Tokyo Tatemono Co., Ltd.pdf.irpocket.com/C8804/qzIz/e8EA/Qs16.pdf · Ofuro-no-Osama Oimachi was in...
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A N N U A L R E V I E W 2 0 1 2
Fiscal Year Ended December 31, 2012
Tokyo Tatemono Co., Ltd.
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MANAGEMENT REVIEW
Operating EnvironmentIn the fiscal 2012, the Japanese economy showed some signs of a turnaround, primarily attributable to increased public spending associated with demand for post-quake reconstruction, which came into full swing. In the second half of the fiscal year, however, the economy stalled, mainly because of falling exports caused, among other things, by the persistent European sovereign debt problem and the slowing of the Chinese economy, as well as dampened consumer spending in the absence of certain policy effects. In the real estate industry, there were signs of a recovery in the rental office market, reflecting an improving vacancy rate, offsetting the final stage of large new supply in the Tokyo metropolitan area and persistent weakness in rent levels. The residential housing market remained generally firm with the high contract rate continuing, backed mainly by low interest rates. In the real estate investment market, there were moves towards a full-fledged recovery, such as increases in the number of new listings and capital increase through a public offering by J-REITs, as well as a rise in momentum toward the acquisition of properties.
ResultsIn this business environment, the Group took steps to improve its earnings strength and financial position, after it posted significant losses and was forced to cancel dividend payments in the previous fiscal year. These steps included securing profits available for dividend and reducing interest-bearing debt by downsizing total assets. As a result, total revenue from operations for the fiscal year rose from ¥166,943 million for the previous fiscal year, to ¥194,161 million (US$2,249,322 thousand), up 16.3%. This rise was attributable primarily to the posting of dividend income in Commercial Properties business associated with the sale of the site (limited proprietary right of land) for Otemachi 1-6 Project (tentative name) by an SPC in which the Company has a capital stake. Operating income increased from an operating loss of ¥678 million to ¥30,892 million (US$357,882 thousand). Recurring income climbed from a recurring loss of ¥10,875 million to ¥21,741 million (US$251,867 thousand). However, the Group recorded an extraordinary loss of ¥3,932 million, mainly
reflecting losses from sales of portfolio assets and impairment losses. As a result, net income for the fiscal year totaled ¥10,243 million (US$118,667 thousand) (compared to a net loss of ¥71,774 million for the previous fiscal year).
OutlookThe Japanese economy is expected to start to recover in the future, thanks to economic policies put in place following the change of government. Nonetheless, the outlook is unpredictable, with the slowdown of overseas economies, including economic developments in China and the re-ignition of the European sovereign debt crisis, threatening to put downward pressure on the Japanese economy. In the real estate industry, the rental office market will see continued improvement of the vacancy rate in the Tokyo metropolitan area, and rent levels are expected to bottom out and experience an upswing. In the residential housing market, demand is expected to remain firm as interest rates remain low, but the impact of the consumption tax increase on the housing market needs to be monitored. In the real estate investment market, while a full-fledged recovery is expected, the impact of negative developments such as the slowdown of overseas economies gives cause for concern.
FoundationsIn this business environment, under the new Group medium-term business plan called “Restart-Challenging Innovation-” for fiscal 2012 to fiscal 2014, the Group will strive to improve its business foundations to achieve further growth in the future by bolstering its earnings capabilities and financial strength, recording steady income, establishing an earnings foundation, and achieving sound financial conditions. The Group will also seek to enhance its corporate value by contributing to the development of a sustainable society through environmentally considerate business activities in compliance with the Group’s environmental policies, and by enhancing the Group’s management structure through the pursuit of optimal corporate governance.
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FINANCIAL REVIEW
Revenue and IncomeCommercial properties businessIn the commercial properties business, the Company focused on tenant services, with the aim of “providing a safe and comfortable space” in offices, and sought to improve occupancy rates at large scale properties, thereby strengthening its earnings sources. In the fiscal year under review, the construction of Otemachi Financial City North Tower (Chiyoda Ward, Tokyo) and Nihonbashi TI Building (Chuo Ward, Tokyo) was completed, and Tokyo Tatemono Yaesu Building (Chuo Ward, Tokyo) was in operation for the full year. During the fiscal year, the company sold Tokyo Tatemono Nagoya Building. It also sold other properties, including the site (limited proprietary right of land) for Otemachi 1-6 Project (tentative name) (Chiyoda Ward, Tokyo) held by an SPC in which the Company has a capital stake and Yakuin Business Garden (Chuo Ward, Fukuoka City), and posted dividend income associated with these sales. In addition, the Company posted compensation for development services, etc. with the completion of the construction of Nakano Central Park (Nakano Ward, Tokyo). As a result, revenue from operations was ¥67,499 million (US$781,970 thousand) (up 54.9% from ¥43,570 million for the preceding fiscal year); and operating income was ¥33,164 million (US$384,198 thousand) (up 354.1% from ¥7,303 million).
Residence businessIn the residence business, to embody the concepts represented by the slogans “refined housing” and “comfortable and peaceful housing after residence,” which express the brand identity for Brillia condominiums, the Company started a product development project for working women called Bloomoi and an around-the-clock service called Brillia Daily Life Hotline to respond to issues in the condominium rooms. During the fiscal year under review, the Company recorded sales from condominiums including Brillia Oimachi La Vie En Tower (Shinagawa Ward, Tokyo), The Tower Residence Otsuka (Toshima Ward, Tokyo), Brillia Laketown Parkside (Koshigaya City, Saitama Prefecture),
Brillia Takatsuki Central Place (Takatsuki City, Osaka), etc. Sales of real estate for development of ¥10,862 million were included in housing sales. A loss on revaluation of inventories and a loss on revaluation of SPCs of ¥4,760 million (US$55,150 thousand) (compared to a loss of ¥6,857 million in the previous fiscal year) were posted in cost of revenue. As a result, revenue from operations was ¥86,612 million (US$1,003,393 thousand) (up 3.2% from ¥83,904 million for the preceding fiscal year); and the operating income was ¥983 million (US$11,397 thousand) (compared with operating loss of ¥1,317 million for the preceding fiscal year).
Brokerage businessIn brokerage services for corporate customers, the Company strengthened proposal sales (CRE sales) for the effective use of real estate owned and operated by companies, among others. In brokerage services for individual customers, the Company launched the Authorization System of Used House Brillia, which provides certain guarantees for part of the condominiums sold by the Company based on building inspections, thereby endeavouring to expand the Company’s share in the brokerage area. For the fiscal year under review, real estate sales fell, although brokerage fees increased in brokerage, appraisal, and consulting services. As a result, revenue from operations was ¥8,354 million (US$96,781 thousand) (down 19.2% from ¥10,336 million for the preceding fiscal year); and operating income was ¥115 million (US$1,335 thousand) (from operating loss of ¥1,538 million for the previous fiscal year).
Other businessesFor the fiscal year ended December 31, 2012, NIHON PARKING CORPORATION, which became a consolidated subsidiary in the previous fiscal year, contributed to the performance of the metered parking lot business. In the Leisure business, a warm bath facility called Ofuro-no-Osama Oimachi was in operation for the full year, and the capacity utilization of other facilities operated by the Company recovered from the decline in the aftermath of the
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earthquake, contributing to the improved results of this business segment. In the Asset Management business, Tokyo Tatemono Investment Advisors Co., Ltd. originated private placement funds for overseas pension funds in efforts to increase assets under management. As a result, revenue from operations was ¥31,694 million (US$367,176 thousand) (up 8.8% from ¥29,132 million for the preceding fiscal year); and operating income was 2,751 million (US$31,874 thousand) (up 103.9% from ¥1,349 million for the preceding fiscal year).
Analysis of ProfitabilityRevenue from operations rose ¥27,217 million from the previous fiscal year, to ¥194,161 million (US$2,249,322 thousand). This rise was attributable primarily to the posting of dividend income associated with the sale of the site (limited proprietary right of land) for Otemachi 1-6 Project (tentative name) by an SPC in which the Company has a capital stake, and to the full-year contribution to earnings of NIHON PARKING CORPORATION, which became a consolidated subsidiary in the previous fiscal year. Operating income increased from an operating loss of ¥678 million to ¥30,892 million (US$357,882 thousand). Recurring income climbed from a recurring loss of ¥10,875 million to ¥21,741 million (US$251,867 thousand). However, the Group recorded losses from sales of 25 condominiums for rent, etc. and impairment losses in an extraordinary loss. As a result, net income for the year totalled ¥10,243 million (US$118,667 thousand) (compared to a net loss of ¥71,774 million for the previous fiscal year).
Financial PositionTotal assets at the end of the fiscal year were ¥895,296 million (US$10,371,830 thousand), a decrease of ¥2,721 million from the end of the preceding year. The major factors were an increase in investment securities associated with investments in SPCs and the fair market valuation of listed stocks, and a decrease in property and equipment due to a decrease in real estate for sale and sales of condominiums for rent. Total liabilities at the end of the fiscal year were ¥682,804 million (US$7,910,159 thousand), down ¥23,111
million from the end of the preceding year. This was mainly the result of a decrease in interest-bearing debt through the reduction of total assets and a decrease in investments received for real estate-specific joint enterprises. The balance of interest-bearing debt (excluding lease obligations) was ¥479,746 million (US$5,557,767 thousand) (a decrease of ¥33,869 million from the end of the fiscal 2011). Net assets at the end of the fiscal year were ¥212,491 million (US$2,461,671 thousand), an increase of ¥20,390 million from the end of the preceding fiscal year. This was primarily attributable to an increase associated with net income and a rise in the valuation difference on available-for-sale securities. The Company compensated for a capital loss by transferring capital surplus of ¥27,178 million to retained earnings.
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Cash FlowConsolidated cash and cash equivalents (hereinafter “cash”) at the end of the fiscal year increased ¥6,577 million from the end of the preceding fiscal year, to ¥39,466 million. Cash provided by operating activities was ¥57,332 million, cash used in investing activities was ¥15,385 million, and cash used in financing activities was ¥35,855 million.
Cash flow from operating activitiesCash provided by operating activities was ¥57,332 million (US$664,188 thousand) (a rise of ¥49,279 million in cash from the previous fiscal year). This mainly reflected net income before income taxes and minority interests of ¥17,808 million and an increase in cash due to a decrease in inventories of ¥18,074 million.
Cash flow from investing activitiesCash used in investing activities was ¥15,385 million (US$178,243 thousand) (an increase of ¥21,779 million in cash from the previous fiscal year). This was primarily attributable to decrease in cash due mainly to expenditure of ¥23,026 million for purchases of investment securities, ¥20,648 million for purchase of fixed assets, and a ¥10,921 million yen decrease in investments received for real estate specific joint enterprises, although there was an increase in cash attributable to income of ¥31,062 million from the sale of fixed assets.
Cash flow from financing activitiesCash used in financing activities was ¥35,855 million (US$415,383 thousand) (a decrease of ¥76,972 million in cash from the previous fiscal year). This was mainly the result of financing through hybrid finance and a decrease in interest-bearing debt through the reduction of total assets.
