee. The candidates are determined by the Board of Directors based on thoroughdeliberation, reflecting independent and objective opinions of independent outside directors and outside corporate auditors in addition toopinions of internal directors who are familiar with the Company’s business. Independent outside directors and outside corporate auditors
have opportunities to know about relevant information such as the background, insights and achievements of internal directors, internal
corporate auditors and executive officers at several occasions including meetings of the Committee of Outside Directors and Auditors,
briefings for outside directors, and meetings of the Board of Corporate Auditors.

Name

Independence

Reasons of Appointment

Yozo
IzuharaMr. Izuhara had served as President and Chairman of Nippon
Sheet Glass Co., Ltd., and he has extensive knowledge on
overseas business and M&A as a manager. The Company deems
him to be suitable as an outside director, and therefore appointed
him to that position.

Nobumasa
KemoriMr. Kemori previously worked as President and Chairman of
Sumitomo Metal Mining Co., Ltd., with which the Company
has some transactions, etc. Considering the scale and natureof such transactions, the Company judges it is unlikely the
relationship would have any impact on decisions ofshareholders and investors.

Mr. Kemori had served as President and Chairman of Sumitomo
Metal Mining Co., Ltd., and he has extensive knowledge of themining industry from a long-term perspective and overseas
business as a manager. The Company deems him to be suitable as
an outside director, and therefore appointed him to that position.

Yoshiyuki
Norihisa

Mr. Norihisa previously worked as President & CEO and Chairmanof Sumitomo Mitsui Construction Co., Ltd., with which theCompany has some transactions, etc. Considering the scale andnature of such transactions, the Company judges it is unlikely the
relationship would have any impact on decisions of shareholders
and investors.

Mr. Norihisa has a wealth of managerial experience at anothercompany. In view of his personality, insight, experience, etc., theCompany judges he is suitable and qualified to serve as an
outside corporate auditor and has appointed him to that position.

Ms. Terada currently serves as Chairperson Emeritus of Art
Corporation, with which the Company has some transactions,etc. Considering the scale and nature of such transactions, theCompany judges it is unlikely the relationship would have any
impact on decisions of shareholders and investors.

Ms. Terada has a wealth of managerial experience at anothercompany. In view of her personality, insight, experience, etc. theCompany judges she is suitable and qualified to serve as an
outside corporate auditor and has appointed her to that position.

ChiyonoTeradaAmount by type (millions of yen)

Category

Total compensation(millions of yen)

Directors(excluding outside directors)

2,123

2,123*———

8

Corporate auditors(excluding outside corporate auditors)

30

30

—

—

—

2

Outside directors/corporate auditors

67

67

—

—

—

5

2,221

2,221

—

—

—

15

Total

Basic compensation

Stock options

Bonus

Retirement benefit

Number of officers
eligible (persons)*With the agreement of all directors, a portion of the amount of directors’ compensation has been allocated to the five executive officers.

Regarding the amount of directors’ compensation above, the full amount is not paid to the individual directors in the current fiscal year, witharound 50% of the total paid. Payment of the rest is reserved in preparation for retirement benefit for directors, making up for possible
decreases in directors’ compensation if the Company’s financial performance deteriorates in the future, salaries to be paid to persons whowill become advisors or counsellors of the Company after retirement, etc. Regarding the reserved amount, the timing of payment and theamount for each director or corporate auditor cannot be determined, and thus, the reserved amount will become subject to calculation ofcompensation etc. of each director or corporate auditor upon payment in the future or upon confirmation of future payment.
Total amount of compensation of persons with total compensation of 100 million yen or moreAmount by type (millions of yen)

Category

Total compensation(millions of yen)

Kenichi Onodera

Director

120

120

—

—

—

Kojun Nishima

Director

120

120

—

—

—

Name

Basic compensation

Stock options

Bonus

Retirement benefit

Business Review

Supplementary Explanation of the Relationship

Mr. Izuhara previously worked as President and Chairman of
Nippon Sheet Glass Co., Ltd., with which the Company hassome transactions, etc. Considering the scale and nature ofsuch transactions, the Company judges it is unlikely the
relationship would have any impact on decisions ofshareholders and investors.

Total amount of compensation for each category of corporate officers, and number of officers eligible

Sumitomo Realty’s
Corporate Value Creation

Compliance with the independence criteria of outside directors and outside corporate auditors and reasons for appointment thereof
Regarding appointment of independent outside directors and independent corporate directors, the Company appoints outside directors whowill be independent officers based on the requirements for outside directors prescribed in the Companies Act and the independence criteria
set by the Tokyo Stock Exchange.

These four directors are, respectively, the Chairman of the Board, Representative Director and President, Representative Director and
Deputy President in charge of the Management Division, and Representative Director and Deputy President in charge of the Business
Division, and are given this authority because it is judged that they can execute the comprehensive examination and appropriate assessmentof the duties and contributions to performance of each director by deliberation.

A Message from the Management

Policies for Appointment of Directors and Corporate Auditors

Initiatives for Promoting Diversity(Please refer to page 58 for career summary of each outside director and outside corporate auditor.)

Financial Section/
Company Information

Outline of system and policy for determining the amount of compensation for corporate officers
At the ordinary General Meeting of Shareholders held in June 2004, we introduced a performance-based compensation system for directors,
consolidating the three elements that made up the previous system—monthly compensation, annual bonuses and retirement allowances.
Under the new system, the total annual (July to June) compensation for directors is set at just 1% of consolidated ordinary profit (thenumber of directors at the time of the resolution concerning the system was 12).
The amount paid to each director is determined upon agreement by the Chairman of the Board and Representative Directors, a total offour persons, in consideration of each director’s duties and level of contribution to performance. The remainder is retained without fixing theamount per director.
On April 1, 2020, the Company introduced an executive officer system, which enables the appointment of officers comparable to directors
necessary for business expansion, with the aim of the further broadening the scope of business and enhancing employee morale.
Accordingly, with the agreement of all directors, the compensation of executive officers is also to be paid from the aforementioned total
amount of compensation for directors.
The monetary compensation for corporate auditors, who are independent from business execution, is a fixed amount and is determined to
be within ¥6.5 million per month, in accordance with the resolution made at the Ordinary General Meeting of Shareholders held on June 29,
1999 (the number of corporate auditors as of the conclusion of that General Meeting of Shareholders was five).

ESG Management

Compensation of Corporate Officers

We have been actively promoting diversity since before, based on the awareness that the existence of diverse perspectives and values
reflecting a variety of experiences, skills and characteristics within the Company is a strength that supports the sustainable growth of theCompany.
For more than 20 years, we have been actively hiring people with diverse careers at other companies as individuals who can be
immediately effective in the Company. Today, mid-career hires with work experience at other companies account for 90% of our employees,
and are the source of the Company’s growth.
In addition, we believe that equal opportunity in promoting employees to managerial positions is the most important factor for increasing
their motivation, so we promote employees based solely on their enthusiasm, ability and achievements, regardless of gender or whether they
were hired as new graduates or as mid-career hires. As a result, more than 60% of our managers are currently mid-career hires, ensuring
diversity in the managerial positions.
We are also actively working on the promotion of female participation and career advancement. Firstly, we have announced a numericaltarget for the ratio of female employees in sales and engineering positions that support our front line operations (25% in sales and 13% inengineering positions). By further increasing the ratio of female in our employees and working on their career development to expand thepool of our human resources, we will increase the number of female employees for future promotion and gradually promote them tomanagerial positions.
We believe that diversity in managerial positions should be ensured naturally as a result of fair appointments. We believe that setting a
numerical target for diversity in managerial positions may distort equal opportunity in the appointment of managers and lower the morale ofemployees as a whole, and therefore we will not set such a numerical target.

Authorization for determination of individual directors’ compensation, etc.
Based on authority resolved by the Board of Directors, Mr. Kenichi Onodera (Director - Chairman of the Board), Mr. Kojun Nishima(Representative Director and President/Head of Building Development Division), Mr. Nobuaki Takemura (Representative Director and Deputy
President/Head of Management Division) and Mr. Masato Kobayashi (Representative Director and Deputy President/Head of Residential
Business Division) determine the specific content (individual payment amount, timing of payment, payment method, etc.) of thecompensation for individual directors.

61

Integrated Report 2021

Sumitomo Realty & Development Co., Ltd.

62

ESG Management
GovernanceRisk Management

Issue awareness and action plans
The Company has set forth its fundamental mission as “Create even better social assets for the next generation,” which is based on
Sumitomo’s business philosophy, and it established the Code of Conduct as guidelines to govern all our officers and employees in order tofulfill this fundamental mission. The Code of Conduct upholds the concept of implementation of compliance and promotes complianceactivities based on the understanding that compliance is an important management issue.
The Company defines implementation of compliance as not only complying with laws and regulations, but also sensitively responding andadapting to social demands that underlie laws and regulations. We promote our business activities by responding to laws, regulations,internal rules, social common sense, corporate ethics and social demands that underlie them.

Issue awareness and action plans
The Company recognizes that it is important for corporate management to take measures to prevent, mitigate and avoid various businessrisks, as well as respond to emergencies that are expected to have a significant impact on corporate activities, based on an understanding of
the various risks involved in business. In addition to risk management by each business department, the Company strives to stabilize its
business activities and enhance corporate value by understanding, analyzing and appropriately dealing with risks associated withmanagement and businesses through the establishment of cross-sectional organizations.

*Compliance promotion activities refer to activities to prevent all types of corruption including bribery and money laundering, as well as activities to comply with various laws andregulations concerning the environment and society.

Sumitomo Realty & Development Co., Ltd.

Financial Section/
Company Information

Integrated Report 2021

ESG Management

63

Business Review

Initiatives
Whistleblowing system
The Company has established a whistleblowing system for the entire Group, which aims to enable early detection of complianceviolations and appropriate corrective action. In order to encourage active consultation and reporting, we have designed the system toprovide strict legal protection for those who report violations as well as to allow them the option of anonymous reporting. In thissystem, we respond to not only clear compliance violations but also potential violations.
We have established two points of contact for reporting, the Internal Audit Department, which is independent of business divisions
or other internal organizations, serves as the internal point of contact, and an external law firm, which is independent of the
management, serves as the external point of contact.
In addition, we have established a consultation desk in each Group company’s Human Resources Department to provide consultationon harassment and other issues related to the working environment.
Compliance training
Employees are educated on implementation of compliance as Sumitomo Realty Group employees through various training programs
including new employee training, compliance training for all employees and managerial position training. In addition, the ComplianceHandbook, which describes appropriate behavior in terms of compliance in given situations, is distributed to all officers and employees
to be thoroughly acquainted with legal compliance.
Anti-corruption
The Company places preventing all types of corruption as one of the most important management issues and strives to ensure healthy
management environment by identifying risks in each business and raising awareness within the Company. In so doing, we promotewide-ranging anti-corruption initiatives, such as informing and thoroughly enforcing our policy on anti-corruption at corporate trainings,
as well as signing the UN Global Compact which upholds the principle of “Businesses should work against corruption in all its forms,
including extortion and bribery.”Tax transparency
The Company, in the spirit of the law, complies with the tax laws of every country in which it conducts business activities, and strives tomaintain the impartiality of taxation. The Company is also aware of its responsibility to pay taxes as an entity engaged in corporate
activities, and it contributes to society by paying appropriate taxes commensurate with the scale of its business operations, which is theaim of the Action Plan on Base Erosion and Profit Shifting (BEPS).
The Company periodically receives reports from each subsidiary on the performance of duties including the status of businessexecution and the financial condition including tax matters. It provides proper instructions on such reports, and the corporate auditors
and the Internal Audit Department perform audits when necessary, to supervise and control the operation regarding tax.

Examples of matters considered to be risks by the Company and are under the supervision of the Board of Directors
Risk related to the spread of COVID-19
The COVID-19 pandemic, which began last year worldwide, is showing no sign of being contained.
For the fiscal year ending March 31, 2022, the Group has announced its earnings forecast based on the assumption that there will
not be a full recovery before the end of the fiscal year from the decline caused by COVID-19 in commercial facilities in the leasing
business, such as hotels and event halls, and that the business environment will be similar to the previous year.
The Group is working to maintain sales levels while taking measures to prevent infections of customers or employees in accordancewith government policies and industry guidelines.
If, in addition to the above assumption, the COVID-19 pandemic continues to ebb and flow in Japan and other major countries
overseas, causing intermittent declarations of a state of emergency, which extend the period of restrictions on people’s movements andgatherings, sales at commercial facilities such as hotels and event halls may continue to decline. These factors may impact the Group’s
operating results and financial position.
Risk related to financeIn the real estate leasing and sales businesses we operate, investment is made up front, and revenue is not claimed until we first purchaseland and the building is completed. This means we need to secure a stable supply of operating funds by borrowing from banks or issuingbonds.
To achieve this, we strive to stabilize funding by extending the period of and promoting fixed interest rates for consolidated interestbearing debts while working to solidify stable relationship with diverse financial institutions.
Risk related to complianceBusinesses operated by the Group are subject to wide-ranging laws and regulations, including the Building Lots and Buildings
Transaction Business Act, the Construction Business Act, the Building Standards Act and the Labor Standards Act. We closely monitor
any change in them and work to ensure timely and appropriate compliance. The Internal Control Meeting, subordinate to the Risk
Management Committee, monitors the Group’s compliance promotion activities, while the Internal Audit Department conducts internal
audit on entities including subsidiaries and operates multiple whistleblowing desk in and outside the Company, aiming to detect anddeter misconduct and illegal acts.
Risk related to information security
The Group’s businesses hold large amounts of important information, including personal data. The Group has cybersecurity measures inplace to prevent information leaks and trains employees on information security.
Risk related to force majeure events, including disasters
In order to be prepared for force majeure events, including disasters, the Group strives to improve its business continuity by adoptingbase isolation and quake-absorption structures at its properties and equipping facilities with emergency generators to ensure
uninterrupted operation. We also create manuals and carry out disaster drills based on expected scenarios in our business activities inorder to ensure operational sustainability.
Risk related to climate change
The Group aims to respond to physical risks associated with climate change such as storm and flood damage, as well as transition risks
entailed by various systems for curbing climate change and changes in the business environment. We have established the Sustainability
Committee chaired by the Company’s President to control and promote responses to environmental issues through the businessactivities of each department of the Group. In particular, we are promoting decarbonization to mitigate climate change, focusing on
saving energy through the development of new properties with high environmental performance, raising awareness for saving energy
in the operation of our properties, and renovating existing buildings to improve their environmental performance.
Risk related to suppliers
In the real estate business, many suppliers are involved in each phase of the business, including the construction companies, andpersonnel involved in operation after the building’s completion such as cleaning staff, service staff, security staff and operators
responsible for facility maintenance and inspections. In order to mitigate the risks related to suppliers, the Group takes various initiatives
such as starting new transactions with due diligence, thoroughly communicating and enforcing the Sustainable Procurement Guidelines,
direct management of suppliers by our employees, safety trainings for suppliers.

Sumitomo Realty’s
Corporate Value Creation

Management structure
The Company has established the Risk Management Committee chaired by the Company’s President. The Internal Control Meeting (hosted
by the Company’s Internal Audit Department), which is a subordinate organization of the Risk Management Committee, monitors
compliance promotion activities* of the Group, and reports the result to the Risk Management Committee. The Company’s Internal Audit
Department performs internal audits to prevent any misconduct or illegal acts and guide for business improvement. Moreover, thedepartment reports the results of its audits to the corporate auditors and the independent auditor and exchanges opinions with them in an
appropriate manner. These activities help to improve the quality and efficiency of the audit work of the Internal Audit Department, thecorporate auditors and the independent auditor.
The Company has a system in which the Board of Directors supervises the compliance promotion activities. Of the matters examined byrespective department and subsidiaries, important matters are reported to the Board of Directors.

Management structure
In order to address various business risks, the Company has established the Risk Management Committee chaired by the Company’s
President. Among the risks of the Company, the risks associated with the business, such as investment risk and market risk, are monitored
and addressed by the respective departments and subsidiaries properly, and important matters are discussed and determined at meetings ofthe Board of Directors and other important meetings such as meetings of Executive Committee.

A Message from the Management

Compliance64

ESG Management
Governance*For more detail, please refer to “Notice of convocation of the 86th ordinary general meeting of shareholders.” (Available on our website: https://english.sumitomo-rd.co.jp/ir/ir_news)

Timely and Appropriate Information Disclosure and Communication with Shareholders and Investors

Constructive dialogue with shareholders
The Company strives to provide substantial explanation of the Company’s corporate management and business activities through General
Meetings of Shareholders, financial results briefing sessions, individual meetings, and other opportunities for communication withshareholders and investors.
If a shareholder requests a dialogue, the Company’s policy is that the ESG promotion office respond to such request appropriately under
the supervision of the responsible director, etc. depending on the objective of the dialogue, the method of communication, the number ofshares held, the attributes, etc. and strive to make improvement when given constructive opinions.
Regarding dialogues with shareholders, the Company exercises due care concerning the handling of insider information, and notifies, asnecessary, important meetings such as meetings of Executive Committee attended by directors and senior executives, of the details of the
dialogues.
Sumitomo Realty & Development Co., Ltd.

