New Value for New Growth

SUMITOMO REALTY & DEVELOPMENT CO., LTD. ANNUAL REPORT 2012 ANNUAL REPORT & DEVELOPMENT CO., LTD. SUMITOMO REALTY New Value for New Growth Annual Report 2012 Profile About the Company Sumitomo Realty & Development Co., Ltd., a core member of the Sumitomo Group, is one of Japan’s leading real estate companies. The Company is well established as a comprehensive developer and supplier of high-quality ofﬁce buildings and condominiums in urban areas. With operations centered on four areas—leasing, sales, construction and brokerage—the Company has achieved a combination of growth potential and balanced operations that will drive its success in the challenging markets of the 21st century. Sumitomo Realty remains committed to the creation of comfortable work and living environments that contribute to a higher quality of life. Shinjuku NS Building (Head office) Our History 1949–80 81–2000 ■1949 Izumi Real Estate Co., Ltd. established as the ■1982 Completed construction of 30-story Shinjuku NS successor to the holding company of the Sumitomo Building in Shinjuku, Tokyo; moved Company zaibatsu following the breakup of the conglomerate. headquarters there from Shinjuku Sumitomo Building. ■1957 Izumi Real Estate Co., Ltd. changed its name to ■1995 Commenced American Comfort custom home Sumitomo Realty & Development Co., Ltd. construction business. ■1963 Merged with the holding company of the former ■1996 Commenced Shinchiku Sokkurisan remodeling Sumitomo zaibatsu during its liquidation. business. ■1964 Entered condominium sales business with Hama- ■1997 Entered high-quality business hotel market. Opened Ashiya Mansion in Kobe, Hyogo Prefecture. Villa Fontaine Nihonbashi and hotels at two other locations. ■1970 Listed on the Tokyo Stock Exchange and Osaka Securities Exchange. ■1998 Sumitomo Real Estate Sales Co., Ltd., a consolidated subsidiary, listed on the Tokyo Stock Exchange. ■1973 Established Sumitomo Fudosan Tatemono Service Co., Ltd., a consolidated subsidiary. ■1999 Commenced real estate joint investment trust fund. Launched sales of Sumitomo Realty & Development ■1974 Completed construction of 52-story Shinjuku Fund (SURF) series. Sumitomo Building in Shinjuku, Tokyo; moved Company headquarters there from Tokyo Sumitomo Implemented the Sumquest bond issue, which was Building in Marunouchi, Tokyo. the first public issue of real estate securities in Japan. ■1975 Established Sumitomo Real Estate Sales Co., Ltd., a consolidated subsidiary. ■2000 Commenced luxury condominium leasing business. Completed construction of La Tour Shibakoen. ■1980 Established Sumitomo Fudosan Syscon Co., Ltd., a consolidated subsidiary. Global Events ■1964 Tokyo Olympic Games ■1985 The Plaza Accord ■1973 First oil crisis ■1987 Black Monday ■1978 Second oil crisis ■1989 Collapse of Berlin Wall The Nikkei Stock Average reaches an all-time high ANNUAL REPORT 2012 Izumi Garden Tower Shinjuku Central Park City World City Towers City Towers Toyosu 01–10 11–12 ■2001 The number of managed STEP brokerage offices ■2011 Cumulative units contracted topped 70,000 in exceeded 200. Shinchiku Sokkurisan remodeling operations. ■2002 Completed construction of Izumi Garden Tower Opened Grand Mansion Gallery. (Roppongi 1-Chome Redevelopment Project). * Refer to page 17 for details ■2003 Commenced sales of J·URBAN fixed-price Completed Sumitomo Fudosan Shinjuku Grand Tower. urban-style housing series. ■2004 Commenced sales of World City Towers in Minato Ward, Tokyo. ■2006 Established Sumitomo Fudosan Reform Co., Ltd., a consolidated subsidiary. ■2008 Established Sumitomo Fudosan Bellesalle Co., Ltd., a consolidated subsidiary. Sumitomo Fudosan Shinjuku Grand Tower Commenced sales at City Towers Toyosu (Koto Ward, Tokyo). ■2012 Launched a Custom-order Condominium service. * Refer to page 17 for details ■2010 Completed construction of Shinjuku Central Park City Commenced sales of J·RESIDENCE. (Shinjuku Ward, Tokyo) * Refer to page 20 for details J·RESIDENCE ■1999 The euro is introduced ■2011 The Great East Japan Earthquake ■2001 The September 11th terrorist attacks European sovereign debt crisis ■2008 Lehman crisis Record high yen against the U.S. dollar SUMITOMO REALTY & DEVELOPMENT CO., LTD. 01 Contents 03 Consolidated Financial Highlights 26 Financial Section 04 A Message from the Management 26 Eleven-year Financial Summary 06 At a Glance 28 Management’s Discussion and Analysis 08 Review of Operations 32 Consolidated Balance Sheets 08 Leasing 34 Consolidated Statements of Income and Consoli- 14 Sales dated Statements of Comprehensive Income 18 Construction 35 Consolidated Statements of Changes in Net Assets 21 Brokerage 36 Consolidated Statements of Cash Flows 22 CSR 37 Notes to Consolidated Financial Statements 24 Corporate Governance 59 Independent Auditor’s Report 60 Senior Management 61 Corporate Data/Investor Information Cautionary Statement with Respect to Forward-looking Statements Statements made in this annual report with respect to plans, targets and future performance that are not historical fact are forward-looking statements. These statements are based on management’s assumptions and beliefs in light of the information currently available. Sumitomo Realty & Development Co., Ltd. cautions that a number of factors could cause actual results to differ materially from those discussed in the forward-looking statements. Such factors include but are not limited to macroeconomic conditions, supply and demand in the real estate market and interest rate trends. 