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Tokyo Tatemono Co., Ltd. and Consolidated Subsidiaries
Consolidated Balance Sheets December 31, 2012 2011 2012 (Millions of yen) (Thousands of
U.S. dollars) (Note 1)
Assets Current assets:
Cash and deposits (Notes 14 and 17) ¥ 39,468 ¥ 32,925 $ 457,230Accounts receivable, trade 10,202 6,603 118,189Marketable securities (Notes 17 and 18) 5 97 58Investments in silent partnerships (Notes 17 and 18) 6,875 5,339 79,647Inventories (Notes 3 and 6) 89,174 103,582 1,033,069Deferred income taxes (Note 21) 2,348 3,520 27,211Other current assets 14,942 16,318 173,104Allowance for doubtful accounts (571) (582) (6,617)
Total current assets 162,445 167,804 1,881,893
Property and equipment, at cost: Land (Notes 6, 7 and 11) 302,123 310,712 3,500,046Buildings (Notes 6, 7 and 11) 212,446 224,175 2,461,147Construction in progress 4,266 3,441 49,429Other property and equipment (Note 11) 20,541 20,469 237,969
Total property and equipment 539,378 558,799 6,248,592Less accumulated depreciation (102,351) (100,088) (1,185,720)Net property and equipment 437,027 458,710 5,062,872
Intangible and other assets (Notes 4 and 7) 28,389 28,218 328,886
Investments: Investment securities (Notes 8, 17 and 18) 180,660 153,556 2,092,911Investments in unconsolidated subsidiaries and affiliates (Notes 8 and 17) 36,410 34,415 421,810
Investments in silent partnerships (Notes 8, 17 and 18) 50,843 52,128 589,008Long-term loans 89 185 1,032Deferred income taxes (Note 21) 1,778 6,218 20,600Guarantee deposits paid (Note 7) 10,943 10,873 126,776Other investments (Notes 7 and 18) 6,648 5,968 77,016Allowance for doubtful accounts (264) (390) (3,069)Allowance for losses on investments (19,673) (19,673) (227,910)
Total investments 267,434 243,283 3,098,177
Total assets ¥ 895,296 ¥ 898,017 $ 10,371,830
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December 31, 2012 2011 2012 (Millions of yen) (Thousands of
U.S. dollars) (Note 1)
Liabilities and net assets Current liabilities:
Short-term borrowings (Notes 5, 6 and 17) ¥106,778 ¥118,038 $ 1,237,011Current portion of bonds payable (Notes 5 and 17) 22,200 10,000 257,182Accounts payable, trade (Note 6) 9,307 6,460 107,822Accrued income taxes 1,708 461 19,797Provision for warranties for completed construction 4 5 56Provision for bonuses 293 273 3,396Provision for directors’ bonuses 71 71 824Deposits received under Real Estate Specified Joint Enterprise Law (Note 7) 24,770 30,090 286,955
Other current liabilities (Note 6) 35,559 31,994 411,945Total current liabilities 200,693 197,395 2,324,993Long-term liabilities:
Bonds payable (Notes 5 and 17) 99,950 109,750 1,157,900Long-term debt (Notes 5, 6 and 17) 245,625 269,752 2,845,527Deferred income taxes (Note 21) 12,276 7,496 142,223Deferred income taxes on land revaluation 26,169 20,911 303,173Accrued severance indemnities (Note 20) 7,676 7,079 88,933Provision for directors’ retirement benefits 1,138 1,113 13,185Provision for environmental measures 279 285 3,241Guarantee deposits received (Notes 6 and 17) 43,696 40,493 506,214Deposits received under Real Estate Specified Joint Enterprise Law (Note 7) 32,907 38,508 381,222
Other long-term liabilities (Note 6) 12,390 13,130 143,542Total long-term liabilities 482,111 508,521 5,585,165Total liabilities 682,804 705,916 7,910,159
Commitments and contingent liabilities (Note 9)
Net assets: Shareholders’ equity (Note 13):
Common stock, without par value: Authorized: 800,000,000 shares Issued: 433,059,168 shares in 2012 and 2011 92,451 92,451 1,071,031
Additional paid-in capital 63,518 90,696 735,843Retained earnings 11,164 (22,812) 129,339Less: Treasury stock, at cost (549) (546) (6,369)
Total shareholders’ equity 166,584 159,788 1,929,845Accumulated other comprehensive income:
Net unrealized gains or losses on available-for-sale securities 23,960 11,153 277,576
Deferred gains or losses on hedges (368) – (4,274)Revaluation reserve for land 15,672 16,446 181,566Foreign currency translation adjustments (774) (2,450) (8,974)
Total accumulated other comprehensive income 38,489 25,149 445,894Minority interests 7,417 7,163 85,931
Total net assets 212,491 192,101 2,461,671Total liabilities and net assets ¥895,296 ¥898,017 $10,371,830
See accompanying notes to the consolidated financial statements.
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Tokyo Tatemono Co., Ltd. and Consolidated Subsidiaries
Consolidated Statements of Income Year ended December 31, 2012 2011 2012 (Millions of yen) (Thousands of
U.S. dollars) (Note 1)
Revenue from operations ¥194,161 ¥166,943 $2,249,322 Cost of revenue from operations 140,385 145,237 1,626,339
Gross profit 53,775 21,706 622,982
Selling, general and administrative expenses (Note 10) 22,883 22,384 265,099 Operating income (loss) 30,892 (678) 357,882
Other income (expenses): Interest income 41 37 484 Dividends income 707 781 8,192 Interest expenses (8,472) (8,403) (98,153) Gain on sales of noncurrent assets 3,286 795 38,074 Loss on sales of noncurrent assets (1,109) (14) (12,857) Loss on retirement of noncurrent assets (118) (123) (1,377) Loss on building reconstruction – (215) – Stock issuance cost (4) (4) (48) Bond issuance cost (71) (123) (822) Gain on sales of investment securities 38 978 445 Dividends paid on Real Estate Specified Joint Enterprise Law (1,202) (1,668) (13,929) Write-downs of investment securities (1,859) (43,302) (21,536) Loss on adjustment for changes of accounting standard for asset retirement obligations – (69) –
Equity in earnings of affiliated companies 577 198 6,689 Impairment loss (Note 11) (3,992) (3,374) (46,250) Provision for environmental measures – (6) – Loss on disaster – (607) – Compensation income 493 – 5,713 Loss on reversal of foreign currency translation adjustments (671) – (7,774) Provision of allowance for losses on investments – (19,075) – Other, net (727) (1,012) (8,428)
(13,084) (75,210) (151,577) Income (loss) before income taxes and minority interests 17,808 (75,889) 206,304
Income taxes (Note 21): Current 2,020 867 23,409 Deferred 5,234 (5,382) 60,638
7,255 (4,514) 84,048 Income (loss) before minority interests 10,553 (71,374) 122,256
Minority interests 309 399 3,588 Net income (loss) ¥ 10,243 ¥ (71,774) $ 118,667
See accompanying notes to the consolidated financial statements.
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Tokyo Tatemono Co., Ltd. and Consolidated Subsidiaries
Consolidated Statements of Comprehensive Income Year ended December 31, 2012 2011 2012 (Millions of yen) (Thousands of
U.S. dollars) (Note 1)
Income (loss) before minority interests ¥10,553 ¥(71,374) $122,256
Other comprehensive income (Note 12): Net unrealized gains or losses on available-for-sale securities 12,190 (283) 141,225 Deferred gains or losses on hedges (368) – (4,274) Revaluation reserve for land (4,201) 2,809 (48,672) Foreign currency translation adjustments 1,235 (75) 14,309 Share of other comprehensive income of associates accounted for using the equity method
1,081
(136)
12,524
Total other comprehensive income 9,936 2,312 115,113 Comprehensive income ¥20,489 ¥(69,061) $237,370
Comprehensive income attributable to: Comprehensive income attributable to owners of the parent ¥20,156 ¥(69,448) $233,504 Comprehensive income attributable to minority interests 333 387 3,866
See accompanying notes to the consolidated financial statements.
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Tokyo Tatemono Co., Ltd. and Consolidated Subsidiaries
Consolidated Statements of Changes in Net Assets Year ended December 31, 2012 2011 2012 (Millions of yen) (Thousands of
U.S. dollars) (Note 1)
Common stock Balance at beginning of the year ¥ 92,451 ¥ 92,451 $ 1,071,031 Balance at end of the year ¥ 92,451 ¥ 92,451 $ 1,071,031
Additional paid-in capital Balance at beginning of the year ¥ 90,696 ¥ 90,696 $1,050,695 Deficit disposition (27,178) – (314,852) Sales of treasury stock (0) (0) (3) Transfer to additional paid-in capital from retained earnings 0 – 3 Balance at end of the year ¥ 63,518 ¥ 90,696 $ 735,843
Retained earnings Balance at beginning of the year ¥ (22,812) ¥ 50,692 $ (264,274) Deficit disposition 27,178 – 314,852 Net income (loss) 10,243 (71,774) 118,667 Cash dividends paid – (1,730) – Transfer to revaluation reserve for land (3,427) – (39,708) Change of scope of consolidation (16) – (193) Transfer to additional paid-in capital from retained earnings (0) – (3) Balance at end of the year ¥11,164 ¥ (22,812) $ 129,339
Treasury stock, at cost Balance at beginning of the year ¥ (546) ¥ (543) $ (6,333) Purchases of treasury stock (3) (5) (40) Sales of treasury stock 0 1 5 Balance at end of the year ¥ (549) ¥ (546) $ (6,369)
Net unrealized gains or losses on available-for-sale securities Balance at beginning of the year ¥ 11,153 ¥ 11,323 $ 129,209 Net change in unrealized gains or losses on available-for-sale securities, net of deferred income taxes
12,807
(170)
148,366
Balance at end of the year ¥ 23,960 ¥ 11,153 $ 277,576
Deferred gains or losses on hedges Balance at beginning of the year ¥ – ¥ – $ – Net change in deferred gains or losses on hedges (368) – (4,274) Balance at end of the year ¥ (368) ¥ – $ (4,274)
Revaluation reserve for land Balance at beginning of the year ¥ 16,446 ¥ 13,637 $ 190,530 Transfer to revaluation reserve for land (773) 2,809 (8,963) Balance at end of the year ¥ 15,672 ¥ 16,446 $ 181,566
Foreign currency translation adjustments Balance at beginning of the year ¥ (2,450) ¥ (2,136) $ (28,391) Net change in foreign currency translation adjustments 1,676 (313) 19,416 Balance at end of the year ¥ (774) ¥ (2,450) $ (8,974)
Minority interests ¥ 7,417 ¥ 7,163 $ 85,931
Total net assets ¥212,491 ¥192,101 $ 2,461,671
See accompanying notes to the consolidated financial statements.