Financial Section/
Company Information

System for information disclosure
The Company considers that it is important to ensure soundness and transparency of management by means of timely and appropriate
information disclosure. In accordance with this basic policy, the Company has put in place systems that enable swift reporting to the
responsible department at the head office and implementation of appropriate information management measures, if a material fact that
may have an impact on investors’ investment decisions arises at the Company’s departments or at subsidiaries.
Upon emergence of a material fact and reporting thereof, the responsible department, the General Affairs Department, Corporate
Planning Department, and other relevant departments, discuss whether there is need for timely disclosure, and if it is judged that disclosure
is necessary, timely disclosure is performed without delay following the necessary internal procedures. Subsequently, the disclosure materials
are posted on the Company’s website for thorough information disclosure.

ESG Management

Integrated Report 2021

The policy on measures to a large-scale purchase of shares of the Company and the Board’s stance
The Company believes that if a large-scale purchase of the Company shares (“Large-Scale Purchase”) is initiated, the shareholders should
decide to accept or reject the Large-Scale Purchase. In order for the shareholders to correctly recognize the effect on the corporate value andcommon interests of shareholders, however, it is necessary that both the party making the Large-Scale Purchase (the “Large-Scale
Purchaser”) and the Board of Directors of the Company provide to the shareholders necessary and sufficient information, opinions,alternative proposals, etc., and necessary and sufficient time to consider them.
The Policy sets out rules on Large-Scale Purchases (hereinafter referred to as “Large-Scale Purchase Rules”) and requests the Large-Scale
Purchaser to comply with the Large-Scale Purchase Rules. The Large-Scale Purchase Rules state that the Large-Scale Purchaser provide theBoard of Directors of the Company necessary and sufficient information regarding the Large-Scale Purchase in advance, and only commence
the Large-Scale Purchase after a certain period of evaluation by the Board of Directors of the Company has elapsed. The Board of Directors
shall take countermeasures that it deems necessary if the Large-Scale Purchaser does not comply with the Large-Scale Purchase Rules, oreven though the Large-Scale Purchaser complies with the Large-Scale Purchase Rules, if it is clear that the Large-Scale Purchase will cause
unrecoverable damages to the Company or if the Large-Scale Purchase significantly damages the corporate value and common interests ofshareholders.
Additionally, the Board of Directors of the Company shall consult with a Special Committee consisting of external academic experts,
lawyers, certified public accountants, etc., and shall receive the recommendations of the Committee when taking decisions as to whether or
not the Large-Scale Purchaser complies with the Large-Scale Purchase Rules, whether or not it is clear that the Large-Scale Purchase willcause unrecoverable damages to the Company, whether or not the Large-Scale Purchase will significantly damage the corporate value andcommon interests of shareholders, and whether or not countermeasures should be taken. The Board of Directors of the Company shall takethe Special Committee’s recommendations into the fullest account.
As stated above, the Policy stipulates rules to secure the necessary information and time for shareholders to deliberate on the Large-Scale
Purchase, as well as countermeasures if the Large-Scale Purchaser does not comply with the Large-Scale Purchase Rules or if it is clear that
the Large-Scale Purchase will cause unrecoverable damages to the Company. The purpose of the Policy is not to maintain the status of theCompany’s officers but to contribute to the Company’s corporate value and the common interests of its shareholders.

Business Review

65

Meanwhile, if the Company adopts a short-term management policy to seek temporary earnings and realizes latent gains by selling realestate holdings prior to having accomplished the objectives of the development plans formulated to contribute to higher corporate value inthe future, the leasing business cash flows that act as a stable revenue source will decrease, thereby exposing the development plans tofinancial risk. As such, the Company is unable to rule out a possible threat of damage to the foundation of the Company’s corporate value.
The Company’s management policy aims to steadily increase corporate value based on a medium- to long-term outlook, and isconsequently incompatible with such short-term goals. As such, if an investor seeking to orchestrate a takeover emerges, the Company mustseek a mandate from its shareholders upon having ensured sufficient information and time for completing discussions. Accordingly, theCompany deems that preliminary development of procedures through “the Policy on Large-Scale Purchase of Shares of the Company(Takeover Defense Measures)” (hereinafter referred to as the “Policy”) aligns with the common interests of shareholders. The Policy was
adopted based on the decision of the meeting of its Board of Directors dated May 17, 2007, was continued or renewed upon receiving
approval from shareholders at each of the shareholders’ meetings of the 74th fiscal year dated June 28, 2007, the 77th fiscal year dated
June 29, 2010, the 80th fiscal year dated June 27, 2013, the 83rd fiscal year dated June 29, 2016, and the 86th fiscal year dated June 27,
2019. The term of the Policy will expire upon the conclusion of the shareholders’ meeting of the 89th fiscal year scheduled to be held in
June 2022.

Sumitomo Realty’s
Corporate Value Creation

Details of and initiatives to help realize the basic policy(1) Steadily achieving objectives of the medium-term management plans and maintaining the revenue and profit growth trajectoryWith top priority placed on achieving objectives of the medium-term plans it draws up every three years, the Company has increased its
corporate value as a result of having steadily carried out such initiatives.
The Company has been steadily achieving its anticipated objectives under each of the plans, having implemented seven management
plans thus far, starting with the First Management Plan (April 1997 to March 2001) whose aims involved overcoming the adverse effects
encountered by the Company when Japan’s bubble economy burst, and achieving a rebound to record-high financial results.
The Seventh Management Plan (April 2016 to March 2019), concluded in March 2019, assumed an outlook whereby the Sixth Plan’sfavorable business environment was unlikely to persist into the Seventh Plan, yet the Seventh Management Plan marked the start of ourstated objective of setting new record-high financial results beyond those achieved under the Sixth Plan and thereby maintaining our“revenue and profit growth trajectory.” Fortunately, the Company’s business environment remained favorable overall, particularly withrespect to leasing office buildings in Tokyo amid a scenario of business conditions in Japan looking increasingly upbeat year by year, driven byfavorable economies worldwide. As a result, the Company substantially exceeded its initial targets across the board in terms of revenue fromoperations, operating income and ordinary profit over the cumulative three year period. Moreover, the Company achieved record-highfinancial results over six consecutive fiscal years, having achieved revenue from operations and ordinary profit in the final fiscal year of theplan, the fiscal year ended March 31, 2019, respectively exceeding 1 trillion yen and 200 billion yen for the first time ever. The SeventhManagement Plan ended on a successful note with the Company having achieved profit growth exceeding initial expectations.
Moreover, the Company has been taking steps to furthermore strengthen its corporate governance. This has entailed eliminating risk
involving conflict of interest due to parent-subsidiary listing by having made its real estate brokerage subsidiary Sumitomo Real Estate Sales
Co., Ltd., a wholly-owned subsidiary in June 2017, and building a framework for promoting increased corporate value over the medium- tolong-term by optimally allocating the Group’s managerial resources.
The Company’s new medium-term management plan, the Eighth Management Plan (April 2019 to March 2022) released in May 2019,
cites as its first objective the goal of achieving consecutive record-highs with respect to financial performance while maintaining the pace ofgrowth attained under the previous Seventh Management Plan. Meanwhile, we remain committed to increasing the Company’s corporate
value by steadily implementing plans for capital investment of 2 trillion yen in leasing properties with respect to development plans that havetaken shape in central Tokyo, and continuing to strengthen our platform for generating revenues over the long-term.
(2) Growth underpinned by central Tokyo office building leasing business and corporate value
The real estate leasing business primarily involving office buildings in central Tokyo has been a driving force underpinning the Company’s
growth thus far. Given that this business accounts for nearly 70% of the Company’s operating income overall, it clearly forms the core aspectof its corporate value acting as a major pillar of operations.
The Company has been expanding its business platform by promoting development of office buildings with a specific focus on central
Tokyo over roughly half a century since the early 1970s, an era that ushered in completion of the Shinjuku Sumitomo Building, often referred
to as the “triangular building.” The Company has experienced various change in the business environment such as unprecedented economic
crises that include the bursting of Japan’s bubble economy and the 2008 global financial crisis in wake of the Lehman Brothers collapse,
along with Japan’s bubble economy and recent business conditions under Japan’s Abenomics policies. Still, the Company has consistently
persisted with respect to unwaveringly implementing its management policies such that: (i) the Company will not pursue temporary gains by
selling assets; (ii) the Company will hold ownerships of buildings constructed on sites it has developed; and (iii) the Company will generate
stable leasing income over the long-term by owning and leasing such buildings. Having consequently grown to become a building ownerprofessing to be “No.1 in Tokyo” with more than 230 buildings located in central Tokyo, the Company’s cash flow from the leasing businesshas reached 200 billion yen for the fiscal year ending March 31, 2021 (operating income of the real estate leasing business + depreciation).
The office building leasing business calls for comprehensive strengths for carrying out business encompassing everything from acquisitionof development sites to operations that include planning projects, marketing tenants, providing services for tenants and managing buildings.
Given that acquiring development sites is the most important of these operations, the Company has been developing sites for buildings as if
it were a manufacturer in terms of the approach it takes to redevelopment in terms of buying up land and coordinating rights and interestsof landowners. In addition, the Company attaches importance to performing building management, tenant marketing, etc. directly, thus
grasping the actual conditions of clients and sites appropriately and always eagerly working on the improvement of project planning andmaking operations more efficient. As a result, we have realized high profitability, and have increased the value of the property possessed aswell as of the corporations. Unrealized gains from rental and other investment properties have accumulated over the years, and amounted toapproximately 3.4 trillion yen by March 31, 2021, as disclosed on the financial summary for the fiscal year ended March 31, 2021.
(3) The necessity for the takeover defense measures
The Eighth Management Plan cites as its secondary objective the notion of steadily promoting new building development plans in central
Tokyo to achieve gross floor area exceeding 800,000 tsubo (one tsubo is roughly 3.3 m2), which constitutes more than 50% of the
1,520,000 tsubo in gross floor area for leasing as of March 31, 2019. The Company aims to further expand its earnings base, increase its
corporate value and augment shareholder returns by successively completing such developments and putting them into operation.
Such large-scale development plans involve ultimately generating revenues from the substantial amount of cumulative upfront investment
made thus far.
The Company has long managed to continuously expand its business platform by developing lease buildings while avoiding exposure to
vicissitudes of the real estate market and business conditions, given that it has normally been buoyed by its leasing business cash flows whichhave been a stable source of revenues. As such, the Company needs to maintain and further expand its cash flows from the leasing business,
which have grown to around 200 billion yen, in order to confidently carry out such upfront investment without having to continually resort
to interest-bearing debt. Moreover, it is likely to take another six or seven years before the Company achieves full profitability given that thefocus has been on large-scale redevelopment.

A Message from the Management

Takeover Defense Measures66

Financial Section

Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
As of and for the years ended March 31
Millions of yen Thousands of U.S. dollars*1

2017

2016

2015

2014

2013

2012

2011

2021

¥  917,472
398,237
263,394
188,70765,792¥1,013,512
395,592
324,928
218,930
71,199¥1,012,198
381,763
331,751
221,693
71,867¥  948,402
353,880
311,192
209,355
69,168¥  925,151
337,465
314,299
203,623
66,714¥  854,964
313,340
274,760
199,115
61,496¥  806,835
289,117264,207
188,994
58,486¥  780,273
283,729
234,093
201,190
57,210¥  736,652
278,316
232,149
171,081
50,957¥  688,662
271,811
198,153
165,995
49,396¥  744,756
292,874
239,709
162,924
46,429$ 8,287,174
3,597,128
2,379,144
1,704,525
594,282

Cost of revenue from operations

629,564

691,832

711,050

664,015664,183

614,190579,964

558,986

529,913490,436551,364

5,686,614

SG&A expenses% of revenue from operations

68,663
7.5%

87,348
8.6%

81,758
8.1%

78,7498.3%

72,796
7.9%

66,532
7.8%

60,976
7.6%

60,815
7.8%

55,394
7.5%

50,760
7.4%

54,9297.4%

620,215

Operating income% of revenue from operations

219,24423.9%

234,332
23.1%

219,38921.7%

205,63721.7%

188,17120.3%

174,240
20.4%

165,89420.6%

160,471
20.6%

151,345
20.5%

147,465
21.4%

138,46218.6%

1,980,345

Ordinary profit*2

209,949

220,520203,227

186,870

167,697

148,424

139,055

130,536

114,916

107,912106,295

1,896,396

Profit attributable to owners of parent

141,389

140,997

130,102

119,731

103,488

87,79780,566

69,697

59,82553,23650,9081,277,111

Depreciation and amortization

57,812

48,97446,312

41,62739,44534,57433,51935,311

37,761

36,04923,704522,202

At Year-end
Total assets
Shareholders’ equity*3
Net interest-bearing debt
Unrealized gains on investment and rental properties¥5,673,666
1,503,021
3,372,953
3,432,632¥5,317,623
1,294,998
3,245,548
3,176,151¥5,130,118
1,202,103
3,170,595
2,703,263¥5,167,198
1,114,975
3,210,303
2,328,140¥4,980,039
1,007,347
3,101,162
1,996,441¥4,675,914
888,099
2,971,668
1,697,562¥4,523,804
832,462
2,875,660
1,290,144¥4,220,428
707,947
2,652,929
1,132,644¥4,105,500
627,0112,424,932
1,001,547¥3,859,698
553,843
2,407,640
976,000¥3,234,202
526,227
1,901,850
1,000,973$51,247,999
13,576,199
30,466,561
31,005,627

Per Share Amounts (Yen)Profit attributable to owners of parent
Shareholders’ equity
Cash dividend applicable to the year¥   298.33
3,171.34
40.00¥   297.50
2,732.41
35.00¥   274.51
2,536.40
30.00¥   252.62
2,352.53
27.00¥   218.34
2,125.36
24.00¥   185.23
1,873.71
22.00¥   169.97
1,756.25
21.00¥   147.02
1,493.48
20.00¥   126.18
1,322.52
20.00¥   112.28
1,168.11
20.00¥   107.35
1,109.78
20.00$      2.69
28.65
0.36

26.5
10.1
4.2
5.5
96
94
2.2
12.6

24.4
11.3
4.7
6.0
96
95
2.5
12.8

23.4
11.2
4.5
5.6
99
96
2.6
11.4

21.6
11.3
4.2
5.5
98
94
2.9
10.5

20.2
10.9
4.0
5.3
98
95
3.1
9.0

19.0
10.2
3.9
4.8
98
94
3.3
7.3

18.4
10.5
3.9
4.7
97
87
3.5
6.5

16.8
10.4
4.0
4.7
95
82
3.7
6.1

15.3
10.1
3.9
4.8
93
80
3.9
4.9

14.3
9.9
4.3
5.3
93
80
4.3
4.2

16.3
10.0
4.4
5.6
89
79
3.6
4.7

Key Ratios
Equity ratio (%)
ROE (%)ROA (%)
Return on leasing business*4 (%)
Long-term debt ratio (%)
Fixed-interest rate debt ratio (%)
ND/E ratio*5 (Times)
Interest coverage ratio*6 (Times)*1. U.S. dollar amounts in this report are translated, for convenience only, at the rate of ¥110.71 = U.S. $1, the prevailing exchange rate at March 31, 2021.
*2. Ordinary profit, which equals operating income after adjustment for non-operating gains/losses, is a management index that is widely used in Japan.
Due to differences in accounting standards, ordinary profit is not referred to in the Company’s English-language financial statements but is included here because it plays an important role in thecalculation of incentive payments for directors.
*3. Shareholders’ equity = Net assets – Non-controlling interests*4. Return on leasing business = Cash flows from leasing business/Cash flows from leasing business/Net assets of leasing business*5. ND/E ratio = Net interest-bearing debt (Interest-bearing debt – Cash, time and notice deposits) / Shareholders’ equity*6. Interest coverage ratio = (Operating income + Interest and dividend income) / Interest expense
Note: 1. The Company changed its accounting policy (revenue recognition standards of Sumitomo Real Estate Sales) from the beginning of the fiscal year ended March 31, 2020. The figures provided for the
fiscal year ended March 31, 2019 are those after retroactive application.
2. The numbers represented in this Eleven-year Financial Summary are based on the financial statements in this report and may differ slightly from those in Japanese.

67

Integrated Report 2021

Sumitomo Realty & Development Co., Ltd.

Financial Section/
Company Information

2018

ESG Management

2019

Business Review

2020

Sumitomo Realty’s
Corporate Value Creation

2021

For the Year
Revenue from operations
Leasing
Sales
Construction
Brokerage

A Message from the Management

Eleven-year Financial Summary

68

Financial Section
Management’s Discussion and Analysis
Billions of yen

1,200

240

925.1 948.4

1,012.1 1,013.5

160

Net assets
Total net assets amounted to ¥1.5 trillion (¥208.0 billion increase year onyear). Profit attributable to owners of parent stood at ¥141.3 billion, andretained earnings increased. In addition, net unrealized holding gains on
securities increased by ¥84.1 billion. As a result, the equity ratio improved
from 24.4% at the end of the previous fiscal year to 26.5% and ROE
remained at a double-digit level, 10.1%.
Furthermore, unrealized gains on investment and rental properties
increased from ¥3.1 trillion at the end of the fiscal year to ¥3.4 trillion as ofthe end of the fiscal year under review (refer to page 94) and have beenhighly evaluated by rating agencies as a buffer against financial risks. JCR
and R&I have issued ratings of AA− and A+, respectively.