02 ANNUAL REPORT 2012 Consolidated Financial Highlights Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries Years ended March 31 Overview of March 2012 Fiscal Year Revenue from operations fell due to a year-on-year decrease in condominium units delivered. However, operating income and ordinary profit exceeded our initial provisional forecasts and we recorded higher earnings for the second consecutive year. Net income was also higher year on year. Thousands of Millions of yen U.S. dollars*1 2012 2011 2010 2012 For the Year Revenue from operations ¥ 688,662 ¥ 744,756 ¥ 719,636 $ 8,385,024 Operating income 147,465 138,463 133,979 1,795,507 Ordinary profit*2 107,912 106,296 100,464 1,313,917 Net income 53,236 50,908 52,662 648,192 At Year-end Total assets ¥3,859,698 ¥3,234,203 ¥3,168,098 $46,994,984 Shareholders’ equity*3 553,844 526,227 488,896 6,743,504 Interest-bearing debt 2,554,115 2,021,599 1,935,166 31,098,441 Per Share Data (Yen and U.S. dollars) Net income ¥ 112.28 ¥ 107.35 ¥ 111.04 $ 1.37 Shareholders’ equity 1,168.11 1,109.78 1,030.93 14.22 Cash dividend applicable to the year 20.00 20.00 20.00 0.24 *1 U.S. dollar amounts in this report are translated, for convenience only, at the rate of ¥82.13 = U.S.$1, the prevailing exchange rate at March 31, 2012. *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 broken out in the Company’s English-language financial statements, but it is included here because it plays an important role in the calculation of incentive payments for directors. *3 Shareholders’ equity = Net assets – Minority interests Revenue from Operations Operating Income Ordinary Profit*2 Net Income ¥688.7 billion ¥147.5 billion ¥107.9 billion ¥53.2 billion in the March 2012 fiscal year in the March 2012 fiscal year in the March 2012 fiscal year in the March 2012 fiscal year (Billions of Yen) (Billions of Yen) (Billions of Yen) (Billions of Yen) 900 180 150 75 600 120 100 50 300 60 50 25 0 691.9 695.2 719.6 744.8 688.7 720.0 0 154.6 146.4 134.0 138.5 147.5 150.0 0 125.2 113.6 100.5 106.3 107.9 109.0 0 63.1 46.2 52.7 50.9 53.2 58.0 08 09 10 11 12 13 08 09 10 11 12 13 08 09 10 11 12 13 08 09 10 11 12 13 (Forecast) (Forecast) (Forecast) (Forecast) SUMITOMO REALTY & DEVELOPMENT CO., LTD. 03 A Message from the Management We aim to achieve the targets of our Fifth Manage- ment Plan and move to the next stage of growth by responding flexibly to change in our operating environment. Junji Takashima Kenichi Onodera Chairman President Progress under the Fifth Management Plan billion and ordinary profit was ¥107.9 billion. Operating income We are currently working on our Fifth Management Plan, which and ordinary profit thus rose for the second consecutive year. ends in the March 2013 fiscal year. This plan was formulated in We began the March 2012 fiscal year with a provisional the middle of two straight years of lower earnings due to the target of achieving ordinary profit in excess of ¥100.0 billion for impact of the global economic downturn after the beginning of the 6th straight year. The target was provisional because of the global financial crisis. Before that, in the year ended March difficult conditions which made it hard to predict the impact of 31, 2008, we achieved record ordinary profit of ¥125.2 billion. the Great East Japan Earthquake on our performance. However, We embarked on this plan with the basic policies of “Getting we actually did better than we expected. Consumer sentiment back on track toward increased revenue and profit” and cooled and materials were in short supply after the earthquake, “Targeting record-setting business results in the March 2013 but that turmoil was brought to a close relatively quickly, while fiscal year.” continued low interest rates underpinned a robust performance In the March 2012 fiscal year, the second year of the Fifth in our condominiums and brokerage operations. Leasing opera- Management Plan, we saw the continuation of a seesaw busi- tions also made a contribution, recording the first increase in ness environment, with the after-effects of the Great East Japan three years, mainly due to newly opened buildings. Earthquake still being felt.

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