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Tokyo Tatemono Co., Ltd. and Consolidated Subsidiaries Consolidated Statements of Cash Flows
Year ended December 31, 2012 2011 2012 (Millions of yen) (Thousands of
U.S. dollars) (Note 1)
Operating activities Income (loss) before income taxes and minority interests ¥ 17,808 ¥ (75,889) $ 206,304Adjustments to reconcile income before income taxes and minority intereststo net cash provided by (used in) operating activities:
Depreciation and amortization 8,790 9,023 101,838Impairment loss 3,992 3,374 46,250Amortization of goodwill 252 245 2,925Equity in earnings of affiliated companies (577) (198) (6,689)Increase (decrease) in allowance for doubtful accounts (136) 330 (1,583)Increase (decrease) in allowance for losses on investments – 19,075 –Increase (decrease) in provision for bonuses 19 (10) 224Provision for accrued severance indemnities, less payments 597 688 6,916Interest and dividend income (749) (818) (8,677)Interest expense 8,472 8,403 98,153Loss on valuation of investment securities 1,859 43,302 21,536Gain on sales of investment securities (38) (978) (445)Loss on building reconstruction – 215 –Loss on disposition of foreign currency translation adjustments 671 – 7,774Gain on sales and retirement of noncurrent assets (2,057) (657) (23,839)Decrease (increase) in accounts receivable, trade (3,595) (500) (41,656)Decrease (increase) in investments in silent partnerships 338 – 3,918Decrease (increase) in inventories (Note 14) 18,074 7,117 209,388Increase (decrease) in lease and guarantee deposits received 3,071 (702) 35,579Increase (decrease) in accounts payable, trade (309) (178) (3,585)Decrease (increase) in lease and guarantee deposits (71) 82 (826)Increase in deposits received 1,878 (1,149) 21,766Other 7,610 9,116 88,168
Subtotal 65,900 19,891 763,441Interest and dividends income received 880 926 10,204Interest expense paid (8,349) (8,394) (96,728)Income taxes paid (1,098) (4,369) (12,729)Net cash provided by operating activities 57,332 8,053 664,188Investing activities Proceeds from sales and redemption of investment securities 9,235 9,320 106,990Purchases of investment securities (23,026) (21,837) (266,760)Purchase of investments in subsidiaries resulting in change in scope ofconsolidation (Note 14) – (1,605) –
Payments for investments in silent partnerships (3,068) (130) (35,553)Proceeds from withdrawal of investments in silent partnerships 1,571 1,573 18,210Proceeds from sales of noncurrent assets 31,062 7,639 359,853Purchases of noncurrent assets (20,648) (21,113) (239,209)Payments of loans receivable (13) (79) (160)Collection of loans receivable 406 183 4,705Increase (decrease) in deposits received under Real Estate Specified JointEnterprise Law (10,921) (3,398) (126,522)
Other 17 (7,718) 202Net cash used in investing activities (15,385) (37,164) (178,243)Financing activities Increase (decrease) in short-term borrowings (404) (800) (4,691)Proceeds from long-term loans payable 95,300 148,072 1,104,031Repayment of long-term loans payable (130,281) (127,512) (1,509,282)Payments for long-term accounts payable (883) (931) (10,235)Proceeds from issuance of bonds payable 15,000 25,000 173,772Redemption of bonds payable (12,600) – (145,968)Proceeds from sales of treasury stock 0 0 1Purchase of treasury stock (3) (5) (40)Purchase of treasury stock of subsidiaries in consolidation – (200) –Cash dividends paid (2) (1,730) (24)Cash dividends paid to minority shareholders (80) (120) (928)Proceeds from stock issuance to minority shareholders – 414 –Other (1,900) (1,069) (22,017)Net cash (used in) provided by financing activities (35,855) 41,116 (415,383)Effect of exchange rate change on cash and cash equivalents 495 (22) 5,744Net increase (decrease) in cash and cash equivalents 6,586 11,982 76,305Cash and cash equivalents at beginning of period 32,889 20,906 381,016Decrease in cash and cash equivalents resulting from exclusion of subsidiaries from consolidation (9)
– (108)
Cash and cash equivalents at end of period (Note 14) ¥ 39,466 ¥ 32,889 $ 457,213
See accompanying notes to the consolidated financial statements.
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Tokyo Tatemono Co., Ltd. and Consolidated Subsidiaries
Notes to the Consolidated Financial Statements 1. Basis of Preparation of Financial Statements The accompanying consolidated financial statements of Tokyo Tatemono Co., Ltd. (“the Company”) and consolidated subsidiaries (collectively “the Group”) are prepared on the basis of accounting principles generally accepted in Japan, which are different in certain respects as to the application and disclosure requirements of International Financial Reporting Standards, and are compiled from the consolidated financial statements prepared by the Company as required by the Financial Instruments and Exchange Law of Japan. In addition, the notes to the accompanying consolidated financial statements include financial information which is not required under accounting principles generally accepted in Japan but is presented herein as additional information. Certain reclassifications have been made to present the accompanying consolidated financial statements in a format which is familiar to readers outside Japan. As permitted by the Financial Instruments and Exchange Law, amounts of less than one million yen have been omitted. As a result, the totals in yen in the accompanying consolidated financial statements do not necessarily agree with the sums of the individual amounts. The U.S. dollar amounts presented in the accompanying consolidated financial statements are included solely for the convenience of readers outside Japan. The exchange rate of ¥86.32 to U.S.$1.00 prevailing on December 31, 2012 has been used in the translation of yen amounts into U.S. dollar amounts in the accompanying consolidated financial statements. It should not be construed that yen amounts have been or could in the future be converted into U.S. dollar amounts at the above or any other rate. 2. Significant Accounting Policies (a) Basis of consolidation The accompanying consolidated financial statements include the accounts of the
Company and any significant companies which it controls directly or indirectly, as well as the accounts of companies over which the Company exercises significant influence in terms of their operating and financial policies.
Numbers of companies included in the scope of consolidation at December 31, 2012
and 2011 were as follows:
2012 2011
Consolidated subsidiaries 34 37
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2. Significant Accounting Policies (continued) (a) Basis of consolidation (continued) The difference between the cost of an acquisition and the fair value of the net assets of
an acquired subsidiary/affiliated company at the date of acquisition is reported in the consolidated balance sheets under other assets or other liabilities and is amortized by the straight-line method over a period of 5 to 20 years.
The equity basis of accounting has been applied to 9 and 9 affiliated companies in
consideration of their material impact on the accompanying consolidated financial statements for the years ended December 31, 2012 and 2011, respectively.
Investments in certain unconsolidated subsidiaries (owned more than 50%) and
affiliates (owned 20% to 50%) are carried at cost rather than being accounted for by the equity method because their aggregate net income and retained earnings were not material to the accompanying consolidated financial statements.
(b) Cash and cash equivalents The Company and its consolidated subsidiaries substantially consider all highly liquid
investments with a maturity of three months or less at the time of purchase to be cash equivalents. Reconciliations between cash reflected in the accompanying consolidated balance sheets and cash and cash equivalents reflected in the accompanying consolidated statements of cash flows at December 31, 2012 and 2011 are presented in Note 14.
(c) Allowance for doubtful accounts The allowance for doubtful accounts, including a specific allowance, is provided at the
amount considered sufficient to cover possible losses on collection. Long-term loans at December 31, 2012 and 2011 were offset against doubtful debts of
¥2,698 million ($31,260 thousand) and ¥2,698 million, respectively. These debts consisted of certain loans and the related interest.
(d) Allowance for losses on investments The allowance for losses on investments is provided at the amount considered
sufficient to cover possible losses on investments in affiliates and others based on their respective financial condition.
(e) Marketable and investment securities Securities are classified and accounted for, depending on management’s intentions, as
follows: i) held-to-maturity debt securities, which are expected to be held to maturity, are reported at amortized cost, and ii) available-for-sale securities, for which market quotations are determinable, are reported at their respective fair value with unrealized gain or loss, net of the applicable taxes, reported as a separate component of net assets. Unrealized gain is not available for distribution in the form of cash dividends.
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2. Significant Accounting Policies (continued) (f) Inventories Inventories are mainly stated at cost, determined by the identified cost method. Net
book value of inventories in the consolidated balance sheet is written down when their net realizable values decline.
(g) Property and equipment, and depreciation Property and equipment are carried at cost, less accumulated depreciation. Depreciation of property and equipment is calculated by the straight-line method,
except in the case of furniture and fixtures on which the declining-balance method at rates determined based on the estimated useful lives of the respective assets is applied. However, depreciation of property and equipment held by the overseas consolidated subsidiaries is determined by the straight-line method over the estimated useful lives of the respective assets.
Under the Land Revaluation Law promulgated and revised on March 31, 1998 and
1999, respectively, the Company elected for a one-time revaluation of land held for its own use to a value based on real estate appraisals at December 31, 2000. The resulting revaluation reserve for land represents an unrealized appreciation in the value of this land and is stated, net of income taxes, as a separate component of net assets. Revaluation reserve for land is not available for distribution in the form of dividends. There was no related effect on the accompanying consolidated statements of income.
(h) Intangible assets Intangible assets are amortized by the straight-line method over their respective
estimated useful lives. Expenditure relating to computer software developed for internal use is charged to income as incurred, except in cases where it contributes to the generation of income or future cost savings. In these cases, it is capitalized and amortized using the straight-line method over its estimated useful life, which is no longer than 5 years.
(i) Leases Leased property is depreciated over the lease term by the straight-line method with no
residual value. In addition, those finance lease transactions that do not transfer ownership and commenced on or before December 31, 2008, are accounted for based on standards for ordinary rental transactions.
(j) Share and bond issuance costs Costs relating to the issuance of shares and bonds are charged to income when
incurred.
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2. Significant Accounting Policies (continued) (k) Derivatives and hedging activities The Company defers unrealized gains or losses resulting from changes in fair value of
derivative financial instruments until the related losses or gains on the hedged items are recognized, if derivative financial instruments meet certain criteria for hedges.
Interest-rate swaps which meet specific matching criteria and qualify for hedge
accounting treatment are not remeasured at market value; however, the differentials paid or received under the respective swap agreements are recognized and included as interest expense or income.
The Company enters into interest-rate swap contracts to manage its exposure to
interest-rate fluctuation with respect to certain of its liabilities. It is the Company’s policy to utilize derivatives only for the purpose of reducing market risk.
(l) Accrued severance indemnities Accrued severance indemnities are stated at the amount required to cover the liability
as of the balance sheet date and is based on the Company’s estimates of its liability for retirement benefits and its pension fund assets as of the balance sheet date.
The retirement benefit obligation is attributed to each period by the straight-line
method over the estimated average remaining years of service of the eligible employees.
Actuarial gain or loss is amortized, commencing the year following the year in which
the gain or loss is recognized, by the straight-line method over a period of 10 years which is shorter than the estimated average remaining years of service of the eligible employees.
(m) Net income per share Computations of basic net income per share are based on the weighted-average
number of shares of common stock outstanding during each year. Diluted net income per share is computed based on the weighted-average number of shares of common stock outstanding during each year after giving effect to the dilutive potential of shares to be issued.
(n) Income taxes Deferred income taxes are determined based on the differences between the amounts
determined for financial reporting purposes and the tax bases of assets and liabilities and are measured using the enacted tax rates and laws which will be in effect when the differences are expected to reverse.
(o) Reclassifications Certain reclassifications of the consolidated financial statements for the year ended
December 31, 2011 have been made to conform with the presentation for the year ended December 31, 2012.
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2. Significant Accounting Policies (continued) (p) Accounting changes (Accounting Standard for Accounting Changes and Error Corrections)
Effective January 1, 2012, the Company has adopted the “Accounting Standard for Accounting Changes and Error Corrections” (Statement No. 24 issued by the Accounting Board of Japan (“ASBJ”) on December 4, 2009) and the “Guidance on Accounting Standard for Accounting Changes and Error Corrections” (Guidance No. 24 issued by ASBJ on December 4, 2009).
(q) Accounting Standard Issued But Not Yet Adopted
(Accounting Standard for Consolidated Financial Statements) • Revised Accounting Standard for Consolidated Financial Statements (Statement
No. 22 issued by ASBJ on March 25, 2011) • Revised Guidance on Disclosures about Certain Special Purpose Entities
(Guidance No. 15 issued by ASBJ on March 25, 2011) • Revised Guidance on Determining a Subsidiary and an Affiliate (Guidance
No. 22 issued by ASBJ on March 25, 2011) • Revised Practical Solution on Application of the Control Criteria and Influence
Criteria to Investment Associations (PITF No. 20 issued by ASBJ on March 25, 2011)
(1) Summary
Prior to the revision, special purpose entities that met specific criteria were presumed to be excluded from both subsidiaries of investors and companies transferring assets to the relevant special purpose entities. After the revision of accounting standards, special purpose entities are only excluded from companies transferring assets to special purpose entities.
(2) Planned date of adoption
The Company will adopt the revised accounting standards from the beginning of the fiscal year ended December 31, 2014.