219.2

20.3

30

Billions of yen

240

400

0

24.8

2018

2019

2020

2021

0

2022

(Forecast)

2017

2018

2019

Operating Income

2020

2021

2022

209.9

221.0

186.8
20

80

2017

220.5

203.2

23.9

23.1

21.7

21.7

228.0

160

167.6

10

80

0

0

(Forecast)

Operating Margin (right scale)

2017

2018

Ordinary Profit2019

141.3 150.0

140.9

130.1

119.7

103.4

Financial Resources for Capital and Liquidity of Funds
AssetsTotal assets as of the end of the fiscal year under review amounted to ¥5.6
trillion (¥356.0 billion increase year on year). Property and equipment
increased to ¥4.0 trillion (¥271.9 billion increase year on year) due toinvestment in buildings for leasing.
Liabilities
Total liabilities amounted to ¥4.1 trillion (¥148.0 billion increase year onyear). Consolidated interest-bearing debt increased to ¥3.5 trillion (¥120.3
billion increase year on year). ND/E ratio continued to improve from 2.5
times at the end of previous fiscal year to 2.2 times. As of the end of the
fiscal year under review, long-term debt accounted for 96% of consolidated
interest-bearing debt, and fixed-interest rate debt for 94% (those number
were 96% and 95%, respectively, at the end of the previous fiscal year).

%

188.1

800

Cash flows from financing activities
Long-term loans payable amounted to ¥316.6 billion (including non-recourse
loans) to further promote long-term stabilization of fund raising, while
repayment of long-term loans payable at maturity totalled ¥194.1 billion(including non-recourse loans). As a result, net cash provided by financing
activities amounted to ¥102.0 billion.

219.3

205.6

917.4 920.0

234.3

2020

2021

2022

(Forecast)Profit Attributable to Owners of Parent* Please see note *2 on page 67.

Total Assets

Shareholders’ Equity andEquity Ratio

Billions of yen

Billions of yen

6,000

4,980.0

5,167.1

5,130.1

5,317.6

5,673.6

4,000

1,503.0

1,500

1,000

1,007.3

1,114.9

2,000

1,202.1

2018

2019

2020

0

2021

2017

2018

Billions of yen

3,600

24.4

3,101.1

26.5

30

2,400

15

1,200

2019

2020

2021

0

0

Shareholders’ Equity(Net Assets – Profit Attributable to Non-controlling Interests)

3,210.3

3,170.5

3,245.5

3,372.9

Times

6

4
3.1

500

2017

%

45

1,294.9

23.4

21.6

20.2

0

Net Interest-bearing Debt and
ND/E Ratio

2017

2.9

2018

2.6

2019

Net Interest-bearing Debt

2.2

2.5

2020

2021

2

0

ND/E Ratio (right scale)

Equity Ratio (right scale)

ROE and ROA

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

%

%

15

100

98
95

10.9

11.3

11.2

11.3

10

5
4.0

4.2

4.5

4.7

99

98

Interest Coverage Ratio

96

94

96

96
95

Billions of yen

250

94

214.1
200

80

194.8

10.1

4.2

60

150

40

100

20

50

10.5

2017

2018

2019

2020

2021

ROE (Net Income / Shareholders‘ Equity)
ROA (Operating income + Interest and Dividend Income / Total Assets)

0

2017

2018

2019

2020

Short-term Loans and Commercial Paper
Long-term Loans and Bonds
Fixed-interest Rate Debt Ratio

2021

0

246.0

Times

231.0

12.8

12.6

15
12

11.4
9

9.0

6

21.5
0

229.4

2017

20.3
2018

20.1
2019

18.3

19.1
2020

2021

3

Financial Section/
Company Information

Integrated Report 2021

Billions of yen

Ordinary Profit* andProfit Attributable to Owners of Parent

ESG Management

69

Operating Income and Operating Margin

Business Review

Cash flows from operating activities
With the ordinary profit of ¥209.9 billion, an increase in depreciation andamortization, and a slight decrease in inventories, net cash provided byoperating activities amounted to ¥225.9 billion.

Revenue from Operations

Sumitomo Realty’s
Corporate Value Creation

Cash Flows
Cash flows for the consolidated fiscal year under review were as
follows:
Cash flows from operating activities: ¥225,947 million (¥4,511
million decrease year on year)
Cash flows from investing activities: ¥(336,682) million (¥46,564
million decrease year on year)
Cash flows from financing activities: ¥102,086 million (¥19,442
million increase year on year)
Cash and cash equivalents decreased to ¥187,281 million (¥6,167
million decrease year on year)

Cash flows from investing activities
As a result of investment in property and equipment totaling ¥355.4 billion
mainly for the purpose of augmenting the leasing business, net cash used ininvesting activities amounted to ¥336.6 billion.

A Message from the Management

Business results for the consolidated fiscal year ended March 31, 2021
(fiscal 2020)
The financial results for the consolidated fiscal year under review wereas follows; revenue from operations recorded ¥917.4 billion (¥96.0
billion, or 9.5% decrease year on year), operating income ¥219.2
billion (¥15.0 billion, or 6.4% decrease year on year), and ordinary
profit ¥209.9 billion (¥10.5 billion, or 4.8% decrease year on year).
Although revenue from operations, operating income, and ordinary
profit declined from the previous year, profit attributable to owners ofparent recorded ¥141.3 billion (¥0.3 billion, or 0.3% increase year onyear), achieving profit increase for the tenth consecutive year, andrecord-high for the eighth consecutive year.
By segment, in the leasing business, the commercial facilities suchas hotels and event halls were significantly affected by COVID-19.
However, the mainstay office building business recorded increases inboth revenue and profit by maintaining low vacancy rates, andunderpinned the performance as a whole. Furthermore, due toreduced advertising and selling expenses and improvements in grossprofit margin, the sales business, focusing on condominium sales,
recorded double-digit growth in profit, contributing to the overall
result. (Please refer to page 25 and 26 for detail of each segment)
Non-operating income recorded ¥13.8 billion (¥1.6 billion increase
year on year) due to an increase in dividend income, receipt of
employment adjustment subsidy, etc. while non-operating expenses
decreased to ¥23.1 billion (¥2.8 billion decrease year on year) due to adecrease in interest expense, etc. As a result, non-operating income/expenses improved by ¥4.5 billion from the previous fiscal year andrecorded ¥(9.2) billion yen.
Extraordinary income recorded ¥13.6 billion (¥7.1 billion increase
year on year) mainly due to transferring all of its equity interest in thecondominium development joint venture company in Dalian City,
China. On the other hand, extraordinary loss recorded ¥13.2 billion(¥7.9 billion decrease year on year) due to loss on disposal of property
and equipment accompanying renovation of existing buildings, etc. As
a result, extraordinary income/loss improved by ¥15.1 billion year on
year and recorded ¥409 million.

0

Operating Income + Interest and Dividend Income
Interest Expense
Interest Coverage Ratio (right scale)

Sumitomo Realty & Development Co., Ltd.

70

Financial Section

Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
As of March 31, 2021 and 2020
Thousands of
U.S. dollars (Note 1)

Millions of yen

2021

2020

2021

¥  146,620
211,446
16,344
24,69740,742
4,023
65,964
152,124
661,960¥  146,726
131,471
70,37336,39332,344
5,440
51,196
148,102622,045$ 1,324,361
1,909,909
147,629
223,078
368,007
36,338595,827
1,374,076
5,979,225

2,890,210
296,673
286,151
5,258
30,393
3,508,685

2,842,156
250,182
293,505
6,270
8,465
3,400,578

26,106,133
2,679,731
2,584,690
47,493
274,528
31,692,575

122,805
104,154
1,126,670(4,475)
1,349,154

122,805
104,154
1,002,634(4,473)1,225,120

1,109,249
940,782
10,176,768(40,420)
12,186,379

160,441(2,989)(4,266)681
153,867
1,503,021¥5,673,666

76,335(3,560)(2,718)(177)
69,8801,295,000¥5,317,623

1,449,201(26,998)(38,533)
6,150
1,389,820
13,576,199$51,247,999¥  188,340
18,714(38)
636,803
68,377912,196¥  195,361
17,406(61)
648,881
54,447916,034$ 1,701,201
169,036(343)
5,751,992
617,6228,239,508

68,689510,503(2,084)577,108

100,156
372,414(2,082)
470,488

620,441
4,611,173(18,824)
5,212,790

Long-term liabilities:
Long-term debt due after one year (Notes 5, 6 and 8)
Long-term non-recourse debt due after one year (Notes 5, 6 and 8)
Guarantee and deposits received (Notes 6 and 13)
Net defined benefit liability (Note 9)
Other long-term liabilities (Note 12)
Total long-term liabilities

2,778,475
1,705,467
44,9391,915
107,850
4,638,646

2,558,356
1,584,047
40,382
2,054
133,718
4,318,557

25,096,875
15,404,814
405,916
17,297974,168
41,899,070

Contingent liabilities (Note 20)

Accumulated depreciation and accumulated impairment losses
Net property and equipment(626,477)
4,012,169(578,302)
3,740,255(5,658,721)
36,240,349

Other assets:
Guarantee and lease deposits paid to lessors (Notes 6 and 7)
Leasehold rights and other intangible assets
Deferred income taxes (Note 12)
Other
Total other assets
Total assets

68,74362,411
11,071
29,968172,193¥5,673,666

70,172
57,56230,06733,045
190,846¥5,317,623

620,929563,734
100,000
270,689
1,555,352$51,247,999

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

Property and equipment:
Land (Notes 4, 5 and 19)
Buildings and structures (Notes 4, 5 and 19)
Machinery and equipment (Notes 5 and 19)
Leased assets
Construction in progress (Notes 4 and 19)

Net assets (Note 14)
Shareholders’ equity
Common stock:
Authorized —1,900,000 thousand shares
Issued    —476,086 thousand shares
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity
Accumulated other comprehensive income (loss)
Net unrealized holding gains on securities
Net deferred losses on hedges
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Total net assets
Total liabilities and net assets

See accompanying notes.

71

Integrated Report 2021

Sumitomo Realty & Development Co., Ltd.

Financial Section/
Company Information

2021

ESG Management

2020

Business Review

2021

Liabilities and Net Assets
Current liabilities:
Short-term debt (Notes 6 and 8)
Long-term debt due within one year (Notes 5, 6 and 8)
Long-term non-recourse debt due within one year (Notes 5, 6 and 8)
Notes and accounts payable—trade (Note 6)
Accrued income taxes
Accrued bonuses
Deposits received (Note 13)
Other current liabilities
Total current liabilities

Sumitomo Realty’s
Corporate Value Creation

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

Thousands of
U.S. dollars (Note 1)

Millions of yen

A Message from the Management

Consolidated Balance Sheets72

Financial Section

Consolidated Statements of Changes in Net Assets

Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
For the years ended March 31, 2021, 2020 and 2019

Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
For the years ended March 31, 2021, 2020 and 2019
Millions of yen

Thousands of
U.S. dollars (Note 1)

Thousands

Number ofshares ofcommon
stock

2019

2021

Revenue from operations
Costs and expenses:
Cost of revenue from operations
Selling, general and administrative expenses¥917,473¥1,013,513¥1,012,198$8,287,174

629,565
68,664
698,229

691,832
87,349779,181

711,050
81,759792,8095,686,614
620,215
6,306,829

Operating income
Other income (expenses):
Interest expense, net
Dividend income
Gain on sale of property and equipment
Loss on sale of property and equipment
Loss on impairment of fixed assets (Note 10)
Loss on disposal of property and equipment
Gain on sale of investments in securities (Note 7)
Loss on sale of investments in securities (Note 7)
Loss on devaluation of investments in securities (Note 7)
Loss related to COVID-19
Reversal of allowance for doubtful accounts
Other, net

219,244234,332

219,389

1,980,345(18,043)
11,561536—(3,876)(7,890)13,116
(312)
(489)
(629)
—
(2,859)(8,885)(18,530)
11,024278(2,131)(9,660)(1,567)
1,417—(7,838)—4,824(6,339)(28,522)(19,589)
9,472
75(3,724)(8,576)(1,280)12—(1,105)——(6,115)(30,830)(162,975)
104,426
4,841—(35,010)(71,267)
118,472(2,818)(4,417)(5,682)—(25,825)(80,255)

Income before income taxes
Income taxes (Note 12):Current
DeferredTotal

210,359

205,810

188,559

1,900,090

64,9304,040
68,97068,180(3,367)64,81362,823(4,367)58,456

586,487
36,492622,979

Profit141,389

140,997

130,103

1,277,111

—

—

—

—

¥141,389¥  140,997¥  130,103$1,277,111

Profit attributable to non-controlling interests
Profit attributable to owners of parent

Yen

Amounts per share of common stock:
Profit attributable to owners of parent:—Basic—Diluted
Cash dividend applicable to the year

U.S. dollars (Note 1)

2020

2019

2021

Commonstock

CapitalsurplusRetainedearnings

Treasurystock¥122,805—
122,805
—
—
—
—
—
—

¥104,154—
104,154
—
—
—
—
0
—

¥  765,326(5,299)760,027
130,103
—
—
—
—
(57)

¥(4,443)—(4,443)
—
—
—
(27)
0
—

¥  987,842(5,299)982,543
130,103
—
—
(27)
0
(57)

¥131,115—
131,115——(21,905)———¥(2,049)—(2,049)
—
—
—
—
—
—

¥(2,093)—(2,093)
—
(259)
—
—
—
—

¥ 160
—
160
—
—
—
—
—
—

¥127,133—
127,133—(259)(21,905)———¥1,114,975(5,299)1,109,676
130,103(259)(21,905)
(27)
0
(57)

—
—
—
—
¥122,805
—
—
—
—
—
—

—
—
—
—
¥104,154
—
—
—
—
0
—

(6,635)(6,635)——¥  876,803
140,997
—
—
—
—
—

—
—
—
—
¥(4,470)
—
—
—
(3)
0
—

(6,635)(6,635)——¥1,099,292
140,997
—
—
(3)
0
—

—
—
—
—
¥109,210——(32,875)—————(1,923)—¥(3,972)
—
—
—
—
—
—

—
—
—
—
¥(2,352)
—
(366)
—
—
—
—

—
—
—
(234)
¥ (74)
—
—
—
—
—
—

—
—
(1,923)(234)¥102,812—(366)(32,875)———(6,635)(6,635)(1,923)(234)¥1,202,104
140,997(366)(32,875)
(3)
0
—

—
—
—
—
¥122,805
—
—
—
—
—
—

—
—
—
—
¥104,154
—
—
—
—
—
—

(7,583)(7,583)——¥1,002,634
141,389
—
—
—
—
657

—
(7,583)—(7,583)————¥(4,473) ¥1,225,120—
141,389
—
—
—
—
(2)
(2)
—
—
—
657

—
—
—
—
¥ 76,335——
84,106
—
—
—

—
—
412
—
¥(3,560)
—
—
—
—
—
—

—
—
—
—
¥(2,718)—(1,548)
—
—
—
—

—
—
—
(103)
¥(177)
—
—
—
—
—
—

—
—
412
(103)
¥ 69,880—(1,548)
84,106———(7,583)(7,583)412(103)¥1,295,000
141,389(1,548)
84,106
(2)
—
657

—
—
—
—
¥122,805————¥104,154(9,005)(9,005)——¥1,126,670—(9,005)—(9,005)————¥(4,475) ¥1,349,154————¥160,441——
571—¥(2,989)————¥(4,266)

—
—
—
858
¥ 681

—
—
571
858
¥153,867(9,005)(9,005)571
858¥1,503,021

Thousands of U.S. dollars (Note 1)
Accumulated other comprehensive income (loss)
RemeasureNet unrealized
Foreignments ofTotal
holding gains
Net deferredcurrency
definedshareholders’(losses) on
gains (losses)
translation
benefitequitysecurities
on hedges
adjustments
plans

Total
accumulated
othercomprehensive
income (loss)

Total net
assetsShareholders’ equity¥298.33—
40.00¥297.50—
35.00¥274.51
—
30.00

$2.69
—
0.36

See accompanying notes.

