MITSUBISHI ESTATE Annual Report 2013

In scal 2013, the Mitsubishi Estate Group con-fronted an extremely harsh operating environ-ment. Our results were negatively impacted by such factors as nancial instability in Europe and a slowdown in the rate of economic growth in China. In addition to corrections fol-lowing the sale of large-scale properties in s-cal 2012, we recorded an extraordinary loss in connection with the reconstruction of several of ce buildings. Accounting for these and other factors, the Mitsubishi Estate Group reported a substantial year-on-year decline in both revenues and income. On a more positive note, conditions throughout the real estate market entered a recovery phase from the second half of the scal year under review. For example, the sup-ply of new large-scale of ce buildings in cen-tral Tokyo has tapered off. Demand for of ce space by the corporate sector is steadily rising in line with the positive turnaround in eco-nomic conditions in Japan. As a result, signs of improvement in the supply and demand balance are becoming increasingly evident. Turning to the condominium market, condi-tions remain rm. This re ects the underlying strength of continued volume zone sales tar-geting rst-time buyers. At the same time, the weak yen and robust stock prices at the beginning of 2013 fueled a recovery in the sale of higher priced properties. In the real estate investment market, trends were buoyed by the in ow of funds from overseas. This has triggered a period of active buying and selling. While recognizing that the Group’s results will not immediately bene t from improve-ments in market conditions, we are con dent that our consistently earnest marketing efforts will in time bear fruit. On this basis, we antici-pate a substantial year-on-year surge in income in scal 2014. This con dence is par-ticularly strong in our Residential Business activities. Our determined efforts to reduce costs following the launch of Mitsubishi Jisho Residence Co., Ltd. are nally showing signs of success and we anticipate our activities in this area will gather considerable momentum in scal 2014. In the Building Business, how-ever, improvements in the of ce building mar-ket are yet to contribute fully to the Group’s performance. While we project a substantial increase in operating income on the back of an upswing in property sales in scal 2014, growth in mainstay of ce leasing income will remain limited. Looking ahead, we will chan-nel our energies toward early improvements in new building utilization rates and the increased pro tability of existing buildings. In this latter case, we will work to revise rents and redou-ble efforts toward reducing costs.Management & ServicesBusinessHotelsArchitecturalDesign &EngineeringInvestmentManagementShoppingCentersPM & LeasingBrokerage andOther ServicesInvestment & DevelopmentBusinessMarunouchiRedevelopmentCommercial PropertyDevelopment &Investment BusinessResidentialBusinessInternationalBusinessSynergiesPlease tell us more about “BREAKTHROUGH 2020,” your medium- to long-term management plan.In “BREAKTHROUGH 2020,” we rst and foremost lay out the values and code of con-duct that our employees should abide by, spe-ci cally, ve values and ve actions. Then, roughly dividing the Group’s business domains into the: • Investment & Development Business: The Business group where Mitsubishi Estate invests in development projects, • Management & Services Business: The Business group where Mitsubishi Estate offers customers added value through professional services,we set forth our aim to reinforce our value chains by closely linking the two business domains. Fully leveraging these value chains, the aim of the Group’s medium- to long-term man-agement plan is to cement its No. 1 position in the investment and development business elds.Five “Values”Five “Actions”“Innovative”Continue to take on challenges as an innovative urban developer“Eco-conscious”Aim for sustainable growth through advanced environmental initiatives“Customer-oriented”Always think about customer value from a customer perspective“Global”Develop HR, structure and businesses suitable for global operations“As One Team”Unite as one team and strive to realize BREAKTHROUGH 2020Please provide us with an overview of results of scal 2013 (the scal year ended March 31, 2013) and an outline of the issues you expect to confront in scal 2014.4