(3) Effect of adoption of the accounting standard
The impact of the adoption of this accounting standard is currently under assessment.
(Accounting Standard for Retirement Benefits) • Accounting Standard for Retirement Benefits (Statement No. 26 issued by ASBJ
on May 17, 2012) • Guidance on Accounting Standard for Retirement Benefits (Guidance No. 25
issued by ASBJ on May 17, 2012)
(1) Summary
The accounting standard was amended from the viewpoint of improvements to financial reporting and international convergence, mainly focusing on how actuarial gains and losses and past service costs should be accounted for, how retirement benefit obligations and current service costs should be determined, and enhancement of disclosures.
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2. Significant Accounting Policies (continued) (q) Accounting Standard Issued But Not Yet Adopted (continued)
(2) Planned date of adoption
The Company will adopt this accounting standard from the end of the fiscal year ending December 31, 2014. However, the Company will adopt amendments relating to determination of retirement benefit obligation and current service costs from the beginning of the fiscal year ending December 31, 2015.
(3) Effect of adoption of the accounting standard
The impact of the adoption of this accounting standard is currently under assessment.
3. Inventories Inventories as of December 31, 2012 and 2011 consisted of the following:
December 31, 2012 2011 2012 (Millions of yen) (Thousands of
U.S. dollars)
Real estate for sale ¥40,756 ¥ 51,478 $ 472,155 Real estate for sale in progress 37,618 35,277 435,803 Real estate for development 10,799 16,826 125,110 ¥89,174 ¥103,582 $1,033,069
4. Intangible and Other Assets Intangible and other assets as of December 31, 2012 and 2011 consisted of the following:
December 31, 2012 2011 2012 (Millions of yen) (Thousands of
U.S. dollars)
Leasehold right ¥24,704 ¥24,424 $286,201 Goodwill 3,094 3,325 35,847 Other 590 468 6,838 ¥28,389 ¥28,218 $328,886
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5. Short-term Borrowings and Long-term Debt Short-term borrowings as of December 31, 2012 and 2011 consisted of the following: December 31, 2012 2011 2012 (Millions of
yen) Average interest rate (%)
(Millions of yen)
Average interest rate (%)
(Thousands of U.S. dollars)
Loans, principally from banks ¥ 1,402 0.95 ¥ 1,807 0.94 $ 16,247
Current portion of bonds payable 22,200 1.94 10,000 1.60 257,182
Current portion of long-term debt
105,376
1.50
116,230
1.64
1,220,764
Total ¥128,978 ¥128,038 $1,494,194
Long-term debt as of December 31, 2012 and 2011 consisted of the following: December 31, 2012 2011 2012
(Millions of yen) (Thousands of
U.S. dollars)
1.60% unsecured straight bonds, due 2012 ¥ – ¥ 10,000 $ – 1.76% unsecured straight bonds, due 2013 10,000 10,000 115,848 1.89% unsecured straight bonds, due 2014 20,000 20,000 231,696 1.92% unsecured straight bonds, due 2015 20,000 20,000 231,696 2.12% unsecured straight bonds, due 2013 12,000 12,000 139,017 1.58% unsecured straight bonds, due 2015 10,000 10,000 115,848 1.80% unsecured straight bonds, due 2016 10,000 10,000 115,848 1.73% unsecured straight bonds, due 2018 10,000 10,000 115,848 1.44% unsecured straight bonds, due 2017 15,000 15,000 173,772 0.81% unsecured straight bonds, due 2016 10,000 – 115,848 4.57% unsecured deferrable interest subordinated callable bonds, due 2072 4,000 – 46,339
0.60% unsecured straight bonds, due 2017 900 – 10,426 3.65% specific bonds, due 2013 – 2,500 –1.23% unsecured straight bonds, due 2014 250 250 2,896 Loans, principally from banks and insurance companies
351,002
385,983
4,066,291
473,152 505,733 5,481,375 Less: Current portion of long-term debt (127,576) (126,230) (1,477,946) ¥ 345,575 ¥ 379,502 $ 4,003,428
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5. Short-term Borrowings and Long-term Debt (continued) The aggregate annual maturities of long-term debt subsequent to December 31, 2012 are summarized as follows:
Year ending December 31,
(Millions of yen)
(Thousands of U.S. dollars)
2014 ¥110,614 $1,281,445 2015 90,232 1,045,3192016 66,331 768,4402017 26,157 303,0322018 and thereafter 52,239 605,188Total ¥345,575 $4,003,428
6. Pledged Assets Assets pledged as collateral at December 31, 2012 and 2011 consisted of the following:
December 31, 2012 2011 2012 (Millions of yen) (Thousands of
U.S. dollars)
Inventories ¥ 6,976 ¥ 7,041 $ 80,826Buildings 9,081 10,466 105,209Land 16,364 35,149 189,577Total ¥32,423 ¥52,658 $375,614
Secured debt as of December 31, 2012 and 2011 consisted of the following:
December 31, 2012 2011 2012 (Millions of yen) (Thousands of
U.S. dollars)
Short-term borrowings ¥ 3,120 ¥ 1,346 $ 36,155 Accounts payable, trade 700 700 8,109Other current liabilities 16 16 191Long-term debt 5,556 21,177 64,375Guarantee deposits received 291 307 3,374Other long-term liabilities 4,200 4,900 48,656 ¥13,885 ¥28,448 $160,862
In addition to the above, cash and deposits (time deposits) of ¥1 million ($17 thousand) and ¥1 million, marketable securities of ¥5 million ($58 thousand) and ¥58 million, and investment securities of ¥778 million ($9,018 thousand) and ¥641 million were pledged as collateral to protect employee deposits as assets in and for security deposits from operation under the Building Lots and Buildings Transaction Business Act and other laws as of December 31, 2012 and 2011, respectively. Of the assets above, Nihonbashi 1-Chome Development Special Purpose Corporation provided its buildings of ¥883 million and land of ¥18,785 million as collateral for interest rate swaps and provided its assets of ¥2,500 million as a general lien for bonds payable (specific bonds) as of December 31, 2011 under the provisions of Article 128 of the Act on Securitization of Assets (Act No. 105 of 1998).
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7. Real Estate Held for Specific Partnership Project (under a Silent Partnership Agreement)
Real estate held for a specific partnership project (under a silent partnership agreement) as of December 31, 2012 and 2011 consisted of the following:
December 31, 2012 2011 2012 (Millions of yen) (Thousands of
U.S. dollars)
Buildings ¥28,442 ¥33,086 $329,498 Land 29,676 32,260 343,792 Leasehold right 4,395 4,439 50,916 Other intangible assets 0 0 5 Guarantee deposits paid 756 774 8,768 Other investments 271 248 3,149 ¥63,542 ¥70,809 $736,130
At December 31, 2012, the portion of current liabilities and long-term liabilities corresponding to the above project were recorded as “Deposits received under Real Estate Specified Joint Enterprise Law.” 8. Investments in Unconsolidated Subsidiaries and Affiliates Investments in unconsolidated subsidiaries and affiliates as of December 31, 2012 and 2011 consisted of the following:
December 31, 2012 2011 2012 (Millions of yen) (Thousands of
U.S. dollars)
Investment securities (Stock) ¥ 5,757 ¥ 4,778 $ 66,696 Investment securities (Preferred securities) 6,410 5,711 74,258
Investments in unconsolidated subsidiaries and affiliates 24,243 23,925 280,855
Investments in silent partnerships – 400 – 9. Commitments and Contingent Liabilities At December 31, 2012, the Company was contingently liable for guarantees on loans to its customers and employees which amounted to approximately ¥6,359 million ($73,672 thousand). The Company has rights to various types of collateral offered as security against the above guarantees these loans.
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10. Selling, General and Administrative Expenses Major components of selling, general and administrative expenses for the years ended December 31, 2012 and 2011 are summarized as follows: Year ended December 31, 2012 2011 2012
(Millions of yen) (Thousands of
U.S. dollars)
Advertisement expenses ¥3,248 ¥2,753 $37,634Salaries 5,622 5,875 65,140Provision of allowance for doubtful accounts – 336 –Provision for accrued bonuses 120 98 1,397Provision for accrued bonuses for directors 71 71 822Retirement benefit expenses 734 667 8,513Provision for accrued directors’ retirement benefits 156 152 1,817
11. Impairment Loss The Company and certain of its consolidated subsidiaries have recognized impairment losses for the following groups of assets for the year ended December 31, 2012:
Company Major use Asset category Location (Millions of
yen) (Thousands of U.S. dollars)
Tokyo Tatemono Co., Ltd., Others
Rental condominiums, others
Land, leasehold right, buildings and others
Shibuya-ku, Tokyo, others
¥3,992
$46,250 ¥3,992 $46,250
The aggregate impairment loss of ¥3,992 million ($46,250 thousand) consisted of ¥2,391 million ($27,710 thousand) on land and ¥1,356 million ($15,712 thousand) on buildings and other assets and ¥244 million ($2,826 thousand) on leasehold right. The recoverable amounts of the asset groups were measured at the net selling value. The net selling value is mainly measured based on the evaluation by real estate appraisers. Part of the above assets were sold after recognition of the impairment loss. The Company and certain of its consolidated subsidiaries have recognized impairment losses for the following groups of assets for the year ended December 31, 2011:
Company Major use Asset category Location (Millions of
yen)
Tojo Golf Club, Inc., Others
Golf courses, others Land, buildings and others
Kato, Hyogo Prefecture, others
¥1,652
Tokyo Tatemono Co., Ltd., Others
Rental condominiums, others
Land, buildings and others
Minato-ku, Tokyo, others
¥1,721 ¥3,374
The aggregate impairment loss of ¥3,374 million consisted of ¥1,422 million on land and ¥1,952 million on buildings and other assets. The recoverable amounts of the asset groups were measured at the net selling value. The net selling value is mainly measured based on the evaluation by real estate appraisers.
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12. Other Comprehensive Income Reclassification adjustments and tax effects allocated to each component of other comprehensive income for the year ended December 31, 2012 are summarized as follows: Year ended December 31, 2012 (Millions of
yen)(Thousands ofU.S. dollars)
Net unrealized gains or losses on available-for-sale securities:
Amount arising during the year ¥18,858 $218,476Reclassification adjustments for gains and losses included in net income (40) (465)
Amount before tax effects 18,818 218,010Tax effects (6,628) (76,785)Net unrealized gains or losses on available-for-sale
securities 12,190 141,225 Deferred gains or losses on hedges:
Amount arising during the year (572) (6,637)Reclassification adjustments for gains and losses included in net income – –
Amount before tax effects (572) (6,637)Tax effects 203 2,362Deferred gains or losses on hedges (368) (4,274)
Revaluation reserve for land: Tax effects (4,201) (48,672)
Foreign currency translation adjustments: 611 7,079Amount arising during the year 671 7,774Reclassification adjustments for gains and losses included in net income 1,282 14,853
Amount before tax effects (46) (543)Foreign currency translation adjustments 1,235 14,309
Share of other comprehensive income of companies accounted for by the equity method:
Amount arising during the year 1,444 16,730Reclassification adjustments for gains and losses included in net income (5) (69)
Amount before tax effects 1,438 16,661Tax effects (357) (4,136)Reclassification adjustments for gains and losses included in net income 1,081 12,524
Total other comprehensive income ¥ 9,936 $115,113 13. Shareholders’ Equity The Corporation Law of Japan (the “Law”) provides that an amount equal to 10% of the amount to be disbursed as distributions of capital surplus (other than the capital reserve) and retained earnings (other than the legal reserve) be transferred to the capital reserve and the legal reserve, respectively, until the sum of the capital reserve and the legal reserve equals 25% of the capital stock account. Such distributions can be made at any time by resolution of the shareholders, or by the Board of Directors if certain conditions are met.