Consolidated Statements of Comprehensive Income
Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
For the years ended March 31, 2021, 2020 and 2019

2021

2020

2019

2021

ProfitOther comprehensive income (loss) (Note 18)
Net unrealized holding gains (losses) on securities
Net deferred gains (losses) on hedges
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Total other comprehensive income (loss)
Comprehensive income¥141,389¥140,997¥130,103$1,277,111

84,106571(1,548)858
83,987¥225,376(32,875)
412
(366)
(103)
(32,932)¥108,065(21,905)(1,923)(259)(234)(24,321)¥105,782

759,697
5,158(13,982)7,749
758,622$2,035,733

Comprehensive income attributable to:
Owners of the parent
Non-controlling interests¥225,376—¥108,065—¥105,782—$2,035,733—

CapitalsurplusRetainedearnings

Treasurystock

Total net
assets$1,109,249
—
—
—
—
—
—

$940,782 $ 9,056,400—
1,277,111
—
—
—
—
—
—
—
—
—
5,935

$(40,403) $11,066,028—
1,277,111
—
—
—
—
(17)
(17)
—
—
—
5,935

$ 689,504——
759,697———$(32,156)
—
—
—
—
—
—

$(24,551)—(13,982)————$(1,599) $ 631,198 $11,697,226——
1,277,111—(13,982)(13,982)—759,697759,697
—
—
(17)
—
—
—
—
—
5,935

—
—
—
—
$1,109,249—(81,339)—(81,339)—(81,339)—(81,339)
—
—
—
—
—
—
—
—
$940,782 $10,176,768 $(40,420) $12,186,379————$1,449,201

—
—
5,158
—
$(26,998)————$(38,533)——(81,339)——(81,339)
—
5,158
5,158
7,749
7,749
7,749
$ 6,150 $1,389,820 $13,576,199

See accompanying notes.

See accompanying notes.

73

Integrated Report 2021

Sumitomo Realty & Development Co., Ltd.

Financial Section/
Company Information

Thousands of
U.S. dollars (Note 1)

Millions of yen

Commonstock

Balance at April 1, 2020
Profit attributable to owners of parent
Foreign currency translation adjustments
Net unrealized holding gains (losses) on securities
Acquisition of treasury stock
Disposal of treasury stock
Change in scope of consolidation
Cash dividends paid:
Final for prior year ($0.17 per share)
Interim for current year ($0.17 per share)
Net deferred gains (losses) on hedges
Remeasurements of defined benefit plans
Balance at March 31, 2021

Total
accumulated
othercomprehensive
income (loss)

ESG Management

2021

Balance at April 1, 2018
476,086
Cumulative effects of changes in accounting policies—
Restated balance
476,086
Profit attributable to owners of parent—
Foreign currency translation adjustments—
Net unrealized holding gains (losses) on securities—
Acquisition of treasury stock—
Disposal of treasury stock—
Change in scope of consolidation—
Cash dividends paid:
Final for prior year (¥14 per share)—
Interim for current year (¥14 per share)—
Net deferred gains (losses) on hedges—
Remeasurements of defined benefit plans—
Balance at April 1, 2019
476,086
Profit attributable to owners of parent—
Foreign currency translation adjustments—
Net unrealized holding gains (losses) on securities—
Acquisition of treasury stock—
Disposal of treasury stock—
Change in scope of consolidation—
Cash dividends paid:
Final for prior year (¥16 per share)—
Interim for current year (¥16 per share)—
Net deferred gains (losses) on hedges—
Remeasurements of defined benefit plans—
Balance at April 1, 2020
476,086
Profit attributable to owners of parent—
Foreign currency translation adjustments—
Net unrealized holding gains (losses) on securities—
Acquisition of treasury stock—
Disposal of treasury stock—
Change in scope of consolidation—
Cash dividends paid:
Final for prior year (¥19 per share)—
Interim for current year (¥19 per share)—
Net deferred gains (losses) on hedges—
Remeasurements of defined benefit plans—
Balance at March 31, 2021
476,086

Net unrealized
holding gains(losses) on
securities

Total
shareholders’equityBusiness Review

2020

Accumulated other comprehensive income (loss)
RemeasureForeign
ments ofNet deferredcurrency
definedgains (losses)
translation
benefiton hedges
adjustments
plans

Sumitomo Realty’s
Corporate Value Creation

2021

Millions of yen
Shareholders’ equity

A Message from the Management

Consolidated Statements of Income

74

Financial Section

Notes to Consolidated Financial Statements

Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
For the years ended March 31, 2021, 2020 and 2019

Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
As of March 31, 2021 and 2020, and for the years ended March 31, 2021, 2020 and 2019
Thousands of
U.S. dollars (Note 1)

Millions of yen

2021¥ 210,359
57,813
3,876
(21)
226
(536)
7,890
(12,803)489(11,836)
18,318(1,185)
7,304(12,041)(4,922)
26,434289,365¥ 205,810
48,9749,660(4,848)
60
1,853
1,567
(1,417)
7,838(11,680)
19,186
4,637
46,767(18,543)(416)(6,117)303,331¥ 188,559
46,313
8,576
(309)
(242)
3,649
1,280
(12)
1,105
(10,067)
20,1842,233
65,981
26,189(12,073)(1,800)339,566$ 1,900,090
522,20235,010(190)
2,041(4,841)
71,267(115,644)
4,417(106,910)
165,459(10,704)
65,974(108,762)(44,458)
238,770
2,613,721

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

11,836(18,224)(57,030)
225,947

11,680(19,334)(65,218)
230,459

10,066(20,147)(69,427)
260,058

106,910(164,610)(515,130)2,040,891

Cash flows from investing activities:
Payments for purchases of property and equipment
Proceeds from sale of property and equipment
Payments for purchases of investments in securities
Proceeds from sale and redemption of investments in securities
Payments for guarantee and lease deposits paid to lessors
Proceeds from guarantee and lease deposits paid to lessors
Payments for guarantee and lease deposits received
Proceeds from guarantee and lease deposits received
Other, net
Net cash used in investing activities(355,432)
1,659(20,500)
49,141(748)
1,954(16,549)
24,264(20,471)(336,682)(270,347)
11,307(46,695)
2,676(1,121)804(10,950)
29,525(5,318)(290,119)(188,573)
6,617(31,281)
334
(738)
4,475
(14,324)
35,664(21,387)(209,213)(3,210,478)
14,985(185,168)
443,871(6,756)
17,650(149,481)
219,167(184,907)(3,041,117)

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

(106)
—
6,000
(8,000)259,500(131,471)
57,140(62,678)(2)(18,005)(292)
102,086

121,083(40,000)
2,000(2,000)
153,300(129,619)
93,720(100,363)(3)(15,163)(310)
82,645(35,773)(60,000)
4,900(4,900)198,300(225,752)
37,110(44,611)(27)(13,269)(2,036)(146,058)(957)—
54,196(72,261)
2,343,962(1,187,526)
516,123(566,146)(18)(162,632)(2,638)922,103(1,088)

(244)

243

(9,827)

Effect of exchange rate changes on cash and cash equivalents

See accompanying notes.

(9,737)22,741(94,970)(87,950)

193,448

170,707

262,046

1,747,340

3,570¥ 187,281—¥ 193,448

3,631¥ 170,707

32,246$ 1,691,636

2

Accounting policies(1) Consolidation
The accompanying consolidated financial statements include theaccounts of the Company and significant companies over which theCompany has power of control through majority voting rights orexistence of certain conditions evidencing control by the Company.
In the elimination of investments in subsidiaries, the assets andliabilities of the subsidiaries, including the portion attributable to minority
shareholders, are recorded based on the fair value at the time theCompany acquired control of the respective subsidiaries.
All significant intercompany balances, transactions and profits havebeen eliminated in consolidation.
(2) Foreign currency translation
Receivables and payables denominated in foreign currencies aretranslated into Japanese yen at the year-end rate.
Financial statements of consolidated overseas subsidiaries aretranslated into Japanese yen at the year-end rate, except forshareholders’ equity accounts, which are translated at historical rates,
and income statement items resulting from transactions with theCompany, which are translated at the rates used by the Company.
Differences arising from translation are presented as “Foreign
currency translation adjustments” in net assets.
(3) Cash and cash equivalents
In preparing the consolidated statements of cash flows, cash on hand,readily available deposits and short-term, highly liquid investments with

75

Integrated Report 2021

(4) Recognition of revenue
Revenues from sales operations of condominiums, detached houses andland lots are recognized when the units are delivered and customers
accepted the delivery. Revenues from leasing operations of officebuildings, residences and other properties are recognized as rent accrues
over the lease term.
The Company’s consolidated subsidiary, Sumitomo Real Estate Sales
Co., Ltd. recognizes brokerage fees as revenue at the delivery of theproperty. However, the amount received of the brokerage fees waspreviously recognized as revenue on the date it was received in case ofwhich the brokerage fees are received after the conclusion of the sales
contracts and before the delivery of property. From the year ended March
31, 2020, its revenue recognition has been changed and the total
amount received of the brokerage fees are recognized as revenue at thetiming of the delivery of the property.
This change was made as a result of reviewing the revenue
recognition policy of Sumitomo Real Estate Sales Co., Ltd. to be alignedwith the policy of the Company, after it was delisted and became awholly owned subsidiary to the Company, and implemented as theCompany completed the preparation of the operation system toaccommodate the change at the timing of formulating the EighthManagement Plan starting from the year ended March 31, 2020.
The consolidated financial statements for the year ended March 31,
2019 have been adjusted reflecting the retroactive application of the new
accounting policy.
As a result, revenue from operations decreased by ¥1,032 million,
operating income and income before income taxes decreased by ¥1,030
million respectively. In addition, the balance of retained earnings at April
1, 2018 decreased by ¥5,299 million reflecting cumulative effects to net
assets at the beginning of the year ended March 31, 2019.
As the effect of the change on amounts per share of common stock,earnings per share decreased by ¥1.51 for the year ended March 31,
2019.
(5) Inventories
Inventories are stated at cost, determined by the specific identification
method principally. The carrying amount of inventories is written downwhen the profitability declines.
(6) Securities
Held-to-maturity securities are stated at amortized cost. Investments in
subsidiaries and affiliates that are not consolidated or accounted forusing the equity method are stated at moving-average cost. Available-forsale securities with available fair values are stated at fair value. Unrealized
gains and losses on these securities are reported, net of applicable
income taxes, as a separate component of net assets. Realized gains andlosses on the sale of such securities are computed using moving-average
cost.
Preferred equity securities are stated at cost determined by the specificidentification method, and securities with no available fair value arestated at moving-average cost.
Investments in limited partnerships, which are regarded as securities
under the Financial Instruments and Exchange Act, are accounted for in a

Sumitomo Realty & Development Co., Ltd.

Financial Section/
Company Information

Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Increase in cash and cash equivalents of newly consolidated
subsidiaries
Cash and cash equivalents at end of year (Note 3)

The accompanying consolidated financial statements of Sumitomo Realty& Development Co., Ltd. (“the Company”) and its consolidated
subsidiaries have been prepared in accordance with the provisions set
forth in the Financial Instruments and Exchange Act and its related
accounting regulations, and in conformity with accounting principles
generally accepted in Japan (“Japanese GAAP”), which are different incertain respects as to application and disclosure requirements fromInternational Financial Reporting Standards (“IFRS”).
The accounts of the Company’s overseas subsidiaries are based on
their accounting records maintained in conformity with generally
accepted accounting principles prevailing in the respective countries of
domicile. The accompanying consolidated financial statements have been
restructured and translated into English (with certain expandeddisclosure) from the consolidated financial statements of the Company
prepared in accordance with Japanese GAAP and filed with theappropriate Local Finance Bureau of the Ministry of Finance as requiredby the Financial Instruments and Exchange Act. Certain supplementary
information included in the statutory Japanese-language consolidated
financial statements, but not required for fair presentation, is notpresented in the accompanying consolidated financial statements.
The translation of the Japanese yen amounts into U.S. dollars is
included solely for the convenience of readers outside Japan, using theprevailing exchange rate at March 31, 2021, which was ¥110.71 to U.S.
$1. The translation should not be construed as representations that theJapanese yen amounts have been, could have been or could in the future
be converted into U.S. dollars at this or any other rate of exchange.

ESG Management

2019

maturities not exceeding three months at the time of purchase areconsidered to be cash and cash equivalents.

Business Review

2020

 asis of presenting consolidatedBfinancial statements

Sumitomo Realty’s
Corporate Value Creation

2021

Cash flows from operating activities:
Income before income taxes
Depreciation and amortization
Loss on impairment of fixed assets (Note 10)
Provision for (Reversal of) allowance for doubtful accounts
Increase (Decrease) in net defined benefit liability
Loss (Gain) on sale of property and equipment, net
Loss on disposal of property and equipment
Loss (Gain) on sale of investments in securities, net
Loss (Gain) on devaluation of investments in securities
Interest and dividend income
Interest expense
Decrease (Increase) in notes and accounts receivable—trade
Decrease (Increase) in inventories
Increase (Decrease) in notes and accounts payable—trade
Increase (Decrease) in advances received
Other, net
Total

1

A Message from the Management

Consolidated Statements of Cash Flows76

Financial Section(11) Income taxes
Income taxes are provided for on the basis of income for financial
statement purposes. The tax effects of temporary differences between
the carrying amounts of assets and liabilities for financial statements andincome tax purposes are recognized as deferred income taxes.

77

Integrated Report 2021

¥260,825
366,597$2,355,930
3,311,327(2) Information on the nature of significant accounting estimates for
identified items
Real estate for sale is stated at cost on the consolidated financial
statements. In case the net realizable value is lower than its cost, theprofitability is regarded to have declined, and the net realizable value
is used as the carrying amount. The difference between the cost andthe net realizable value is recognized as a loss for the current fiscal
year.
The net realizable value is estimated based on business plans withthe consideration of expected selling price, construction cost trend,
etc. The estimation is based on the assumption of unit sales price inits sales area and construction cost per unit on the basis of theCompany’s past results.
In case a loss on devaluation of the real estate for sale is to berecognized due to the change of the above-mentioned assumption,
the impact on the consolidated financial statements may besignificant.
Loss on impairment of fixed assets(1) Carrying amounts in the consolidated financial statements for theyear ended March 31, 2021
Property and equipment
Leasehold rights

Millions of yen

Thousands of
U.S. dollars¥4,012,169
60,162$36,240,349
543,420(2) Information on the nature of significant accounting estimates for
identified items
The amounts determined by deducting accumulated depreciation andaccumulated impairment losses from the acquisition costs is used as
the carrying amount. When a property’s profitability has declined andan impairment indicator exists, the Group is required to determine
whether an impairment loss should be recognized. Impairment
indicators include recurring operating losses, a significant adversechange that could affect the recoverable amount, a significant
deterioration of business environment and a significant decrease in
the market prices. Such market prices are calculated by the Company
using income approach, and future cash flow and discount rate isestimated based on the assumption of current rent per unit, rent levelin the market, occupancy rate, discount rate, etc.
For fixed assets of which the impairment indicator exists, theimpairment loss is recognized if the total amount of their future cash
flow before discount is lower than the book value.
The carrying amounts of fixed assets of which the impairment loss
is to be recognized, have been reduced to the recoverable amounts,
and the amount of the reduction is recognized as impairment loss forthe current fiscal year. The recoverable amounts are determined based(17) New accounting pronouncements (Accounting standards andguidance issued but not yet effective)“Accounting Standard for Revenue Recognition” (ASBJ Statement No.
29, March 31, 2020)“Implementation Guidance on Accounting Standard for Revenue
Recognition” (ASBJ Guidance No. 30, March 26, 2021)(1) Overview
The standard and guidance provide comprehensive principles forrevenue recognition. Under the standard and guidance, revenue isrecognized by applying the following 5 steps:
Step 1: Identify contract(s) with customers
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligation in
the contract
Step 5: Recognize revenue when (or as) the entity satisfies a
performance obligation(2) Effective date
Effective from the beginning of the year ending March 31, 2022
(3) Effects of the application of the standards
The Company and its consolidated domestic subsidiaries are currently
in the process of determining the effects of these new standards onthe consolidated financial statements.
“Accounting Standard for Fair Value Measurement” (ASBJ Statement No.
30, July 4, 2019)“Implementation Guidance on Accounting Standard for Fair Value
Measurement” (ASBJ Guidance No. 31, July 4, 2019)“Accounting Standard for Measurement of Inventories” (ASBJ Statement
No. 9, July 4, 2019)“Accounting Standard for Financial Instruments” (ASBJ Statement No.
10, July 4, 2019)“Implementation Guidance on Disclosures about Fair Value of Financial
Instruments” (ASBJ Guidance No. 19, March 31, 2020)(1) Overview
In order to enhance comparability with internationally recognizedaccounting standards, “Accounting Standard for Fair Value
Measurement” and “Implementation Guidance on AccountingStandard for Fair Value Measurement” (together, hereinafter referred
to as “Fair Value Accounting Standards”) were developed andguidance on methods measuring fair value was issued. Fair Value
Accounting Standards are applicable to the fair value measurement of
the following items:* Financial instruments in “Accounting Standard for Financial
Instruments”; and* Inventories held for trading purposes in “Accounting Standard for
Measurement of Inventories.”

Sumitomo Realty & Development Co., Ltd.

Financial Section/
Company Information(10) Lease transactions
Leased assets related to finance lease transactions without title transfer
are depreciated using the straight-line method over the lease periods as
their useful lives with no residual value.

(15) Amounts per share of common stock
The computation of earnings per share is based on the weighted-average
number of shares of common stock outstanding during each year.
Diluted earnings per share is computed based on the amount of profit
attributable to owners of parent on common stock and the weightedaverage number of shares of common stock outstanding during eachyear after giving effect to the dilutive potential of shares of common
stock to be issued upon the exercise of stock options.
Diluted earnings per share is not presented as there are no potential
shares.
Cash dividends per share represent actual amounts applicable to therespective year.