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13. Shareholders’ Equity (continued) The following distribution of retained earnings applicable to the year ended December 31, 2012 was duly approved at the annual general meeting of the shareholders held on March 28, 2013:
(Millions of yen)
(Thousands ofU.S. dollars)
Cash dividends of ¥5 ($0.057) per share ¥2,163 $25,063
14. Supplemental Cash Flow Information 1. The following table represents reconciliations of cash and deposits reflected in the
accompanying consolidated balance sheets and cash and cash equivalents reflected in the accompanying consolidated statements of cash flows at December 31, 2012 and 2011: December 31, 2012 2011 2012 (Millions of yen) (Thousands of
U.S. dollars)
Cash and deposits ¥39,468 ¥32,925 $457,230 Time deposits with a maturity of more than three months
(1)
(36)
(17)
Cash and cash equivalents ¥39,466 ¥32,889 $457,213 2. The decrease (increase) in inventories includes increases and decreases in accounts
payable, trade and advances pertaining to inventories. 3. Major components of assets and liabilities of NIHON PARKING CORPORATION
and two other companies at the time of consolidation, and relationship between the acquisition value of the shares and the “purchase of investments in subsidiaries resulting in a change in scope of consolidation” as of December 31, 2011 are as follows: (Millions of yen)
Current assets ¥ 2,478 Noncurrent assets 11,080 Goodwill 337 Current liabilities (4,691) Long-term liabilities (6,079) Minority interests (189) Acquisition cost of investments in subsidiaries 2,936 Purchase in the previous fiscal year (5) Cash and cash equivalents of consolidated subsidiaries (1,546) 1,385 Payment for funding loan on the premise of acquiring shares in consolidated subsidiaries
220
Purchase of investments in subsidiaries resulting in change in scope of consolidation
¥ 1,605
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15. Business Transactions with Special Purpose Entities The Company and a consolidated subsidiary, Tokyo Tatemono Real Estate Sales Co., Ltd., invest in special purpose entities (SPEs) to diversify their sources of funding and calculate their profit and loss from individual SPEs more precisely. This note is applicable to 30 and 34 SPEs, in which the Company and Tokyo Tatemono Real Estate Sales Co., Ltd., respectively, own interests of 40% or more. The SPEs utilized consist mainly of tokurei-yugenkaisha, or limited liability companies, and tokutei-mokuteki-kaisha (“TMKs”), or specific purpose companies, under the Law on Securitization of Assets. In addition to investments by the Company, Tokyo Tatemono Real Estate Sales Co., Ltd. and its associates, SPEs are funded by borrowings from financial institutions, such as non-recourse loans and asset-backed securities for TMKs. The Company and Tokyo Tatemono Real Estate Sales Co., Ltd. plan to collect an appropriate amount for their investments at the exit of the above projects. The Company’s and Tokyo Tatemono Real Estate Sales Co., Ltd.’s risk exposure is limited to the amount of “equity investments in properties for sale.” The Company had no investments with voting rights in these SPEs and neither any director nor any employees of the Company were dispatched to them. The following table summarizes transactions with the SPEs for the year ended December 31, 2012: Year ended December 31, 2012 (Millions of yen) Balance Revenue and cost
Investments (*1) ¥161,732 Revenue from operations (*2) ¥17,950 Cost of revenue from operations (*3) 1,210 Management – Revenue from operations (*4) 3,030 Brokerage – Revenue from operations (*5) 1,414 Year ended December 31, 2012 (Thousands of U.S. dollars) Balance Revenue and cost
Investments (*1) $1,873,637 Revenue from operations (*2) $207,952 Cost of revenue from operations (*3) 14,026 Management – Revenue from operations (*4) 35,111 Brokerage – Revenue from operations (*5) 16,388 (*1) Consists of 112,702 million ($1,305,639 thousand) of investment securities, ¥6,875
million ($79,647 thousand) of investments in silent partnerships (current assets), and ¥42,154 million ($488,350 thousand) of investments in silent partnerships (noncurrent assets), which include investments in silent partnerships and preferred securities issued by TMKs.
(*2) Consists of dividends on the investments earned by the Company and Tokyo Tatemono Real Estate Sales Co., Ltd., and comprises ¥17,935 million ($207,780 thousand) for the commercial properties segment and ¥14 million ($171 thousand) for the brokerage business segment.
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15. Business Transactions with Special Purpose Entities (continued) (*3) Consists of costs and losses incurred by the Company in connection with the
investments, and comprises ¥1,036 million ($12,004 thousand) for the commercial properties segment and ¥174 million ($2,022 thousand) for the brokerage business segment.
(*4) Consists of asset management fees earned by the Company and Tokyo Tatemono
Real Estate Sales Co., Ltd. and comprises ¥2,296 million ($26,606 thousand) for the commercial properties segment, ¥112 million ($1,300 thousand) for the residential business segment, ¥11 million ($136 thousand) for the brokerage business segment and ¥610 million ($7,067 thousand) for the other segment.
(*5) Consists of brokerage commissions and agency fees earned by the Company and Tokyo Tatemono Real Estate Sales Co., Ltd. and included in the commercial properties segment.
(*6) Other than the above, ¥659 million ($7,644 thousand) and ¥1,859 million ($21,536 thousand) in valuation losses (including the provision of allowance for investment loss) were recorded in cost of revenue from operations and other expenses respectively, since the fair value of investments, etc. of the Company declined significantly.
Combined assets, liabilities and net assets of the SPEs based on the most recent year end date of each SPE are summarized as follows:
December 31, 2012 (Millions of yen)
Assets Liabilities and net assets
Real estate property ¥728,774 Borrowings (*7) ¥514,625 Capital (*8) 272,132 Other 56,824 Other (1,159) Total ¥785,599 Total ¥785,599
December 31, 2012 (Thousands of U.S. dollars)
Assets Liabilities and net assets
Real estate property $8,442,709 Borrowings (*7) $5,961,838 Capital (*8) 3,152,605 Other 658,302 Other (13,433) Total $9,101,011 Total $9,101,011
(*7) Consists of non-recourse loans and asset-backed securities for TMKs.
(*8) Consists of capital deposits in silent partnerships and preferred securities issued by TMKs.
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15. Business Transactions with Special Purpose Entities (continued) The following table summarizes transactions with the SPEs for the year ended December 31, 2011: Year ended December 31, 2011 (Millions of yen) Balance Revenue and cost
Investments (*1) ¥152,287 Revenue from operations (*2) ¥1,866 Cost of revenue from operations (*3) 724 Management – Revenue from operations (*4) 1,398 Brokerage – Revenue from operations (*5) 36 (*1) Consists of ¥39 million of marketable securities, ¥104,373 million of investment
securities, ¥5,000 million of investments in silent partnerships (current assets), and ¥42,875 million of investments in silent partnerships (noncurrent assets), which include investments in silent partnerships and preferred securities issued by TMKs.
(*2) Consists of dividends on the investments earned by the Company and Tokyo Tatemono Real Estate Sales Co., Ltd., and comprises ¥1,628 million for the commercial properties segment, ¥233 million for the residential business segment and ¥4 million for the brokerage business segment.
(*3) Consists of costs and losses incurred by the Company in connection with the investments, and included in the commercial properties segment.
(*4) Consists of asset management fees earned by the Company and Tokyo Tatemono Real Estate Sales Co., Ltd. and comprises ¥832 million for the commercial properties segment, ¥115 million for the residential business segment, ¥22 million for the brokerage business segment and ¥426 million for the other segment.
(*5) Consists of brokerage commissions and agency fees earned by the Company and Tokyo Tatemono Real Estate Sales Co., Ltd. and comprises ¥35 million for the commercial properties segment and ¥1 million for the other segment.
(*6) Other than the above, ¥6,143 million and ¥45,040 million in valuation losses (including the provision of allowance for investment loss) were recorded in cost of revenue from operations and other expenses respectively, since the fair value of investments, etc. of the Company declined significantly.
Combined assets, liabilities and net assets of the SPEs based on the most recent year end date of each SPE are summarized as follows:
December 31, 2011 (Millions of yen)
Assets Liabilities and net assets
Real estate property ¥708,149 Borrowings (*7) ¥513,011 Capital (*8) 252,865 Other 48,762 Other (8,965) Total ¥756,912 Total ¥756,912 (*7) Consists of non-recourse loans and asset-backed securities for TMKs.
(*8) Consists of capital deposits in silent partnerships and preferred securities issued by TMKs.
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16. Lease Transactions (1) Finance leases (Lessee) The following pro forma amounts represent the acquisition costs, accumulated
amortization/depreciation and net book value of the leased property as of December 31, 2011, which would have been reflected in the accompanying consolidated balance sheets if the finance leases currently accounted for as operating leases had been capitalized: (Millions of yen) Acquisition costs:
Vehicles ¥ 25 Furniture and equipment 866 Intangible assets (software) 177
¥1,069 Accumulated amortization/depreciation:
Vehicles ¥ 22 Furniture and equipment 338 Intangible assets (software) 136
¥ 497 Accumulated impairment loss
Furniture and equipment ¥ 417 Net book value:
Vehicles ¥ 2 Furniture and equipment 110 Intangible assets (software) 41
¥ 154 Future minimum lease payments:
Within one year ¥ 153 Over one year 102
¥ 256
Amortization/depreciation was calculated by the straight-line method over the
respective lease periods assuming a nil residual value. Information on finance leases as of December 31, 2012 has been omitted because of
the lack of materiality.
(Millions of yen)
Balance in impairment loss account on leased assets ¥102 Lease payments (assumed amortization/depreciation) ¥210 Reversal of impairment loss account on leased assets ¥ 60 Impairment loss on leased assets ¥ 2
Information on finance leases as of December 31, 2012 has been omitted because of
the lack of materiality.
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16. Lease Transactions (continued) (2) Operating leases (Lessee)
December 31, 2012 2011 2012 (Millions of yen) (Thousands of
U.S. dollars)Future minimum lease payments:
Within one year ¥ 5,467 ¥ 4,977 $ 63,336 Over one year 82,323 86,042 953,704
¥87,791 ¥91,020 $1,017,041
Operating leases (Lessor)
December 31, 2012 2011 2012 (Millions of yen) (Thousands of
U.S. dollars)Future minimum lease payments:
Within one year ¥ 4,465 ¥ 4,369 $ 51,735 Over one year 17,824 14,518 206,497
¥22,290 ¥18,887 $258,232 17. Financial Instruments Financial Instruments at December 31, 2012 are summarized as follows: Overview (1) Policy for financial instruments The Company and its consolidated subsidiaries have the policy to limit fund
management to short-term deposits and raises funds mainly through loans from banks and the issuance of corporate bonds. Derivative instruments are used to mitigate risks referred to below, and the Company and its consolidated subsidiaries do not enter into derivative transactions for speculation.
(2) Types of financial instruments and related risk Primary marketable securities and investment securities are preferred capital
contribution certificates of special purpose companies under the Asset Liquidation Act and shares in companies with which the Group has business relationships. The Group is exposed to credit risks of issuers, interest rate risks, and market price fluctuation risks.
Investments in silent partnership are investments in special purpose companies and are
exposed to the credit risks of issuers and interest rate risks.
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17. Financial Instruments (continued) Overview (continued) Short-term borrowings are mainly used for funding working capital. Long-term debt
and bonds payable are mainly used for capital expenditures. Debts with floating interest rates are subject to interest-rate risk, however, the Company and its consolidated subsidiaries utilize derivatives (interest rate swaps) as hedging instruments for some long-term debt with floating interest rates to fix the cash flows of interest payments.
(3) Risk management for financial instruments
(a) Monitoring of credit risk
(the risk that customers or counterparties may default)
Each operating department monitors the status of major counterparties and manages the due dates and balances of receivables. The Group seeks to identify, at an early stage, any collectability issues due to the worsening financial conditions of counterparties to mitigate credit risk.
(b) Monitoring of market risks
(the risks arising from fluctuations in foreign exchange rates, interest rates and others)
To minimize the risks arising from fluctuations in interest rates on loans payable, the Group uses interest rate swaps. In relation to marketable securities and investment securities, the Group regularly monitors the fair values and financial situation of the issuers (counterparties). The Group reviews the status of its holdings of financial instruments considering market trends and relationships with counterparties.
(c) Monitoring of liquidity risk
(the risk that the Group may not be able to meet its obligations on scheduled due dates)
Based on the report from each division, the Group prepares and updates its cash flow plans on a timely basis to manage liquidity risk.
(4) Supplementary explanation of the estimated fair value of financial instruments The fair value of financial instruments is based on their quoted market price, if
available. When there is no quoted market price available, fair value is reasonably estimated. Since various assumptions and factors are used in estimating the fair value, different assumptions and factors could result in different fair value.
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17. Financial Instruments (continued) Estimated Fair Value of Financial Instruments The carrying value of financial instruments in the consolidated balance sheet, their fair value, and the differences between them as of December 31, 2012 are as follows. (Financial instruments whose fair value is extremely difficult to estimate are not included; please see Note 2 below.)
Carrying
value Estimated fair value Difference
(Millions of yen) Assets (1) Cash and deposits ¥ 39,468 ¥ 39,468 ¥ – (2) Marketable securities and investment
securities Other securities 52,724 52,724 –
Total assets 92,193 92,193 – Liabilities (1) Short-term borrowings 1,402 1,402 – (2) Long-term debt (including due within
one year) 351,002 351,778 776 (3) Bonds payable (including due within
one year) 122,150 124,439 2,289 Total liabilities 474,554 477,620 3,065 Derivatives (*) (572) (572) – (*) The value of assets and liabilities arising from derivative transactions is shown at net
value, and with the amount in parenthesis representing net liability position.
Carrying
value Estimated fair value Difference
(Thousands of U.S. dollars) Assets (1) Cash and deposits $ 457,230 $ 457,230 $ – (2) Marketable securities and investment
securities Other securities 610,807 610,807 –
Total assets 1,068,038 1,068,038 –
Liabilities (1) Short-term borrowings 16,247 16,247 – (2) Long-term debt (including due within
one year) 4,066,291 4,075,283 8,991 (3) Bonds payable (including due within
one year) 1,415,083 1,441,608 26,524 Total liabilities 5,497,622 5,533,139 35,516 Derivatives (*) (6,637) (6,637) – (*) The value of assets and liabilities arising from derivative transactions is shown at net
value, and with the amount in parenthesis representing net liability position.
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17. Financial Instruments (continued) Estimated Fair Value of Financial Instruments (continued) Notes: 1. Methods to determine the estimated fair value of financial instruments and other
matters related to securities and derivative transactions Assets
Cash and deposits
Since these items are settled in a short period of time, their carrying value approximates fair value.
Marketable securities and investment securities
The fair value of stocks is based on quoted market prices. The fair value of debt securities is mainly based on prices provided by the financial institutions making markets in these securities. Liabilities
Short-term borrowings
Since these items are settled in a short period of time, their carrying value approximates fair value.
Long-term debt (including due within one year)
Since variable interest rates of certain long-term debt are determined based on current interest rates in a short period of time, their carrying value approximates fair value. The fair value of long-term debt with fixed interest rates is based on the present value of the total of principal and interest discounted by the interest rate to be applied if similar new debt were entered into.
Bonds payable (including due within one year)
The fair value of bonds payable is based on the quoted market price. Derivatives
The fair value of derivatives is based on prices provided by the financial institution.
The estimated fair value of interest rate swap contracts is included in the estimated fair value of long-term debt since amounts in such derivative contracts accounted for short-cut method are handled together with long-term debt as hedged items.
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17. Financial Instruments (continued) Estimated Fair Value of Financial Instruments (continued) 2. Financial instruments for which it is extremely difficult to determine the fair value
(Millions of yen)
(Thousands of U.S. dollars)
(1) Unlisted stocks (*1) ¥ 9,350 $ 108,323 (2) Preferred securities (*1) 130,757 1,514,793 (3) Investments in silent partnerships (*2) 57,718 668,655 (4) Guarantee deposits received (*3) 43,696 506,214 (*1) These items are not included in “Assets (2) Marketable securities and
investment securities” since their market price is unavailable and the assessment of their fair value is deemed extremely difficult.
(*2) The fair value of investments in silent partnerships is not disclosed since their market price is unavailable and the assessment of their fair value is deemed extremely difficult.
(*3) Since market price for lease and guarantee deposit payables is unavailable and calculation of the actual period of duration from lease initiation to termination is difficult, it is extremely difficult to estimate fair value reasonably and therefore the fair value of lease and guarantee deposit payables is not disclosed.
3. Redemption schedule for receivables and marketable securities with maturities at
December 31, 2012
Due in one year or less
Due after one year through
five years
Due after five years through ten years
Due after ten years
(Millions of yen)
Cash and deposits ¥38,969 ¥ – ¥ – ¥ – Marketable securities and investment securities
Held-to-maturity securities Corporate bonds – 10 – –
Other securities with maturities Government bonds 5 10 – –
Total ¥38,974 ¥20 ¥ – ¥ –
Due in one year or less
Due after one year through
five years
Due after five years through ten years
Due after ten years
(Thousands of U.S. dollars)
Cash and deposits $451,449 $ – $ – $ – Marketable securities and investment securities
Held-to-maturity securities Corporate bonds – 115 – –
Other securities with maturities Government bonds 57 115 – –
Total $451,507 $231 $ – $ –
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17. Financial Instruments (continued) 4. The redemption schedule for bonds and long-term debt at December 31, 2012
Due in one year or less
Due after one year through
two years
Due after two years through
three years
Due after three years
through four years
Due after four years through
five years Due after five years
(Millions of yen)
Bonds payable ¥ 22,200 ¥ 20,450 ¥30,200 ¥20,200 ¥15,100 ¥14,000 Long-term debt 105,376 90,164 60,032 46,131 11,057 38,239 Total ¥127,576 ¥110,614 ¥90,232 ¥66,331 ¥26,157 ¥52,239
Due in one year or less
Due after one year through
two years
Due after two years through
three years
Due after three years
through four years
Due after four years through
five years Due after five years
(Thousands of U.S. dollars)
Bonds payable $ 257,182 $ 236,909 $ 349,860 $234,012 $174,930 $162,187 Long-term debt 1,220,764 1,044,536 695,458 534,428 128,102 443,001 Total $1,477,946 $1,281,445 $1,045,319 $768,440 $303,032 $605,188
Financial Instruments at December 31, 2011 are summarized as follows: Estimated Fair Value of Financial Instruments The carrying value of financial instruments in the consolidated balance sheet, their fair value, and the differences between them as of December 31, 2011 are as follows. (Financial instruments whose fair value is extremely difficult to estimate are not included; please see Note 2 below.)
Carrying
value Estimated fair value Difference
(Millions of yen) Assets (1) Cash and deposits ¥ 32,925 ¥ 32,925 ¥ – (2) Marketable securities and investment
securities Other securities 33,712 33,712 –
Total assets 66,637 66,637 – Liabilities (1) Short-term borrowings 1,807 1,807 – (2) Long-term debt (including due within
one year) 385,983 389,798 3,815 (3) Bonds payable 119,750 121,722 1,972 Total liabilities 507,541 513,328 5,787 Derivatives – – –
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17. Financial Instruments (continued) Estimated Fair Value of Financial Instruments (continued) Notes: 1. Methods to determine the estimated fair value of financial instruments and other
matters related to securities and derivative transactions Assets
Cash and deposits
Since these items are settled in a short period of time, their carrying value approximates fair value.
Marketable securities and investment securities
The fair value of stocks is based on quoted market prices. The fair value of debt securities is mainly based on prices provided by the financial institutions making markets in these securities. Liabilities
Short-term borrowings
Since these items are settled in a short period of time, their carrying value approximates fair value.
Long-term debt (including due within one year)
Since variable interest rates of certain long-term debt are determined based on current interest rates in a short period of time, their carrying value approximates fair value. The fair value of long-term debt with fixed interest rates is based on the present value of the total of principal and interest discounted by the interest rate to be applied if similar new debt were entered into.
Bonds payable
The fair value of bonds payable is based on the quoted market price. Derivatives
The estimated fair value of interest rate swap contracts is included in the estimated fair value of long-term debt since amounts in such derivative contracts accounted for short-cut method are handled together with long-term debt as hedged items.
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17. Financial Instruments (continued) Estimated Fair Value of Financial Instruments (continued) 2. Financial instruments for which it is extremely difficult to determine the fair value
(Millions of yen)
(1) Unlisted stocks (*1) ¥ 8,772 (2) Preferred securities (*1) 121,658 (3) Investments in silent partnerships (*2) 57,468 (4) Guarantee deposits received (*3) 40,493 (*1) These items are not included in “Assets (2) Marketable securities and
investment securities” since their market price is unavailable and the assessment of their fair value is deemed extremely difficult.
(*2) The fair value of investments in silent partnerships is not disclosed since their market price is unavailable and the assessment of their fair value is deemed extremely difficult.
(*3) Since market price for lease and guarantee deposit payables is unavailable and calculation of the actual period of duration from lease initiation to termination is difficult, it is extremely difficult to estimate fair value reasonably and therefore the fair value of lease and guarantee deposit payables is not disclosed.
3. Redemption schedule for receivables and marketable securities with maturities at
December 31, 2011
Due in one year or less
Due after one year through
five years
Due after five years through ten years
Due after ten years
(Millions of yen)
Cash and deposits ¥32,557 ¥ – ¥ – ¥ – Marketable securities and investment
securities
Held-to-maturity securities Corporate bonds 20 – – –
Other securities with maturities Government bonds 58 15 – –
Total ¥32,635 ¥15 ¥ – ¥ –
4. The redemption schedule for bonds and long-term debt at December 31, 2011
Due in one year or less
Due after one year through
two years
Due after two years through
three years
Due after three years
through four years
Due after four years through
five years Due after five years
(Millions of yen)
Bonds payable ¥ 10,000 ¥ 24,500 ¥20,250 ¥30,000 ¥10,000 ¥25,000 Long-term debt 116,230 107,415 76,042 46,263 31,616 8,415 Total ¥126,230 ¥131,915 ¥96,292 ¥76,263 ¥41,616 ¥33,415
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18. Marketable Securities and Investment Securities Information regarding marketable securities classified as other securities as of December 31, 2012 and 2011 is summarized as follows: (1) Marketable other securities
December 31, 2012
Carrying
value Acquisition
cost Unrealized gain (loss)
Carrying value
Acquisition cost
Unrealized gain (loss)
(Millions of yen) (Thousands of U.S. dollars) Securities whose
carrying value exceeds their acquisition cost:
Stock ¥42,172 ¥ 8,023 ¥34,148 $488,562 $ 92,954 $395,607Government bonds 15 14 0 174 172 1Other 8,237 6,659 1,578 95,430 77,147 18,283
50,425 14,698 35,727 584,166 170,275 413,891Securities whose
carrying value does not exceed their acquisition cost:
Stock 2,299 2,753 (454) 26,640 31,903 (5,262) 2,299 2,753 (454) 26,640 31,903 (5,262)Total ¥52,724 ¥17,452 ¥35,272 $610,807 $202,178 $408,629
December 31, 2011
Carrying
value Acquisition
cost Unrealized gain (loss)
(Millions of yen) Securities whose
carrying value exceeds their acquisition cost:
Stock ¥23,365 ¥ 5,045 ¥18,319 Government bonds 73 72 0
23,438 5,118 18,320 Securities whose
carrying value does not exceed their acquisition cost:
Stock 4,474 5,725 (1,250)Other 5,798 6,411 (612)
10,273 12,136 (1,863)Total ¥33,712 ¥17,254 ¥16,457
The Company and certain of its subsidiaries recognized the impairment losses on other
securities amounting to ¥209 million for the year ended December 31, 2011 and on unlisted stocks amounting to ¥4,694 million ($54,384 thousand) and ¥50,662 million for the years ended December 31, 2012 and 2011, respectively.