Real estate for sale
Real estate for sale in process

Thousands of
U.S. dollars

ESG Management(9) Allowance for doubtful accounts
The Company and its consolidated subsidiaries (“The Group”) provide for
doubtful accounts at an estimated uncollectable amount based on theevaluation of certain identified doubtful and bankrupt receivables plus anamount calculated using the percentage of actual collection losses incertain reference periods with respect to remaining receivables.

(14) Derivative transactions and hedge accounting
The Group states derivative financial instruments at fair value andrecognize changes in the fair value as gains or losses unless derivative
financial instruments are used for hedging purposes and qualify forhedge accounting.
If derivative financial instruments are used as hedges and meet certain
hedging criteria, the Group defers recognition of gains or losses resulting
from changes in fair value of the derivative financial instruments until the
related gains or losses on the hedged items are recognized.
Also, if interest rate swap contracts are used as a hedge and meetcertain hedging criteria (regarding interest rate swap contracts), the net
amount to be paid or received under the interest rate swap contracts isadded to or deducted from the interest on the assets or liabilities relative
to which the swap contract was executed as a hedge.

Millions of yen

on the appraisal value by a real estate appraiser, the amounts
equivalent to the publicly notified land price and the amounts
calculated by discounting the future cash flow.
In case the impairment indicator exists, and an impairment loss is
to be recognized due to the change of the above-mentioned
assumption, the impact on the consolidated financial statements may
be significant.

Business Review(8) Software costs
Software costs are amortized using the straight-line method over theestimated useful lives (five years).

(13) Construction contracts
The construction projects for which the outcome of the portion
completed by the end of the fiscal year under review can be reliably
estimated are accounted for by the percentage-of-completion method(the degree of completion of each construction project is estimated using
the cost-comparison method), while other construction projects areaccounted for by the completed-contract method.

(16) Significant accounting estimates
Evaluation of real estate for sale, etc.
(1) Carrying amounts in the consolidated financial statements for theyear ended March 31, 2021

Sumitomo Realty’s
Corporate Value Creation(7) Property and equipment
The Company and its consolidated domestic subsidiaries depreciatebuildings using the straight-line method, and other property andequipment (excluding facilities attached to buildings and structuresacquired on or after April 1, 2016) using the declining-balance method
over their estimated useful lives. The consolidated overseas subsidiaries
depreciate property and equipment using primarily the straight-line
method in accordance with the accounting principles in the respective
countries.
In addition, the Company and its consolidated domestic subsidiaries
depreciate facilities attached to buildings and structures acquired on orafter April 1, 2016 using the straight-line method.
Leased assets related to finance lease transactions without title
transfer are depreciated using the straight-line method over the lease
periods as their useful lives with no residual value.
Estimated useful lives used in the computation of depreciation are
generally as follows:
Buildings and structures...................... 6 to 60 years
Machinery and equipment.................. 2 to 20 years
Leased assets...................................... Lease periods(12) Employees’ severance and retirement benefits
The Company and its certain consolidated subsidiaries provide two typesof post-employment benefit plans, lump-sum payment plans and defined
benefit corporate pension plans, under which all eligible employees areentitled to benefits based on their current rate of pay, length of service
and the conditions under which termination occurs.
For the calculation of retirement benefit obligations, the estimatedamount of retirement benefits is allocated to the respective fiscal years by
the straight-line method.
Some of the Company’s consolidated subsidiaries calculate net
defined benefit liability and retirement benefit expenses by using asimplified method in which retirement benefit obligations are equal tothe amount that would be paid if all employees resigned voluntarily atthe end of the fiscal year.
Prior service costs are recognized as expenses in the period in which
they are incurred, and actuarial gains and losses are recognized as
expenses in the following period.

A Message from the Management

manner similar to the equity method based on the recent financial
statements.
If the market value of held-to-maturity securities, investments in
subsidiaries and affiliates and available-for-sale securities declines
significantly, such securities are stated at fair value and the difference
between fair value and the carrying amount is recognized as a loss in the
period of the decline. If the fair value of investments in unconsolidated
subsidiaries and affiliated companies not accounted for using the equity
method is not readily available, such securities should be written down to
the net asset value with a corresponding charge in the income statementin the event net asset value declines significantly. In these cases, such fairvalue or the net asset value will be the carrying amount of the securities
at the beginning of the next fiscal year.

78

Financial Section(19) Additional information(Accounting estimates regarding the impact of COVID-19 pandemic)
The accounting estimates such as the valuation of real estate for sale andthe loss on impairment of fixed assets are calculated reasonably based ondata available at the time of preparing the consolidated financial
statements.
The Group calculated the accounting estimates based on theassumption that the impact of COVID-19 shall be temporary.

Cash and cash equivalents
Thousands of
U.S. dollars

2021

2020

2021

¥188,340(1,059)¥187,281¥195,361(1,913)¥193,448$1,701,201(9,565)$1,691,636

Thousands of
U.S. dollars

Millions of yen

2020

2021

¥351,369
286,254
10,370888¥648,881$2,355,930
3,311,327
78,024
6,711$5,751,992

Thousands of
U.S. dollars

Millions of yen

79

Integrated Report 2021

2021$   18,851

Buildings and structures

98,200108,863

887,002Land

404,372

418,971

3,652,534

Machinery and equipment
Total

107

127

966

¥504,766¥530,052$4,559,353

Secured liabilities at March 31, 2021 and 2020 are as follows:
Thousands of
U.S. dollars

Millions of yen

Long-term debt due within one year
Long-term non-recourse debt due within one year
Long-term debt due after one year
Long-term non-recourse debt due after one year
Total

2021

2020

2021

¥    190
16,344
104,620
296,673¥417,827¥   190
70,373
94,810250,182¥415,555$    1,716
147,629944,991
2,679,731$3,774,067

Thousands of
U.S. dollars

2021

2020

2021

¥(5,759)
6,164
¥405

¥(6,785)
3,523¥(3,262)$(52,019)
55,677$3,658

Cash, time and notice deposits
Buildings and structures
Land
Machinery and equipment
Total

2021

2020

2021

¥  2,995
77,088258,72585¥338,893¥  3,261
86,741
273,324
96¥363,422$   27,053
696,306
2,336,961
768$3,061,088(Note) “Specified assets for non-recourse debts” includes a portion of the amount of “Assets pledged as collateral” for the years ended March 31, 2021 and 2020.

6

Financial instruments

1. Policy for financial instruments
The Group has the policy to limit its fund management to short-term
deposits with funds through loans from banks and the issuance ofcorporate bonds and commercial paper.
The Group utilizes derivative financial instruments only for the
purpose of hedging the interest rate risk associated with the Group’sloans payable, and does not utilize derivative financial instruments forany speculative purposes.
2. Details of financial instruments, risks, and policies andsystems of risk management
Operating receivables such as notes and accounts receivable—trade areexposed to customers’ credit risk, but this risk is generally avoided
through the receipt of deposits.
Investments in securities are business-related equities and are exposed
to market price fluctuation risk. The Group regularly checks the market
value of the securities and the financial condition of the issuers, andcontinuously reviews whether it continues to hold securities withconsideration for its relationships with the issuers.
Guarantee and lease deposits are mostly deposits related to leasing
properties, and are exposed to the counterparty credit risk.
In addition, the Group accommodates counterparties with loans andconsequently is exposed to the borrowers’ credit risk. However, theGroup constantly checks the financial condition of principal borrowers
and their performance using the funds lent to those borrowers even after
accommodation.
The majority of due dates of operating debt, such as notes andaccounts payable, are within one year.
Interest rate swap contracts are used to hedge risks arising fromfluctuations in interest rates on certain loans and corporate bonds.
In regard to derivative transactions, the Group utilizes interest rate
swaps for bank loans and deposits, and utilizes foreign exchange forward
contracts and cross currency swap contracts for foreign currencydenominated transactions. Interest rate swap contracts are exposed to
the risks of interest rate changes, and foreign exchange forward
contracts and cross currency swap contracts are exposed to the risks offoreign exchange rate changes. The derivative financial instruments are
executed with creditworthy financial institutions, and the Group’s
management believes there is insignificant risk of default by
counterparties. Derivative transactions are executed by the Group’s
Finance Department in accordance with the decisions of a committee
whose chairman is the director of the Finance Department. The Finance
Department prepares reports on derivative transactions that are provided
to the director of the Finance Department periodically.

Sumitomo Realty & Development Co., Ltd.

Financial Section/
Company Information

2021¥260,825
366,597
8,638
743¥636,803

The Company transferred amounts between inventories and property and equipment. Such transfers at March 31, 2021 and 2020 are as follows:

Inventories:
Transferred to property and equipment
Transferred from property and equipment
Net increase (decrease)2020¥  2,091

ESG Management

Inventories

Inventories at March 31, 2021 and 2020 are as follows:

Real estate for sale
Real estate for sale in process
Costs on uncompleted construction contracts
Other
Total

2021

¥  2,087

Cash, time and notice deposits

Millions of yen

Millions of yen

4

Thousands of
U.S. dollars

Millions of yen

Specified assets for non-recourse debts at March 31, 2021 and 2020 are as follows:

Cash and cash equivalents at March 31, 2021 and 2020 consisted of the following:

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

Pledged assets

Business Review

3(Adoption of “Accounting Standard for Disclosure of Accounting
Estimates”)
The Group adopted “Accounting Standard for Disclosure of Accounting
Estimates” (ASBJ Statement No. 31, March 31, 2020) to the consolidated
financial statements for the year ended March 31, 2021, and therefore
significant accounting estimates are disclosed in the note to theconsolidated financial statements.
The information for the previous fiscal year is not included in thenote, in accordance with the transitional provision set out in paragraph
11 of the Accounting Standard.

5

Assets pledged as collateral at March 31, 2021 and 2020 are as follows:

Sumitomo Realty’s
Corporate Value Creation(18) Changes in presentation methods(Consolidated statements of cash flows)“Receipts of deposits from partnership investors” and “Restitution ofdeposits from partnership investors” which were previously separately
presented in “Cash flows from investing activities” were included in“Other, net” from the year ended March 31, 2021, because thesignificance of these amounts decreased. Reflecting this change inpresentation, the consolidated statements of cash flows for the years
ended March 31, 2020 and 2019 were reclassified, respectively.
As a result, the following amounts were reclassified to “Other, net”
for respective years: “Receipts of deposits from partnership investors” of¥23 million and “Restitution of deposits from partnership investors” of¥22,208 million for the year ended March 31, 2020, and “Receipts ofdeposits from partnership investors” of ¥1,004 million and “Restitutionof deposits from partnership investors” of ¥10,442 million for the year
ended March 31, 2019.

A Message from the Management

In addition, “Implementation Guidance on Disclosures about Fair
Value of Financial Instruments” has been revised, and items of notes
such as the breakdown by the fair value level of financial instruments
are required.
(2) Effective date
Effective from the beginning of the year ending March 31, 2022
(3) Effects of the application of the standards
The Company and its consolidated domestic subsidiaries are currently
in the process of determining the effects of these new standards onthe consolidated financial statements.

80

Financial Section

transactions” are not representing the market risks related to derivativetransactions.
The carrying amounts of financial instruments on the consolidatedbalance sheets, their fair values and the differences between them as ofMarch 31, 2021 and 2020 are as follows. (Financial instruments whose
fair value is extremely difficult to estimate are not included; please see(Note 2).)

For 2021
Millions of yen
Fair value¥  188,340
18,714¥  188,340
18,714503,108

Thousands of U.S. dollars
Difference

Fair value

Difference¥     ——

$ 1,701,201
169,036$ 1,701,201
169,036$      ——

503,108—

4,544,377

4,544,377——
535¥  710,697—
535¥  710,697——¥    ——
4,833$ 6,419,447—
4,833$ 6,419,447——$     —¥   24,697
146,620
3,101,656
313,017¥3,585,990¥   24,697
146,620
3,137,030
317,321¥3,625,668¥     ——
35,374
4,304¥39,678$   223,078
1,324,361
28,016,042
2,827,360$32,390,841$   223,078
1,324,361
28,335,561
2,866,237$32,749,237$      —
—319,519
38,877$358,396¥   (4,310)¥   (4,310)¥   (4,310)¥   (4,310)¥     —
¥     —$   (38,931)$   (38,931)$   (38,931)$   (38,931)$      —
$      —For 2020
Millions of yen
Fair value

Difference¥  195,361
17,406¥  195,361
17,406¥    ——

366,734

366,734—

Derivative transactions:
Please see Note 16 “Derivative transactions.”(Note 2) Financial instruments whose fair value is extremely difficult to estimate
Carrying amountThousands of
U.S. dollars

Millions of yen

200
747¥  580,448

200
747¥  580,4480—¥     0¥   36,393
146,726
3,026,438
325,637¥3,535,194¥    ——
52,811
5,082¥57,893¥   (5,134)¥   (5,134)¥   (5,134)¥   (5,134)¥    —¥    —

20202021$  378,277¥ 41,879¥ 74,468

2,338

2,338

21,118Preferred equity securities, etc.*1

26,81025,688242,1642

2

18

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

68,20869,224

616,096

Guarantee and deposits received*3

258,219

247,610

2,332,391

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

Financial Section/
Company Information¥   36,393
146,726
2,973,627
320,555¥3,477,301

2021

Unlisted equity securities*1

Investments in subsidiaries and affiliates*

1

ESG Management

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

Carrying amount

Business Review

Carrying amount

Liabilities:(1) Notes and accounts payable—trade and (2) Short-term debt
The fair value of these items approximates their carrying amounts
because of their short-term maturities.
(3) Long-term debt (including due within one year)
For floating rate notes, the carrying amount is used as the fair value
because the market interest rate is reflected in such notes within a shorttime period and because the credit standing of the Company is the sameafter borrowing. The fixed-coupon debt is calculated by discounting the
combined total of principal and interest at an interest rate assumed forsimilar new borrowings.
The specific matching criteria of interest rate swaps are applicable tosome long-term debts with floating interest rates (please see Note 16“Derivative transactions”). The fair value of these items is calculated bydiscounting the combined total of interest and principal, with which theinterest rate swap has been accounted for, at an interest rate rationallyestimated for similar borrowings.
The fair value of corporate bonds issued by the Company (included in(3) Long-term debt (including due within one year)) is based on themarket price.
(4) Long-term non-recourse debt (including due within one year)
For floating rate notes, the carrying amount is used as the fair value
because the market interest rate is reflected in such notes within a shorttime period and the value of its non-exempt properties has not beenchanged.
The fixed-coupon debt is calculated by discounting the combined
total of principal and interest at an interest rate assumed for similar new
borrowings or bonds.
The specific matching criteria of interest rate swaps are applicable tosome long-term non-recourse debts with floating interest rates (please
see Note 16 “Derivative transactions”). The fair value of these items is
calculated by discounting the combined total of interest and principal,
with which the interest rate swap has been accounted for, at an interest
rate rationally estimated for similar borrowings or bonds.

Sumitomo Realty’s
Corporate Value Creation

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

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

A Message from the Management

3. Supplemental information on fair values of financial instruments
The fair values of financial instruments are based on their market prices,
and if the market price is not available, other rational valuation
techniques are used instead. The rational valuation techniques
incorporate variable factors, and as a result the values may change due
to using different assumptions.
The amounts of derivative transactions shown in Note 16 “Derivative* Derivative transactions are stated at net of assets and liabilities. Figures in parentheses indicate net liabilities.

81

Integrated Report 2021

Sumitomo Realty & Development Co., Ltd.

82

Financial Section

Millions of yen
1 year or less

5 to 10 years

Over 10 years¥188,340
18,714

¥ —
—

¥—
—

¥—
—

—
117
¥207,171

—
409
¥409

—
—
¥—

—
—
¥—

(b) Available-for-sale securities:

For 2020
Millions of yen
1 year or lessCash, time and notice deposits
Notes and accounts receivable—trade
Guarantee and lease deposits:
Held-to-maturity securities (National government bonds)
Available-for-sale securities with maturities (National government bonds)
Total

1 to 5 years

5 to 10 years

Over 10 years¥195,361
17,406

¥ —
—

¥—
—

¥—
—

200
206
¥213,173

—
483
¥483

—
43
¥43

—
—
¥—

For 2021

Cash, time and notice deposits
Notes and accounts receivable—trade
Guarantee and lease deposits:
Held-to-maturity securities (National government bonds)
Available-for-sale securities with maturities (National government bonds)
Total

1 to 5 years

5 to 10 years

Over 10 years$1,701,201
169,036

$   —
—

$—
—

$—
—

—
1,057
$1,871,294—
3,694$3,694

—
—
$—

—
—
$—

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

2023

2024

2025

¥146,620
211,446
16,344¥374,410¥     —
237,386
4,786¥242,172¥     —
289,472
4,640¥294,112¥     —
379,4154,374¥383,789

2026 2027 and thereafter¥     —
293,855
52,007¥345,862¥      —1,690,082
230,866¥1,920,948

For 2020
Millions of yen
Year ending March 31

2022

2023

2024

¥146,726
131,471
70,373¥348,570¥     —
211,446
15,404¥226,850¥     —
237,386
3,846¥241,232¥     —
289,472
3,700¥293,172

2022

2023

2024

2025

$1,324,361
1,909,909
147,629$3,381,899$      —2,144,215
43,230$2,187,445$      —2,614,687
41,911$2,656,598$      —3,427,107
39,509$3,466,616

2025 2026 and thereafter¥     —
379,4143,434¥382,848¥       —1,724,438
223,798¥1,948,236

For 2021
Thousands of U.S. dollars
Year ending March 31

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

83

Integrated Report 2021

Acquisition cost

Difference¥217,650
526
409
218,585¥242,9019
14242,924$4,159,977
4,832
3,821
4,168,630$1,965,948
4,751
3,694
1,974,393$2,194,029
81
127
2,194,237

41,474—660
42,134¥503,643

53,019—677
53,696¥272,281(11,545)—(17)(11,562)¥231,362

374,618—
5,962
380,580$4,549,210

478,900—
6,115
485,015$2,459,408(104,282)—(153)(104,435)$2,089,802* Debt securities in securities whose carrying amount exceeds acquisition cost are included in “Guarantee and lease deposits paid to lessors” on the consolidated balance sheets.
(Note) The Company recognized impairment loss on investments in securities of ¥489 million ($4,417 thousand) related to equity securities in available-for-sale securities.

B. Total sales of available-for-sale securities sold in the year ended March 31, 2021 amounted to ¥3,743 million ($33,809 thousand) and the related gains
and losses amounted to ¥1,243 million ($11,228 thousand) and ¥312 million ($2,818 thousand), respectively.
C. Gain on sale of investments in securities of ¥13,116 million ($118,472 thousand) is consisted mainly of gain on sale of the equity interests of Dalian
Qingyun Sky Realty and Development Co., Ltd, amounted to ¥11,873 million ($107,244 thousand).
For 2020
A. The following tables summarize the acquisition costs, carrying amounts and fair values of securities with available fair values as of March 31, 2020:(a) Held-to-maturity securities:
Millions of yen

2026 2027 and thereafter$      —2,654,277
469,759$3,124,036$       —15,265,847
2,085,322$17,351,169

Securities whose fair value exceeds carrying amount:
National and local government bonds, etc.
Securities whose fair value does not exceed carrying amount:
National and local government bonds, etc.
Total

Difference

¥200

¥200

¥0

—
¥200

—
¥200

—
¥0

Carrying amount

Acquisition cost

¥257,807
747—
258,554¥124,727
732—
125,459¥133,080
15—
133,095

108,045—882
108,927¥367,481

130,965—891
131,856¥257,315(22,920)—(9)(22,929)¥110,166(b) Available-for-sale securities:
Securities whose carrying amount exceeds acquisition cost:
Equity securities
Debt securities*
Other
Subtotal
Securities whose carrying amount does not exceed acquisition cost:
Equity securities
Debt securities
Other
Subtotal
Total

Fair value

Millions of yen
Difference

Financial Section/
Company Information

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

2021

Carrying amount

ESG Management

Millions of yen

2022¥460,551
535
423
461,509

Thousands of U.S. dollars
Difference

Carrying amount(Note 4) Repayment schedule of corporate bonds, long-term debt, long-term non-recourse debt and other interest-bearing debt
For 2021
Year ending March 31

Acquisition cost

Business Review

Thousands of U.S. dollars
1 year or lessSecurities whose carrying amount exceeds acquisition cost:
Equity securities
Debt securities*
Other
Subtotal
Securities whose carrying amount does not exceed acquisition cost:
Equity securities
Debt securities
Other
Subtotal
Total

Millions of yen
Carrying amount

Sumitomo Realty’s
Corporate Value Creation

Cash, time and notice deposits
Notes and accounts receivable—trade
Guarantee and lease deposits:
Held-to-maturity securities (National government bonds)
Available-for-sale securities with maturities (National government bonds)
Total

1 to 5 years

Securities

For 2021
A. The following tables summarize the acquisition costs, carrying amounts and fair values of securities with available fair values as of March 31, 2021:(a) Held-to-maturity securities:
Not applicable

A Message from the Management

7(Note 3) Redemption schedule of pecuniary claims and securities with maturities
For 2021* Debt securities in securities whose carrying amount exceeds acquisition cost are included in “Guarantee and lease deposits paid to lessors” on the consolidated balance sheets.
(Note) The Company recognized impairment loss on investments in securities of ¥7,838 million related to equity securities in available-for-sale securities.

B. Total sales of available-for-sale securities sold in the year ended March 31, 2020 amounted to ¥2,302 million and the related gains amounted to¥1,417 million.

Sumitomo Realty & Development Co., Ltd.

84

Financial Section

Short-term debt and long-term debt

Non-recourse debt at March 31, 2021 and 2020 consisted of the following:
Millions of yen

2021

Loans, principally from banks
Commercial paper
Total¥ 26,620
120,000¥146,620

Average interest
rate (%)

0.28(0.04)

2020

Average interest
rate (%)¥ 26,726
120,000¥146,726

0.27
0.00

2021

$  240,448
1,083,913$1,324,361

Thousands of
U.S. dollars

Millions of yen

2021

2020

2021

¥   10,000
10,00010,00020,00020,00020,00020,00020,00020,00010,00010,00010,00020,00020,00010,00010,00030,000¥   10,000
10,00010,00020,00020,00020,00020,00020,00020,00010,00010,00010,00020,00020,00010,00010,00030,000$    90,326
90,32690,326
180,652
180,652
180,652
180,652
180,652
180,652
90,32690,32690,326
180,652
180,652
90,32690,326
270,979

95,0002,608,627
2,973,627(131,471)¥2,842,156

946,708
24,630,531
28,016,042(1,909,909)$26,106,133

2020

2021

¥  1,500
35,60037,100¥  8,000
31,10039,100$   13,549
321,561
335,110

14,844
261,073
275,917¥313,017

62,373
219,082
281,455¥320,555

134,080
2,358,170
2,492,250$2,827,360¥313,017—¥313,017¥320,555—¥320,555$2,827,360—$2,827,360

The aggregate annual maturities of long-term debt at March 31, 2021 are as follows:Year ending March 31

Millions of yen

Thousands of
U.S. dollars

2022
2023
2024
2025
2026
2027 and thereafter
Total¥  211,446
237,386
289,472
379,415
293,855
1,690,082¥3,101,656$ 1,909,909
2,144,215
2,614,687
3,427,107
2,654,277
15,265,847$28,016,042

The aggregate annual maturities of non-recourse debt at March 31, 2021 are as follows:Year ending March 31

2022
2023
2024
2025
2026
2027 and thereafter
Total

Millions of yen

Thousands of
U.S. dollars¥ 16,344
4,786
4,640
4,374
52,007
230,866¥313,017$  147,629
43,23041,911
39,509469,759
2,085,322$2,827,360

ESG Management

104,8102,726,846
3,101,656(211,446)¥2,890,210

SecuredUnsecured
Total

2021

Business Review

1.098% domestic straight bonds, due 2023
0.950% domestic straight bonds, due 2023
0.968% domestic straight bonds, due 2023
0.987% domestic straight bonds, due 2024
0.914% domestic straight bonds, due 2024
0.904% domestic straight bonds, due 2024
0.884% domestic straight bonds, due 2024
0.836% domestic straight bonds, due 2024
0.809% domestic straight bonds, due 2024
0.429% domestic straight bonds, due 2021
0.392% domestic straight bonds, due 2022
0.670% domestic straight bonds, due 2025
0.826% domestic straight bonds, due 2025
0.992% domestic straight bonds, due 2025
0.400% domestic straight bonds, due 2026
0.230% domestic straight bonds, due 2026
0.400% domestic straight bonds, due 2027
Loans, principally from banks and insurance companies, with interest at weighted-average rates of 0.30%
in 2021 and 0.31% in 2020:
SecuredUnsecured
Subtotal
Amount due within one year
Total

Non-recourse bonds, with interest at weighted-average rates of 0.09% in 2021 and 2020, respectively:
Due within one year
Due after one year
Subtotal
Non-recourse loans, with interest at weighted-average rates of 0.12% in 2021 and 0.11% in 2020:
Due within one year
Due after one year
Subtotal
Total

Sumitomo Realty’s
Corporate Value Creation

The interest rates represent weighted-average rates in effect at March 31, 2021 and 2020, regardless of borrowing currencies, though the range ofthe interest rate varies by borrowing currency.
Long-term debt at March 31, 2021and 2020 consisted of the following:Thousands of
U.S. dollars

Millions of yen

Thousands of
U.S. dollars

A Message from the Management

8

Short-term debt at March 31, 2021 and 2020 consisted of the following:

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

85

Integrated Report 2021

Sumitomo Realty & Development Co., Ltd.

86

Financial Section

Employees’ severance and retirement benefits(6) Components of remeasurements of defined benefit plans (before deducting tax effect)

Unrecognized actuarial differences
Total

For 2021 and 2020
1. Defined benefit plan
(1) Adjustment table of retirement benefit obligations between the beginning and the end of the fiscal year

Thousands of
U.S. dollars

Millions of yen

2020

2021

¥12,069
754
49
(194)
(525)
¥12,153¥11,876
732
48
(64)
(523)
¥12,069$109,014
6,811
443(1,752)(4,743)$109,773(2) Adjustment table of plan assets between the beginning and the end of the fiscal year

Thousands of
U.S. dollars

Millions of yen

2021

2020

2021

¥5,799
116
786
366
(172)
¥6,895¥5,857
117
(321)
380
(234)
¥5,799$52,380
1,048
7,100
3,306
(1,554)$62,280(3) Adjustment table of retirement benefit obligations and plan assets at the end of the fiscal year and net defined benefit liability on the consolidatedbalance sheets

Thousands of
U.S. dollars

Millions of yen

Obligations under retirement benefit plans (unfunded)
Net amount of liabilities on the consolidated balance sheets
Net defined benefit liability
Net amount of liabilities on the consolidated balance sheets

2021

2020

2021

¥ 6,328(6,895)(567)
5,825¥ 5,258¥ 6,307(5,799)508
5,762¥ 6,270$ 57,158(62,280)(5,122)
52,615$ 47,493¥ 5,258¥ 5,258¥ 6,270¥ 6,270(4) Components of retirement benefit expenses

Thousands of
U.S. dollars

Millions of yen

2021

2020

2021

¥ 754
49
(116)
257
¥ 944

¥ 732
48
(117)
66
¥ 729

$ 6,811443(1,048)2,321$ 8,527(5) Remeasurements of defined benefit plans (before deducting tax effect)

87

Integrated Report 2021

Debt securities
Equity securities
General life insurance accounts
Other
Total

2021

2020

27.9%
35.9
34.8
1.4
100.0%

29.7%
29.1
39.5
1.7
100.0%(8) Actuarial assumptions
Discount rate
Rate of expected return on plan assets

2021

2020

0.4%
2.0

0.4%
2.0

2. Defined contribution plan
The required contribution amount for a defined contribution plan that one of the Company’s consolidated subsidiaries adopted is ¥388 million ($3,505
thousand) and ¥394 million for the years ended March 31, 2021 and 2020, respectively.
10 Loss on impairment of fixed assets
The Group recognized impairment losses on the following assets for the years ended March 31, 2021, 2020 and 2019, respectively.
For 2021
Use

Location

Assets leased to others

Tokyo, etc.

Number of properties

4

For 2020
Use

Location

Number of properties

Assets leased to others

Tokyo

2

Use

Location

Number of properties

Asset leased to others

Tokyo

1

For 2019

The Group recognized losses on the impairment of certain properties,
which are generally assessed individually for impairment. The Company’s
houses are treated as common assets.
The carrying value of assets have been reduced to their recoverable
amounts by ¥3,578 million ($32,319 thousand) since the total amount of
the future cash flow is estimated to be lower than the carrying value forthe year ended March 31, 2021. The recoverable amounts are calculatedby discounting the future cash flow at 3.6%.
Loss on sales of property and equipment of ¥299 million ($2,701
thousand) and ¥9,660 million were recognized by a consolidated

subsidiary due to restructuring of assets within the Group for the years
ended March 31, 2021 and 2020, respectively. The selling price of theassets for the year ended March 31, 2021 is based on the amountequivalent to the publicly notified land price, and that of the assets forthe year ended March 31, 2020 is based on evaluation by a real estateappraiser. These amounts were determined as their recoverable amounts,
and loss on sales of property and equipment of the assets wasrecognized as impairment losses in other expenses for the years ended
March 31, 2021 and 2020, respectively.

Thousands of
U.S. dollars

Millions of yen

Actuarial differences
Total(7) Major breakdown of plan assets

Financial Section/
Company Information

Service costs
Interest costs
Expected return on plan assets
Actuarial differences
Retirement benefit expenses$ 47,493$ 47,493

2021$(8,852)$(8,852)

ESG Management

Obligations under retirement benefit plans (funded)
Fair value of plan assets

2020

¥257
¥257

Business Review

Plan assets at beginning of year
Expected return on plan assets
Actuarial differences
Employer contributions
Retirement benefits paid
Plan assets at end of year

2021¥(980)¥(980)

Sumitomo Realty’s
Corporate Value Creation

Retirement benefit obligations at beginning of year
Service costs
Interest costs
Actuarial differences
Retirement benefits paid
Retirement benefit obligations at end of year

2021

Thousands of
U.S. dollars

Millions of yen

A Message from the Management

9

As explained in Note 2 (12), the liabilities and expenses for severance and retirement benefits are determined based on the amounts obtained by actuarial
calculations except for the cases using the simplified method.

2021

2020

2021

¥(1,237)¥(1,237)

¥191
¥191

$(11,173)$(11,173)
Sumitomo Realty & Development Co., Ltd.

88

Financial Section

The difference between the statutory tax rate and the effective tax rate for the year ended March 31, 2021 is as follows:

12 Income taxes
The normal effective statutory income tax rate in Japan arising out of the aggregation of corporate, enterprise and inhabitants’ taxes was approximately
30.62% for the years ended March 31, 2021, 2020 and 2019 respectively.

2021

30.62%

Statutory tax rate
Adjustment:
Valuation Allowance
Inhabitant tax on per capita basis
Dividends and other income not taxable permanently
Other
Effective tax rate

2.45
0.14
(0.35)(0.08)
32.78%The difference between the statutory tax rate and the effective tax rate for the years ended March 31, 2020 and 2019 was insignificant and notpresented.
13 Deposits received with interest rate
Guarantee and deposits received at March 31, 2021 and 2020 are as follows:

Details of deferred tax assets and liabilities at March 31, 2021 and 2020 are as follows:

Thousands of
U.S. dollars

Millions of yen

2021

2020

2021

$ 169,876
135,498
105,067
72,05356,96024,641
18,97817,316
12,763
11,914
11,77910,541
8,102
114,226
769,714(178,710)$ 591,004

Deferred tax liabilities:
Net unrealized holding gains on securities
Retained earnings appropriated for tax allowable reserves
Other
Total deferred tax liabilities
Net deferred tax assets¥(70,728)(3,731)(2,648)¥(77,107)¥(11,677)¥(33,756)(3,731)(1,908)¥(39,395)¥ 30,056$(638,858)(33,701)(23,919)$(696,478)$(105,474)

Guarantee and lease deposits from tenants:
Non-interest-bearing
Interest-bearing
Long-term deposits:
Non-interest-bearing
Interest-bearing
Total¥ 65,964—
65,964258,219—
27,932—
286,151¥352,115

—

—

—

2020

¥ 51,196—
51,196247,610—45,895—
293,505¥344,701

Average interest
rate (%)

—

—

—

2021

$  595,827—
595,827
2,332,391—
252,299—2,584,690$3,180,517

14 Net assets
Under the Japanese Corporate Law (“the Law”) and its regulations, theentire amount paid for new shares is required to be designated ascommon stock. However, a company may, by a resolution of the Board of
Directors, designate an amount not exceeding one-half of the price ofthe new shares as additional paid-in capital, which is included in capitalsurplus.
Under the Law, in cases where a dividend distribution of surplus ismade, the smaller of an amount equal to 10% of the dividend or theexcess, if any, of 25% of common stock over the total of additional paid-in
capital and legal earnings reserve must be set aside as additional paid-in
capital or legal earnings reserve. Legal earnings reserve is included inretained earnings on the accompanying consolidated balance sheets.
Under the Law, legal earnings reserve and additional paid-in capital
could be used to eliminate or reduce a deficit and capitalized by aresolution of the shareholders’ meeting.
Additional paid-in capital and legal earnings reserve may not be
distributed as dividends. Under the Law, all additional paid-in capital andall legal earnings reserve may be transferred to other capital surplus andretained earnings, respectively, which are potentially available for dividends.
The maximum amount that the Company can distribute as dividends is
calculated based on the non-consolidated financial statements of theCompany in accordance with the Law and its regulations.

(Note 1) Valuation allowance increased by ¥5,173 million ($46,726 thousand) for the year ended March 31, 2021, as a result of the additional recognition of valuation allowance related to loss carryforwardsof ¥4,840 million ($43,718 thousand).
(Note 2) Net deferred tax assets are included in the following items on the consolidated balance sheets for the years ended March 31, 2021 and 2020.
Thousands of
U.S. dollars

Millions of yen

Other assets—Deferred income taxes
Long-term liabilities—Other long-term liabilities

89

Integrated Report 2021

2021

2020

2021

¥11,071
22,748¥30,067
11$100,000
205,474

Sumitomo Realty & Development Co., Ltd.