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18. Marketable Securities and Investment Securities (continued) (2) Sales of securities classified as other securities and the related aggregate gains and
losses for the years ended December 31, 2012 and 2011 are summarized as follows:
December 31, 2012 2011 2012 (Millions of yen) (Thousands of
U.S. dollars)
Sales proceeds ¥179 ¥1,104 $2,073 Aggregate gains 54 978 634 Aggregate loss 1 – 16
(3) Investments in special purpose companies (SPCs) as of December 31, 2012 and 2011
are summarized as follows:
December 31, 2012 2011 2012 (Millions of yen) (Thousands of
U.S. dollars)
Marketable securities ¥ – ¥ 39 $ – Investments in silent partnerships (included in current assets)
6,875
5,339
79,647
Subtotal 6,875 5,378 79,647
Investment securities 130,757 121,619 1,514,793 Investments in silent partnerships (included in investments) 50,843 52,128 589,007
Other investments 0 230 2 Subtotal 181,600 173,977 2,103,803 Total ¥188,475 ¥179,356 $2,183,450
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19. Derivatives and Hedging Activities Hedge accounting was applied to all derivative transactions as of December 31, 2012. The summary of these transactions is as follows: Interest-related transactions
Class of transactions Hedged items Notional amount
Due after one year
Fair value
(Millions of yen)
Interest rate swap contracts accounted for by the short-cut method pay/fixed and receive/floating
Debt and bonds payable
¥145,678 ¥103,719 (*1)
Interest rate swap contracts Pay/fixed and receive/floating
Debt and bonds payable
36,000
36,000
(*2) (572)
Total ¥181,678 ¥139,719 ¥(572)
Class of transactions Hedged items Notional amount
Due after one year
Fair value
(Thousands of U.S. dollars)
Interest rate swap contracts accounted for by the short-cut method pay/fixed and receive/floating
Debt and bonds payable
$1,687,659 $1,201,571 (*1)
Interest rate swap contracts Pay/fixed and receive/floating
Debt and bonds payable
417,052
417,052
(*2) (6,637)
Total $2,104,712 $1,618,623 $(6,637)
(*1) The estimated fair value of interest rate swap contracts is included in the estimated fair value of the debt and bonds payable since amounts of such derivative contracts accounted for by the short-cut method are handled together with debt and bonds payable as hedged items.
(*2) The fair value of derivatives is based on prices provided by the financial institution. Hedge accounting was applied to all derivative transactions as of December 31, 2011. The summary of these transactions is as follows: Interest-related transactions
Class of transactions Hedged items Notional amount
Due after one year
Fair value
(Millions of yen)
Interest rate swap contracts accounted for by the short-cut method pay/fixed and receive/floating
Debt and bonds payable
¥153,414 ¥109,678 (*)
(*) The estimated fair value of interest rate swap contracts is included in the estimated fair value of the debt and bonds payable since amounts of such derivative contracts accounted for by the short-cut method are handled together with debt and bonds payable as hedged items.
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20. Accrued Severance Indemnities Employees whose services with the Company are terminated are, under most circumstances, entitled to lump-sum severance payments determined by reference to their basic rate of pay, length of service at that time and the conditions under which termination occurs. The minimum payment is an amount based on voluntary retirement. Accrued severance indemnities, net periodic pension cost and assumptions used in such calculations as of and for the years ended December 31, 2012 and 2011 are summarized as follows: December 31, 2012 2011 2012 (Millions of yen) (Thousands of
U.S. dollars)Accrued severance indemnities:
Projected benefit obligation ¥(15,332) ¥(14,189) $(177,624) Fair value of plan assets 6,174 5,152 71,525 (9,158) (9,037) (106,099) Unrecognized prior service cost (69) (76) (803) Unrecognized actuarial gain 1,551 2,034 17,970
Accrued severance indemnities ¥ (7,676) ¥ (7,079) $ (88,933)
Year ended December 31, 2012 2011 2012 (Millions of yen) (Thousands of
U.S. dollars)Net periodic pension cost:
Service cost ¥ 850 ¥ 839 $ 9,857 Interest cost 276 263 3,201 Expected return on plan assets (77) (81) (895) Amortization of prior service cost (7) (7) (84) Recognized actuarial loss 362 325 4,204
Net periodic pension cost ¥1,405 ¥1,338 $16,282
Assumptions: Discount rate 1.5% 1.5~2.0% Anticipated rate of return on plan assets 1.5% 1.5% Amortization period of unrecognized prior service cost 10 years 10 years
Amortization period of actuarial gain or loss 10 years 10 years
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21. Income Taxes Income taxes in Japan applicable to the Company and its domestic consolidated subsidiaries consist of corporation tax, inhabitants’ taxes and enterprise tax, which, in the aggregate, resulted in a statutory tax rate of approximately 40.7% for the years ended December 31, 2012 and 2011. Income taxes of the overseas consolidated subsidiaries are based generally on the tax rates applicable in their respective countries of incorporation. Due to the recording of a loss before income taxes and minority interests, a reconciliation of the differences between the statutory tax rate and the effective tax rate for the year ended December 31, 2011 has been omitted. Reconciliation of the difference between the statutory tax rate and the effective tax rate for the year ended December 31, 2012 is not disclosed because the difference was less than 5% of the statutory tax rate. The significant components of deferred tax assets and liabilities as of December 31, 2012 and 2011 are as follows: December 31, 2012 2011 2012
(Millions of yen) (Thousands of
U.S. dollars)Deferred tax assets:
Write-downs of investment securities ¥ 19,158 ¥ 18,057 $ 221,952 Loss on impairment of noncurrent assets 11,581 11,278 134,172 Net operating loss carry forwards 6,098 10,848 70,645 Allowance for losses on investments 7,003 7,003 81,135 Unrealized dividends on investments in silent partnerships 871 2,873 10,100
Accrued severance indemnities in excess of tax-deductible portion 2,774 2,606 32,146
Write-downs of stocks of subsidiaries and affiliated companies 1,379 1,455 15,976
Loss on appraisal of real estate held for sale 2,078 992 24,078 Loss on appraisal of noncurrent assets 386 394 4,472 Other 3,735 3,550 43,276
Gross deferred tax assets 55,068 59,060 637,957 Valuation allowance (40,783) (40,927) (472,464) Total deferred tax assets 14,285 18,132 165,493
Deferred tax liabilities: Reversal of deferred tax liabilities based on revaluation of assets of subsidiaries (6,207) (6,269) (71,912)
Net unrealized gains or losses on available-for-sale securities (12,446) (5,818) (144,191)
Reversal of reserve for deferred capital gain on land (2,740) (2,740) (31,742)
Gain on change in interest in a consolidated subsidiary (762) (762) (8,835)
Other (278) (300) (3,223) Total deferred tax liabilities (22,435) (15,890) (259,905) Net deferred tax assets ¥ (8,149) ¥ 2,242 $ (94,411)
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21. Income Taxes (continued) Following the promulgation on December 2, 2011 of the “Act for Partial Revision of the Income Tax Act etc. for the Purpose of Creating Taxation System Responding to Changes in Economic and Social Structures” (Act No. 114 of 2011) and the “Act on Special Measures for Securing Financial Resources Necessary to Implement Measures for Reconstruction Following the Great East Japan Earthquake” (Act No. 117 of 2011), Japanese corporation tax rates will be reduced and a special reconstruction corporation tax, a surtax for reconstruction funding after the Great East Japan Earthquake, will be imposed for the fiscal years beginning on or after April 1, 2012.
The effect of this change was to decrease deferred tax liabilities by ¥1,157 million, increase investment securities by ¥40 million, increase net unrealized gains or losses on available-for-sale securities by ¥872 million, decrease deferred income taxes by ¥325 million, increase revaluation reserve for land by ¥3,363 million and decrease deferred tax liability on land revaluation by ¥3,363 million in the accompanying consolidated financial statements as of and for the year ended December 31, 2011. 22. Investment and Rental Properties The Company and some of its subsidiaries own office buildings for lease, apartment houses for lease, commercial facilities for lease and other properties in Tokyo and other areas. Some office buildings for lease are regarded as real estate including space used as rental properties since they are used by the Company and some of its consolidated subsidiaries. The carrying values of these properties in the consolidated balance sheet, their changes during the year ended December 31, 2012 and their fair value at December 31, 2012 are as follows: Carrying value Fair value
December 31,
2011 Changes December 31,
2012 December 31,
2012 (Millions of yen)
Rental properties ¥344,499 ¥(19,348) ¥325,151 ¥356,019 Real estate including space used as rental properties 107,095 (1,140) 105,955 123,844
Carrying value Fair Value
December 31,
2011 Changes December 31,
2012 December 31,
2012 (Thousands of U.S. dollars)
Rental properties $3,990,960 $(224,145) $3,766,814 $4,124,417 Real estate including space used as rental properties 1,240,685 (13,217) 1,227,467 1,434,713
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22. Investment and Rental Properties (continued) Notes:
* The carrying values in the consolidated balance sheet are the amounts determined by deducting accumulated depreciation from the acquisition costs.
* The major increase in the carrying value is due to the acquisition of real estate amounting to ¥19,804 million ($229,425 thousand).
The major decrease in the carrying value is due to depreciation amounting to ¥7,408 million ($85,828 thousand) and impairment loss amounting to ¥3,790 million ($43,913 thousand) and the sales of real estate amounting to ¥28,873 million ($334,488 thousand).
* The fair value is appraised principally by real estate appraisers, and the fair value of other is estimated in accordance with appraisal standards for valuing real estate.
The income or loss from rental properties and real estate including space used as rental properties for the year ended December 31, 2012 are as follows: December 31, 2012
Rental income Rental cost
Rental income, net Other, net
(Millions of yen)
Rental properties ¥37,453 ¥26,912 ¥10,541 ¥(1,694) Real estate including space used as rental properties 5,738 4,045 1,692 (7)
December 31, 2012
Rental income Rental cost
Rental income, net Other, net
(Thousands of U.S. dollars)
Rental properties $433,894 $311,775 $122,118 $(19,627) Real estate including space used as rental properties 66,480 46,871 19,609 (88)
Notes:
* Rental income excludes the one from real estate including space used as rental properties that was used by the Company and some of its consolidated subsidiaries for providing leasing services and operations management.
* Gain on sales of noncurrent assets and impairment loss is a major component of “Other, net” for rental properties. Loss on retirement of noncurrent assets is a major component of “Other, net” for real estate including space used as rental properties.
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22. Investment and Rental Properties (continued) The carrying values of these properties in the consolidated balance sheet, their changes during the year ended December 31, 2011 and their fair value at December 31, 2011 are as follows: Carrying value Fair value
December 31,
2010 Changes December 31,
2011 December 31,
2011 (Millions of yen)
Rental properties ¥330,316 ¥14,183 ¥344,499 ¥371,225 Real estate including space used as rental properties 107,628 (532) 107,095 136,925
Notes:
* The carrying values in the consolidated balance sheet are the amounts determined by deducting accumulated depreciation from the acquisition costs.