Financial Section/
Company Information¥ 18,582
13,899
11,633
3,136
6,312
2,284
1,951
1,847
1,413
1,571
1,742
1,290
909
17,49584,064(14,613)¥ 69,451

Short-term deposits and long-term deposits due within one year:
Non-interest-bearing
Interest-bearing

Average interest
rate (%)

ESG Management¥ 18,807
15,001
11,632
7,977
6,306
2,728
2,101
1,917
1,413
1,319
1,304
1,167
897
12,646
85,215(19,785)¥ 65,430

2021

Business Review

Deferred tax assets:
Loss on devaluation of real estate for sale
Loss on impairment of fixed assets
Loss on adjustment of profit and loss on transfer
Net operating loss carryforwards
Depreciation and amortization of consolidated adjustment
Accrued enterprise tax and business office tax
Loss on devaluation of investments in securities
Net defined benefit liability
Loss on devaluation of investments in SPEs’ holding properties for saleNet deferred losses on hedges
Accrued bonuses
Allowance for doubtful accounts
Elimination of unrealized profit
Other
Subtotal of deferred tax assets
Valuation allowance
Total deferred tax assets

Thousands of
U.S. dollars

Millions of yen

Sumitomo Realty’s
Corporate Value Creation

obligations for restoring office spaces when they move out. For theasset retirement obligations associated with such a case, the duration ofuse of the assets is not clear enough and these assets do not have any
relocation plans. Therefore, the Group is unable to estimate the asset
retirement obligations since it is difficult to estimate the timing of
fulfillment of the obligations. Consequently, for the years ended March
31, 2021 and 2020, asset retirement obligations related to such a caseare not recorded (except for the asset retirement obligations recordedon the financial statements).

A Message from the Management

11 Asset retirement obligations
Even though removing asbestos is required for some buildings theGroup operates at the time of demolishing, it is difficult to estimate thefair value of obligations associated with such assets reasonably since thetiming and/or method of settlement for the retirement obligations are
not clear enough. Therefore, for the years ended March 31, 2021 and2020, asset retirement obligations related to such a case are notrecorded (except for the asset retirement obligations recorded on thefinancial statements).
In addition, under the partial lease contracts, the Group has

90

Financial Section

Thousands of
U.S. dollars

Millions of yen

2021

2020

2019

2021

Operating leases:
Future lease payments:
Due within one year
Due after one year
Total¥  1,574
41,880¥ 43,454¥  1,526
39,395¥ 40,921¥  1,526
42,211¥ 43,737$   14,217
378,286$  392,503

Future lease receipts:
Due within one year
Due after one year
Total

¥ 91,310
140,152¥231,462¥ 89,154
122,544¥211,698¥ 95,607
142,321¥237,928$  824,767
1,265,938$2,090,705

Brokerage business and Adjustments, have been changed to beconsolidated into Brokerage business from the year ended March 31,
2021. The segment information for the year ended March 31, 2020 has
been adjusted retroactively.
The calculation method for segment profit/loss has been changed
reflecting the change of the revenue recognition method of brokerage
fees as stated in (4) “Recognition of revenue” in Note 2 “Accounting
policies”. The segment information for the year ended March 31, 2019has been adjusted retroactively, and as a result, revenue from operations
from customers decreased by ¥1,032 million and segment profit
decreased by ¥1,030 million, respectively, compared to the amount
before its application.

Information by business segment for the years ended March 31, 2021, 2020 and 2019 is summarized as follows:
Millions of yen

16 Derivative transactions

For 2021

Hedge accounting was applied to all derivative transactions for the years ended March 31, 2021 and 2020.
The summary of these transactions is as follows:(2) Interest-related derivatives
For 2021
Hedging accounting

Types of derivative transactions

Deferred hedge
Interest rate swap contracts
accounting
Fixed rate payments / Floating rate receipts
Exceptional accounting for Interest rate swap contracts
interest rate swaps
Fixed rate payments / Floating rate receipts

Millions of yen
Hedged items

Bank loans
Bank loans and bonds

Contract amounts

Contract amounts
due after one year¥  348,900¥  347,400

1,440,247

1,271,549

Fair value¥(4,310)— (*)

Deferred hedge
Interest rate swap contracts
accounting
Fixed rate payments / Floating rate receipts
Exceptional accounting for Interest rate swap contracts
interest rate swaps
Fixed rate payments / Floating rate receipts

Hedged items

Bank loans
Bank loans and bonds

Contract amounts
due after one year

Fair value$ 3,151,477$ 3,137,928$(38,931)

13,009,186

11,485,403— (*)

Contract amounts

Contract amounts
due after one year¥  342,900¥  302,900¥(5,134)

1,474,995

1,333,990— (*)

For 2020

Millions of yen

Hedging accounting

Types of derivative transactions

Deferred hedge
accounting
Exceptional accounting forinterest rate swaps

Interest rate swap contracts
Fixed rate payments / Floating rate receipts
Interest rate swap contracts
Fixed rate payments / Floating rate receipts

Hedged items

Bank loans
Bank loans and bonds

Fair value

Construction
business

Brokeragebusiness

Total

Adjustments

Consolidated financial
statements amounts¥  395,288
2,950
398,238¥  155,246¥4,226,734¥263,30392
263,395¥ 53,932¥658,010¥187,564
1,144
188,708¥ 15,566¥ 23,460¥ 64,026
1,767
65,793¥ 11,480¥179,632¥ 7,292
979
8,271¥   (49)¥71,731¥  917,473
6,932
924,405¥  236,175¥5,159,567¥     —
(6,932)(6,932)¥ (16,931)¥514,099¥  917,473—
917,473¥  219,244¥5,673,666¥   54,332
3,876¥     97—¥   1,209—¥     673—¥   330—¥   56,641
3,876¥   1,172—¥   57,813
3,876

363,798

2,262

341

550

663

367,614107

367,721

Other businesses

For 2020
Revenue from operations:Customers
Intersegment
Total
Segment profit
Segment assets
Other:
Depreciation and amortization
Loss on impairment of fixed assets
Increase in property and equipment,
and intangible assets

Reportable segments
Leasingbusiness

Salesbusiness

Construction
business

Brokeragebusiness¥  392,110
3,482
395,592¥  169,416¥3,922,764¥324,661
267
324,928¥ 46,490¥673,420¥216,622
2,309
218,931¥ 20,583¥ 25,053¥ 69,158
2,041
71,199¥ 14,593¥170,884¥10,962
1,135
12,097¥   775¥72,476¥1,013,513
9,234
1,022,747¥  251,857¥4,864,597¥     —
(9,234)(9,234)¥ (17,525)¥453,026¥1,013,513—
1,013,513¥  234,332¥5,317,623¥   45,421
9,660¥    113—¥  1,283—¥    658—¥   314—¥   47,789
9,660¥   1,185—¥   48,974
9,660

273,245

2,904

1,553

816

608

279,126248

279,374

Other businesses

Total

Adjustments

Consolidated financial
statements amounts

Financial Section/
Company Information

Contract amounts

Salesbusiness(Note) Fair value is determined based on the quoted price obtained from relevant financial institutions.
(*) Interest rate swap contracts which qualify for hedge accounting and meet specific matching criteria are not remeasured at market value, but the differential paid or received under the swap agreements
is recognized and included in interest expenses or income of the long-term debt or the long-term non-recourse debt as hedged items. Thus, the fair value of such interest rate swap contracts is includedin the fair value of the long-term debt.

91

Integrated Report 2021

ESG Management

Types of derivative transactions

Leasingbusiness

Millions of yen

Thousands of U.S. dollars
Hedging accounting

Reportable segments

Business Review(1) Foreign currency-related derivatives
Not applicable

Revenue from operations:Customers
Intersegment
Total
Segment profit
Segment assets
Other:
Depreciation and amortization
Loss on impairment of fixed assets
Increase in property and equipment,
and intangible assets

Sumitomo Realty’s
Corporate Value Creation

17 Segment information
The Group mainly operates their business in five segments: (1) Leasing
business consists of leasing and management of office buildings, rental
apartments, etc., and operation and management of hotels, event halls,
retail facilities, etc.; (2) Sales business consists of sales of condominium
units, detached houses, etc.; (3) Construction business consists ofconstruction and remodeling of detached houses, condominiums, etc.;(4) Brokerage business consists of brokerage of real estate sales and sales
agent of residential properties; and (5) Other businesses including fitnessbusiness and restaurant business.
In accordance with partial reviews of segments for performance
management among the Group, the financial results of Sumitomo Real
Estate Sales, which were previously allocated to Sales business,

A Message from the Management

15 Information for certain lease transactions
Future lease payments and receipts under such non-cancelable operating leases at March 31, 2021, 2020 and 2019 are as follows:

Sumitomo Realty & Development Co., Ltd.

92

Financial Section

For 2019
Sales
business

Construction
business

Brokeragebusiness¥  378,091
3,673
381,764¥  149,933¥3,737,136¥331,516
236
331,752¥ 47,115¥713,300¥219,776
1,917
221,693¥ 20,407¥ 30,057¥71,490377
71,867¥20,978¥14,074¥11,325
1,419
12,744¥ 1,528¥32,545¥1,012,198
7,622
1,019,820¥  239,961¥4,527,112¥     —
(7,622)(7,622)¥ (20,572)¥603,008¥1,012,198—
1,012,198¥  219,389¥5,130,120¥   43,201
8,576¥    145—¥   1,182—¥   458—¥   227—¥   45,213
8,576¥   1,100—¥   46,313
8,576

179,872

590

2,015

920

1,001

184,398397

184,795

Other businesses

Total

Adjustments

Consolidated financial
statements amounts

Thousands of U.S. dollars

For 2021
Leasingbusiness

Salesbusiness

Construction
business

Brokeragebusiness$ 3,570,481
26,647
3,597,128$ 1,402,276$38,178,430$2,378,313
831
2,379,144$  487,147$5,943,546$1,694,192
10,333
1,704,525$  140,602$  211,905$  578,322
15,960594,282$  103,694$1,622,545$   490,760
35,010$     876—$   10,920—$    6,079—

3,286,045

20,432

3,080

4,968

Consolidated financial
statements amounts$ 65,866 $ 8,287,174
8,843
62,61474,7098,349,788$    (443) $ 2,133,276$647,918 $46,604,344$       —(62,614)(62,614)$  (152,931)$4,643,655$ 8,287,174—
8,287,174$ 1,980,345$51,247,999$   2,981 $   511,616—
35,010$   10,586—$   522,202
35,010966

3,321,480

5,989

Total

3,320,514

Intercompany eliminations between the Company and its
consolidated subsidiaries and undistributed corporate assets to eachsegment are included in adjustments of segment assets, and theCompany classified cash, time and notice deposits, investments insecurities and assets of the general administrative division in the
Company and its certain consolidated subsidiaries to corporate assets forthe years ended March 31, 2021, 2020 and 2019.

2021

2020

2019

2021

¥133,468(12,272)
121,196(37,090)¥ 84,106¥(53,788)
6,434(47,354)
14,479¥(32,875)¥(32,668)
1,088(31,580)
9,675¥(21,905)$1,205,564(110,848)
1,094,716(335,019)$  759,697¥   (112)
935
823
(252)
¥    571¥   (349)
942
593
(181)
¥    412¥ (3,628)
876(2,752)829¥ (1,923)$   (1,012)
8,446
7,434
(2,276)$    5,158¥  (1,548)¥   (366)¥   (259)$  (13,982)¥    980
257
1,237
(379)
¥    858¥ 83,987¥   (257)
66
(191)
88
¥   (103)¥(32,932)¥    (66)
(229)
(295)
61
¥   (234)¥(24,321)$    8,852
2,321
11,173(3,424)$    7,749$  758,622

19 Investment and rental properties
The Company and its certain consolidated subsidiaries own some rental properties such as office buildings and residences in Tokyo and other areas. The
carrying amount on the consolidated balance sheets for the year ended March 31, 2021 is ¥3,838,536 million ($34,671,990 thousand). Certain domestic
office buildings are not recognized as rental properties but as a portion used as investment and rental properties since the Company or its certain
consolidated subsidiaries use some of the floor space of these properties.
The carrying amounts of these properties on the consolidated balance sheets, their changes during the fiscal year and their fair values at March 31,
2021 and 2020 are as follows:
Thousands of
U.S. dollars

Millions of yen

Investment and rental properties

2021

2020

2021

¥3,415,982
289,550
3,705,532
6,873,990¥  139,090(6,086)
133,004
397,179¥3,373,449
42,533
3,415,982
6,330,951¥  141,889(2,798)139,091
400,272$30,855,225
2,615,392
33,470,617
62,090,055$ 1,256,345(54,972)
1,201,373
3,587,562(Notes)* Carrying amounts on the consolidated balance sheets are the amounts determined by deducting accumulated depreciation and accumulated impairment losses from the acquisition costs.
* Fair values as of March 31, 2021 and 2020 are calculated by the Company primarily based on their fair values according to Real Estate Appraisal Standards.

93

Integrated Report 2021

Sumitomo Realty & Development Co., Ltd.

Financial Section/
Company Information

A portion used as investment and rental properties

Balance at beginning of fiscal year
Changes during the fiscal year
Balance at end of fiscal year
Fair value at end of fiscal year
Balance at beginning of fiscal year
Changes during the fiscal year
Balance at end of fiscal year
Fair value at end of fiscal year

ESG Management

Intercompany eliminations between the Company and its
consolidated subsidiaries and undistributed corporate expenses to eachsegment are included in adjustments of segment profit, and theCompany classified expenses of the general administrative division in the
Company and its certain consolidated subsidiaries to corporate expenses
for the years ended March 31, 2021, 2020 and 2019.

Adjustments

Other businesses

Unrealized holding gains (losses) on securities:
Increase (Decrease) during the fiscal year
Reclassification adjustments
Amounts before tax effects
Tax effects
Total
Deferred gains (losses) on hedges:
Increase (Decrease) during the fiscal year
Reclassification adjustments
Amounts before tax effects
Tax effects
Total
Foreign currency translation adjustments:
Increase (Decrease) during the fiscal year
Remeasurements of defined benefit plans:
Increase (Decrease) during the fiscal year
Reclassification adjustments
Amounts before tax effects
Tax effects
Total
Total other comprehensive income (loss)

Business Review

Revenue from operations:Customers
Intersegment
Total
Segment profit
Segment assets
Other:
Depreciation and amortization
Loss on impairment of fixed assets
Increase in property and equipment,
and intangible assets

Reportable segments

Thousands of
U.S. dollars

Millions of yen

Sumitomo Realty’s
Corporate Value Creation

Revenue from operations:Customers
Intersegment
Total
Segment profit
Segment assets
Other:
Depreciation and amortization
Loss on impairment of fixed assets
Increase in property and equipment,
and intangible assets

Reportable segments
LeasingbusinessAmounts reclassified to profit in the current period that were recognized in other comprehensive income in the current or previous periods and tax effects
for each component of other comprehensive income (loss) for the years ended March 31, 2021, 2020 and 2019 are as follows:

A Message from the Management

18 Comprehensive income

Millions of yen

94

Financial Section

Independent Auditor’s ReportThousands of
U.S. dollars

Millions of yen

2021

2020

2021

¥337,931
5,759¥181,035
6,785$3,052,398
52,019¥ (46,944)(6,164)(3,741)—¥ (42,436)(1,940)(9,660)(67,244)$ (424,027)(55,677)(33,791)—

Income and expenses for investment and rental properties for the years ended March 31, 2021 and 2020 are as follows:

Thousands of
U.S. dollars

Millions of yen

Investment and rental properties

2021

2020

2021

¥298,596
146,879
151,717(10,084)¥ 18,960
11,3217,639(0)¥291,163
135,568
155,595(12,197)¥ 18,536
8,869
9,667
(45)

$2,697,101
1,326,700
1,370,401(91,085)$  171,258
102,258
69,000(0)(Notes)* As a portion used as investment and rental properties includes a portion used by the Company or its certain consolidated subsidiaries for providing services as well as management and administration,
income for these are not recorded above. The expenses primarily consist of rent, depreciation, taxes and dues, and others.
* Other income (expenses) for investment and rental properties and Other income (expenses) for a portion used as investment and rental properties is mostly the loss on disposal of property and equipment.

20 Contingent liabilities

OpinionWe have audited the accompanying consolidated financial statements of Sumitomo Realty & Development Co., Ltd. (“the Company”) and its
consolidated subsidiaries (collectively referred to as “the Group”), which comprise the consolidated balance sheets as at March 31, 2021 and 2020, theconsolidated statements of income and comprehensive income, changes in net assets and cash flows for each of the years in the three-year period ended
March 31, 2021, and notes, comprising a summary of significant accounting policies and other explanatory information.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Groupas at March 31, 2021 and 2020, and its consolidated financial performance and its consolidated cash flows for each of the years in the three-year period
ended in accordance with accounting principles generally accepted in Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our responsibilities under those standards are further
described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Groupin accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Japan, and we have fulfilled ourother ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements ofthe current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.

Business Review

A portion used as investment and rental properties

IncomeExpenses
Balance
Other income (expenses)
IncomeExpenses
Balance
Other income (expenses)

To the Board of Directors of Sumitomo Realty & Development Co., Ltd.:

Sumitomo Realty’s
Corporate Value Creation

Increase:
Acquired real estateTransferred from real estate for sale in process, etc.
Decrease:
Depreciation and amortization
Transferred to real estate for sale, etc.
Loss on impairment of fixed assets
Transferred to owner-occupied properties, etc.

A Message from the Management

Significant changes during the years ended March 31, 2021 and 2020 are as follows:

The Group was contingently liable as guarantors of borrowings by customers and others in an amount aggregating to ¥11,305 million ($102,114
thousand) and ¥9,407 million at March 31, 2021 and 2020, respectively.
21 Subsequent events
ESG Management(Dividends)
On June 29, 2021, the shareholders of the Company approved payments of a year-end cash dividend of ¥21 ($0.19) per share or a total of ¥9,953 million($89,902 thousand) to shareholders of record at March 31, 2021. Such appropriations are recognized in the period in which they are approved by theshareholders.

Financial Section/
Company Information

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Integrated Report 2021

Sumitomo Realty & Development Co., Ltd.

96

Independent Auditor’s Report

The reasonableness of the valuation of Real Estate for Sale

How the matter was addressed in our audit

The key audit matter

How the matter was addressed in our audit

Office buildings and residences owned by the Group (the “Properties”)
were recognized in the consolidated balance sheet of the Group as ofMarch 31, 2021. As described in Note 19, “Investment and rental
properties” to the consolidated financial statements, the total of such
Properties amounted to ¥3,838,536 million and accounted forapproximately 67% of the consolidated total assets in the consolidated
financial statements. Of such Properties, we determined the Properties
whose profitability had declined were a key audit matter.

The primary procedures we performed to evaluate whether
management’s judgment concerning the identification of an impairment
indicator for the Properties was appropriate included the following:

The Group recognized real estate for sale of ¥260,825 million and realestate for sale in process of ¥366,597 million as described in Note 4,“Inventories” to the consolidated financial statements (collectively, the“Real Estate for Sale”), and their total amount accounted forapproximately 11% of the consolidated total assets in the consolidated
financial statements. Of the Real Estate for Sale, we determined the Real
Estate for Sale whose profitability had declined was related to a key audit
matter.

The primary procedures we performed to evaluate whether the valuationof the Real Estate for Sale was reasonable included the following:

As described in Note 2 (16), “Significant accounting estimates” to theconsolidated financial statements, when a Property’s profitability has
declined and an impairment indicator exists, the Group is required todetermine whether an impairment loss should be recognized. Impairment
indicators include recurring operating losses, a significant adverse changethat could affect the recoverable amount, a significant deterioration ofbusiness environment and a significant decrease in the market prices.

• the judgment of whether there is significant deterioration of businessenvironment or significant adverse change that could affect therecoverable amount due to cancellation or long delay of development
plans, a change in usage or a significant decline in rents and occupancy
rates; and• estimating the future cash flows and discount rates which were used asa basis for calculating the market prices of the Properties.

In addition, in case the impairment indicator exists, and an impairment
loss is to be recognized, the impact on the consolidated financial
statements may be significant.

(2) Evaluation of the reasonableness of the valuation of the Real Estatefor Sale• We inquired management and the personnel in the responsible
divisions, inspected relevant materials and observed certain real estate forsale in progress to evaluate the probability of achieving the development
plans.

Economic trends, trends in personal income, trends in land prices,financial market situations, taxation system and other social aspects havea large impact on the following:• In order to evaluate the reasonableness of the net realizable value, withthe assistance of our own real-estate valuation specialists, as necessary,
we performed the following procedures.

• In order to evaluate the reasonableness of the Properties’ estimatedmarket prices used to determine whether an impairment indicator exists,
we performed the following procedures regarding the estimates of the
future cash flows and discount rates which were used as a basis forcalculating the market prices of the Properties.

• determining the probability of achieving the development plans of realestate for sale in progress; and• We evaluated the appropriateness of the valuation method selected to
calculate the net realizable value in light of the requirements including
those in the accounting standards.

• We evaluated the appropriateness of the valuation method selected to
calculate the market prices in light of the requirements including those in
the accounting standards;

Accordingly, these estimates involved a high degree of uncertainty, as
well as significant subjectivity in management’s judgments. In addition, incase a loss on devaluation of the Real Estate for Sale is to be recognized,
the impact on the consolidated financial statements may be significant.

• We evaluated the reasonableness of the future rents, a significant
assumption for estimating future cash flows, by taking into consideration
future economic conditions including the spread of COVID-19 infection,and by comparing them with actual rents; and• We evaluated the reasonableness of the discount rates by comparing
them with information published by external organizations and also withthe assistance of our own real-estate valuation specialists.

• estimating the selling price of the Real Estate for Sale, which is used to
calculate the net realizable value.

• We obtained an understanding of profitability of the Real Estate for Saleand evaluated the reasonableness of the estimated selling price, asignificant assumption for estimating the net realizable value, by taking
into consideration future economic conditions including the spread of
COVID-19 infection, and by comparing them with the actual selling price.

We, therefore, determined that the reasonableness of the valuation of
the Real Estate for Sale was one of the most significant in our audit of
the consolidated financial statements for the current fiscal year, andaccordingly, a key audit matter.

Responsibilities of Management and Corporate Auditors and the Board of Corporate Auditors for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles
generally accepted in Japan, and for such internal control as management determines is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, asapplicable, matters related to going concern in accordance with accounting principles generally accepted in Japan and using the going concern basis ofaccounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Corporate auditors and the board of corporate auditors are responsible for overseeing the directors’ performance of their duties with regard to the design,
implementation and maintenance of the Group’s financial reporting process.

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Sumitomo Realty & Development Co., Ltd.

Financial Section/
Company Information

We, therefore, determined that the appropriateness of management’s
judgment concerning the identification of an impairment indicator for
the Properties was one of the most significant in our audit of theconsolidated financial statements for the current fiscal year, andaccordingly, a key audit matter.

• We inquired management and the personnel in the responsible
divisions, inspected relevant materials and observed certain Properties todetermine if there was significant deterioration of business environment
or significant adverse change that could affect the recoverable amountdue to cancellation or long delay of development plans, a change inusage or a significant decline in rents or occupancy rates.

As described in Note 2 (16), “Significant accounting estimates” to theconsolidated financial statements, Real Estate for Sale is stated at cost. In
case the net realizable value is lower than its cost, the profitability is
regarded to have declined, and the net realizable value is used as the
carrying amount. The difference between the cost and the net realizablevalue is recognized as a loss for the current fiscal year.

ESG Management

Accordingly, these estimates involved a high degree of uncertainty, as
well as significant subjectivity in management’s judgments.

(2) Evaluation of the appropriateness of management’s judgment
concerning the identification of an impairment indicator for theProperties.

(1) Internal control testing
We tested the design and operating effectiveness of certain of theGroup’s internal controls relevant to the valuation of the Real Estate for
Sale.

Business Review

Economic trends, corporate performance, trends in land prices, financial
market situations, taxation system and other social aspects have a large
impact on the following:(1) Internal control testing
We tested the design and operating effectiveness of certain of theGroup’s internal controls relevant to management’s judgment concerning
the identification of an impairment indicator for the Properties.

Sumitomo Realty’s
Corporate Value Creation

The key audit matter

A Message from the Management

Appropriateness of management’s judgment concerning the identification of an impairment indicator for the Properties

98Independent Auditor’s Report

Convenience Translation
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31, 2021 are presented solely forconvenience. Our audit also included the translation of yen amounts into U.S. dollar amounts and, in our opinion, such translation has been made on thebasis described in Note 1 to the consolidated financial statements.
Interest required to be disclosed by the Certified Public Accountants Act of Japan
We do not have any interest in the Group which is required to be disclosed pursuant to the provisions of the Certified Public Accountants Act of Japan.

A Message from the Management

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not aguarantee that an audit conducted in accordance with auditing standards generally accepted in Japan will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected toinfluence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of our audit in accordance with auditing standards generally accepted in Japan, we exercise professional judgment and maintain professional
skepticism throughout the audit. We also:

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances,while the objective of the audit is not to express an opinion on the effectiveness of the Group’s internal control.

/S/ Atsuji Maeno
Designated Engagement Partner
Certified Public Accountant/S/ Hidekazu Takahashi
Designated Engagement Partner
Certified Public Accountant/S/ Masako Kanno
Designated Engagement Partner
Certified Public Accountant

Conclude on the appropriateness of management’s use of the going concern basis of accounting and based on the audit evidence obtained,
whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the
consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

KPMG AZSA LLC
Tokyo Office, Japan
July 29, 2021

Business Review

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made bymanagement.

Evaluate whether the presentation and disclosures in the consolidated financial statements are in accordance with accounting standards generally
accepted in Japan, the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether
the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

Sumitomo Realty’s
Corporate Value Creation

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform
audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control.

Notes to the Reader of Independent Auditor’s Report:
This is a copy of the Independent Auditor’s Report and the original copies are kept separately by the Company and KPMG AZSA LLC.

ESG Management

Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an
opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remainsolely responsible for our audit opinion.

We communicate with corporate auditors and the board of corporate auditors regarding, among other matters, the planned scope and timing of the audit,
significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide corporate auditors and the board of corporate auditors with a statement that we have complied with relevant ethical requirements regarding
independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and whereapplicable, related safeguards.

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Integrated Report 2021

Financial Section/
Company Information

From the matters communicated with corporate auditors and the board of corporate auditors, we determine those matters that were of most significance inthe audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’sreport unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not
be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits ofsuch communication.

Sumitomo Realty & Development Co., Ltd.

100

Company Information
History

Corporate Data / Investor Information (As of March 31, 2021)

Global Events

Corporate Data

Investor Information

Corporate Name Sumitomo Realty & Development Co., Ltd.

Number of Common Stock
Authorized: 1,900,000,000 shares
Issued: 476,085,978 shares
Number of Shareholders 11,869

Head Office

Shinjuku NS Building, 4-1, NishiShinjuku 2-chome
Shinjuku-ku, Tokyo 163-0820, Japan¥122,805 million

Number of Employees 13,530 (Consolidated)
Corporate Website https://www.sumitomo-rd.co.jp/english/

Major Consolidated Subsidiaries
Sumitomo Real Estate Sales Co., Ltd.
Sumitomo Fudosan Tatemono Service Co., Ltd.
Sumitomo Fudosan Syscon Co., Ltd.
Sumitomo Fudosan Villa Fontaine Co., Ltd.
Sumitomo Fudosan Bellesalle Co., Ltd.
Sumitomo Fudosan Retail Management Co., Ltd.
Sumitomo Fudosan Esforta Co., Ltd.
Sumitomo Fudosan Finance Co., Ltd.

Trust Accounts

28.87%

Financial Institutions

9.31%

Other Companies

37.65%

Foreign Companies

20.99%

Individuals and Others

3.18%

Major Shareholders
Name

Number of shares held(Thousands)

Percentage ofshares held

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

51,645

10.90

Custody Bank of Japan, Ltd.(Trust account)

24,778

5.23

Sumitomo Mitsui Banking Corporation

11,9902.53

Custody Bank of Japan, Ltd.(Trust account 4)

10,768

2.27

STICHTING PGGM DEPOSITARY PGGM LISTED REAL ESTATE PF FUND

10,030

2.12

Taisei Corporation

9,550

2.02

Daikin Industries, Ltd.

8,367

1.77

Shimizu Corporation

7,500

1.58

Obayashi Corporation

7,090

1.50

Custody Bank of Japan, Ltd.(Trust account 5)

6,799

1.43

Note: 1. Number of shares have been rounded down to the nearest thousand shares.
2. Percentage of shares held has been calculated by excluding treasury stock.

Yen

Stock Price (right)
TOPIX (left)

3,000• Izumi Real Estate Co., Ltd. changed its name to Sumitomo Realty & Development Co., Ltd.
• Merged with the holding company of the former Sumitomo zaibatsu during its liquidation.

• Listed on the Second section of the Tokyo Stock Exchange and Osaka Securities Exchange.
• Listed on the First section of the Tokyo Stock Exchange and Osaka Securities Exchange.

1972• Established Sumitomo Realty & Development CA., Inc., a consolidated subsidiary.

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

1974• Completed construction of Shinjuku Sumitomo Building in Shinjuku, Tokyo (in March); moved Company headquarters there from Tokyo
Sumitomo Building in Marunouchi, Tokyo (in June).

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

1978• Established Biwako Resort Club Co., Ltd. (currently Sumitomo Fudosan Villa Fontaine Co., Ltd.), a consolidated subsidiary.

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

1982• Completed construction of Shinjuku NS Building in Shinjuku, Tokyo (in September); moved Company headquarters there from Shinjuku
Sumitomo Building (in October).
• Started sales of Hiroo Garden Hills in Shibuya, Tokyo (a joint project).

1984• Established Sumitomo Fudosan Finance Co., Ltd., a consolidated subsidiary.

1986• Established Sumitomo Fudosan Fitness Co., Ltd. (currently Sumitomo Fudosan Esforta Co., Ltd.), a consolidated subsidiary.

1995• Commenced American Comfort custom home construction business.

1996• Commenced Shinchiku Sokkurisan remodeling business.

1998
1999

2,000

4,000

2002

• Completed construction of Izumi Garden Tower in Minato Ward, Tokyo.

1,500

3,000

2010

1,000

2,000

500

0

1,000

7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6

2016

2017

2018

2019

2020

100

2014
2015

1987
• Black Monday
1989• Collapse of Berlin Wall
• Nikkei Stock Average
all-time high1999
• Introduction of euro

• Commenced sales of J·URBAN urban-style housing series.
2007-2008• The Global Financial
Crisis (Lehman crisis)• Commenced sales of World City Towers in Minato Ward, Tokyo.
• Completed construction of Shiodome Sumitomo Building in Minato Ward, Tokyo.
• Established Sumitomo Fudosan Bellesalle Co., Ltd., a consolidated subsidiary.

2011• The Great East Japan
Earthquake• European sovereign
debt crisis• Record-high yen
against the U.S. dollar• Commenced sales of City Towers Toyosu The Twin (Koto Ward, Tokyo).
• Completed construction of Shinjuku Central Park City in Shinjuku Ward, Tokyo.
• Opened “Grand Mansion Gallery” in Tokyo metropolitan areas (Akihabara, Shinjuku, Shibuya, Ikebukuro, Tamachi).
• Completed construction of Sumitomo Fudosan Shinjuku Grand Tower in Shinjuku Ward, Tokyo.
• Number of condominium units brought to market over full year was the highest in Japan for the first time.

2015• China stock market
crash• Completed construction of Tokyo Nihombashi Tower in Chuo Ward, Tokyo.
• Cumulative units contracted reached 100,000 in Shinchiku Sokkurisan remodeling operations.
• Completed construction of Sumitomo Fudosan Roppongi Grand Tower in Minato Ward, Tokyo.

2017• Sumitomo Real Estate Sales Co., Ltd. delisted as it became a wholly owned subsidiary.

2019• Number of condominium units brought to market over the full year was the highest in Japan for the sixth consecutive year.

2020

1985
• The Plaza Accord

2001• September 11
terrorist attacks

2016

2021

Trading Volume

Millions of shares

0

2011

1978
• Second oil crisis• The Samquest bond issuance, which was the first public offering of commercial real estate securitization in Japan.
• The number of STEP brokerage offices managed by Sumitomo Real Estate Sales Co., Ltd. exceeded 200.

2004

1973
• First oil crisis• Sumitomo Real Estate Sales Co., Ltd., a consolidated subsidiary, listed on the Tokyo Stock Exchange.
• Commenced real estate joint investment trust fund. Launched sales of Sumitomo Realty & Development Fund (SURF) series.

2001

2008
5,000

1964
• Tokyo Olympic Games• Entered condominium sales business with Hama-Ashiya Mansion in Kobe, Hyogo Prefecture.

1970

6,000

2,500

• Opened Osaka Branch.

1971

2003

Stock Price and Trading Volume on Tokyo Stock Exchange
Yen

1957
1963
1964

Breakdown ofshareholders(of which 10,978 holding share unit)

Date of Establishment December 1, 1949
Paid-in Capital

1949• Izumi Real Estate Co., Ltd. established to succeed real estate business of the Sumitomo Honsha Ltd. following the breakup of theconglomerate.

2016• Brexit referendum• Completed renovation of Shinjuku Sumitomo Building / Completed “Sankaku Hiroba,” an all-weather atrium in Shinjuku Ward, Tokyo.
• Fully opened Ariake Garden, a large-scale complex in Koto Ward, Tokyo.

2020• COVID-19 Pandemic
2021• Tokyo Olympic Games

75
50
25
0

7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6

2016

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Integrated Report 2021

2017

2018

2019

2020

2021

Sumitomo Realty & Development Co., Ltd.

102

Shinjuku NS Building, 4-1, Nishi-Shinjuku 2-chome,
Shinjuku-ku, Tokyo 163-0820, Japan
https://www.sumitomo-rd.co.jp/english/

Printed in Japan