* The major increase in the carrying value is due to the acquisition of real estate amounting to ¥19,869 million and the acquisition of real estate due to the increase of subsidiaries amounting to ¥9,805 million.
The major decrease in the carrying value is due to depreciation amounting to ¥7,554 million and the sales of real estate amounting to ¥6,616 million.
* The fair value is appraised principally by real estate appraisers, and the fair value of other is estimated in accordance with appraisal standards for valuing real estate.
The income or loss from rental properties and real estate including space used as rental properties for the year ended December 31, 2011 are as follows: December 31, 2011
Rental income Rental cost
Rental income, net Other, net
(Millions of yen)
Rental properties ¥35,537 ¥25,302 ¥10,235 ¥(1,284) Real estate including space used as rental properties 5,906 4,346 1,560 (229)
Notes:
* Rental income excludes the one from real estate including space used as rental properties that was used by the Company and some of its consolidated subsidiaries for providing leasing services and operations management.
* Impairment loss is a major component of “Other, net” for rental properties. Loss on building reconstruction is a major component of “Other, net” for real estate including space used as rental properties.
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23. Segment Information Business Segments 1. Overview of Reportable Segments The reportable segments of the Company are the constituent units for which separate
financial information is available and for which the Board of Directors conducts regular reviews to determine the allocation of management resources and assess business performance.
The Company conducts business activities by establishing divisions corresponding to their line of business at the head office with the divisions formulating comprehensive strategies for the businesses that they operate.
Therefore, the Company’s business segments are classified based on division and comprise four businesses, which include commercial properties, residential, brokerage, and other as the reportable segments.
In the commercial properties business, the Company leases out and manages office buildings and commercial facilities. In the residential business, the Company sells condominiums and detached houses and leases out and manages condominiums. In the brokerage business, the Company sells and buys real estate and provides brokerage, real estate appraisal and consulting services. In other businesses, the Company operates the leisure business and the renovation business among others.
2. Calculation Methods for the Amounts of Revenue from Operations, Profit and Loss,
Assets and Other Items by Reportable Segment
The accounting methods for the reportable business segments are the same as those stated in the Significant Accounting Policies. Profits in the reportable segments are based on operating income. Intersegment revenue from operations or transfers is based on the current market value.
3. Information on Revenue from Operations, Profit and Loss, Assets, and Other Items by
Reportable Segments Year ended December 31, 2012
Commercial properties Residential Brokerage Other Total Adjustments Consolidated
(Millions of yen) (Notes a and b)
Revenue from operations: Customers ¥ 67,499 ¥ 86,612 ¥ 8,354 ¥ 31,694 ¥194,161 ¥ – ¥194,161 Intersegment 475 374 188 2,001 3,039 (3,039) –
Subtotal 67,974 86,986 8,542 33,696 197,200 (3,039) 194,161
Costs and operating expenses
34,810
86,003
8,427
30,945
160,186
3,082
163,269
Operating income ¥ 33,164 ¥ 983 ¥ 115 ¥ 2,751 ¥ 37,014 ¥ (6,122) ¥ 30,892
Assets ¥526,685 ¥141,785 ¥33,740 ¥105,857 ¥808,069 ¥87,227 ¥895,296 Other items:
Depreciation ¥ 4,664 ¥ 1,889 ¥ 63 ¥ 2,069 ¥ 8,687 ¥ 103 ¥ 8,790 Impairment losses on fixed assets 703 3,023 – 143 3,870 122 3,992
Investment in equity method affiliates 4,881 569 – 24,546 29,997 – 29,997
Increase in property and equipment and intangible assets 17,417 250 1,992 808 20,469 73 20,542
Amortization of goodwill 30 (2) 35 189 252 – 252 Balance of goodwill 488 (4) 70 2,540 3,094 – 3,094
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23. Segment Information Business Segments 1. Overview of Reportable Segments The reportable segments of the Company are the constituent units for which separate
financial information is available and for which the Board of Directors conducts regular reviews to determine the allocation of management resources and assess business performance.
The Company conducts business activities by establishing divisions corresponding to their line of business at the head office with the divisions formulating comprehensive strategies for the businesses that they operate.
Therefore, the Company’s business segments are classified based on division and comprise four businesses, which include commercial properties, residential, brokerage, and other as the reportable segments.
In the commercial properties business, the Company leases out and manages office buildings and commercial facilities. In the residential business, the Company sells condominiums and detached houses and leases out and manages condominiums. In the brokerage business, the Company sells and buys real estate and provides brokerage, real estate appraisal and consulting services. In other businesses, the Company operates the leisure business and the renovation business among others.
2. Calculation Methods for the Amounts of Revenue from Operations, Profit and Loss,
Assets and Other Items by Reportable Segment
The accounting methods for the reportable business segments are the same as those stated in the Significant Accounting Policies. Profits in the reportable segments are based on operating income. Intersegment revenue from operations or transfers is based on the current market value.
3. Information on Revenue from Operations, Profit and Loss, Assets, and Other Items by
Reportable Segments Year ended December 31, 2012
Commercial properties Residential Brokerage Other Total Adjustments Consolidated
(Millions of yen) (Notes a and b)
Revenue from operations: Customers ¥ 67,499 ¥ 86,612 ¥ 8,354 ¥ 31,694 ¥194,161 ¥ – ¥194,161 Intersegment 475 374 188 2,001 3,039 (3,039) –
Subtotal 67,974 86,986 8,542 33,696 197,200 (3,039) 194,161
Costs and operating expenses
34,810
86,003
8,427
30,945
160,186
3,082
163,269
Operating income ¥ 33,164 ¥ 983 ¥ 115 ¥ 2,751 ¥ 37,014 ¥ (6,122) ¥ 30,892
Assets ¥526,685 ¥141,785 ¥33,740 ¥105,857 ¥808,069 ¥87,227 ¥895,296 Other items:
Depreciation ¥ 4,664 ¥ 1,889 ¥ 63 ¥ 2,069 ¥ 8,687 ¥ 103 ¥ 8,790 Impairment losses on fixed assets 703 3,023 – 143 3,870 122 3,992
Investment in equity method affiliates 4,881 569 – 24,546 29,997 – 29,997
Increase in property and equipment and intangible assets 17,417 250 1,992 808 20,469 73 20,542
Amortization of goodwill 30 (2) 35 189 252 – 252 Balance of goodwill 488 (4) 70 2,540 3,094 – 3,094
41
23. Segment Information (continued) Business Segments (continued) Year ended December 31, 2012
Commercial properties Residential Brokerage Other Total Adjustments Consolidated
(Thousands of U.S. dollars) (Notes a and b)
Revenue from operations: Customers $ 781,970 $1,003,393 $ 96,781 $ 367,176 $2,249,322 $ – $ 2,249,322Intersegment 5,503 4,333 2,183 23,190 35,210 (35,210) –
Subtotal 787,473 1,007,726 98,964 390,366 2,284,532 (35,210) 2,249,322
Costs and operating expenses
403,275 996,329
97,629 358,492
1,855,725 35,713 1,891,439
Operating income $ 384,198 $ 11,397 $ 1,335 $ 31,874 $ 428,806 $ (70,924) $ 357,882
Assets $6,101,551 $1,642,553 $390,871 $1,226,343 $9,361,319 $1,010,510 $10,371,830Other items:
Depreciation $ 54,031 $ 21,890 $ 739 $ 23,976 $ 100,637 $ 1,200 $ 101,838Impairment losses on fixed assets 8,148 35,030 – 1,657 44,836 1,413 46,250
Investment in equity method affiliates 56,552 6,597 – 284,364 347,515 – 347,515
Increase in property and equipment and intangible assets 201,780 2,901 23,088 9,363 237,134 852 237,986
Amortization of goodwill 348 (27) 407 2,196 2,925 – 2,925Balance of goodwill 5,653 (57) 815 29,435 35,847 – 35,847
Year ended December 31, 2011
Commercial properties Residential Brokerage Other Total Adjustments Consolidated
(Millions of yen) (Notes a and b)
Revenue from operations: Customers ¥ 43,570 ¥ 83,904 ¥10,336 ¥ 29,132 ¥166,943 ¥ – ¥166,943 Intersegment 503 401 52 1,843 2,801 (2,801) –
Subtotal 44,074 84,305 10,388 30,975 169,745 (2,801) 166,943
Costs and operating expenses
36,771
85,623
11,927
29,626
163,948
3,673
167,622
Operating income ¥ 7,303 ¥ (1,317) ¥ (1,538) ¥ 1,349 ¥ 5,796 ¥ (6,475) ¥ (678)
Assets ¥511,963 ¥181,030 ¥33,751 ¥106,030 ¥832,777 ¥65,240 ¥898,017 Other items:
Depreciation ¥ 4,509 ¥ 2,156 ¥ 53 ¥ 2,181 ¥ 8,901 ¥ 94 ¥ 8,995 Impairment losses on fixed assets 132 1,428 1 1,812 3,374 – 3,374
Investment in equity method affiliates 3,999 484 – 23,986 28,470 – 28,470
Increase in property and equipment and intangible assets 8,069 10,117 1,296 1,511 20,995 94 21,089
Amortization of goodwill 30 (2) 35 182 245 – 245 Balance of goodwill 518 (8) 105 2,710 3,325 – 3,325
Note a: Adjustments to segment operating income of ¥(6,122) million ($(70,924) thousand) and ¥(6,475) million consists of ¥68 million ($796 thousand) and ¥295 million of inter-segment eliminations and ¥(6,190) million ($(71,720) thousand) and ¥(6,770) million of corporate expenses for the years ended December 31, 2012 and 2011, respectively, which mainly represent the Company’s general and administrative expenses that are not allocable to any of the reportable segments.
Note b: Adjustments to segment assets of ¥87,227 million ($1,010,510 thousand) and ¥65,240 million consists of ¥(31,552) million ($(365,527) thousand) and ¥(38,516) million of inter-segment eliminations, ¥118,779 million ($1,376,038 thousand) and ¥103,756 million of corporate assets for the years ended December 31, 2012 and 2011, respectively.
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42
24. Amounts Per Share
December 31, 2012 2011 2012 (Yen) (U.S. dollars)For the Years Ended Net income (loss) Basic ¥23.79 ¥(166.67) $0.275 Diluted – – –
December 31, 2012 2011 2012 (Yen) (U.S. dollars)As of Net assets ¥476.23 ¥429.46 $5.517
Basic net income per share was computed based on the net income available for distribution to shareholders of common stock and the weighted average number of shares of common stock outstanding during the year. Diluted net income per share as of December 31, 2012 and 2011 are not presented as there are no dilutive potential shares. Net assets per share are computed based on the net assets excluding minority interests and the number of shares of common stock outstanding at the year end. The bases for calculation are as follows: 1. Basic net income (loss) per share
December 31, 2012 2011 2012 (Millions of yen) (Thousands of
U.S. dollars)For the Years Ended Net income (loss) ¥ 10,243 ¥ (71,774) $118,667Net income (loss) of common stock ¥ 10,243 ¥ (71,774) $118,667Weighted average number of shares of common stock (thousands) 430,623 430,634
2. Net assets per share
December 31, 2012 2011 2012 (Millions of yen) (Thousands of
U.S. dollars)As of Total net assets ¥212,491 ¥192,101 $2,461,671Amount deducted from total net assets: 7,417 7,163 85,931
Minority interests 7,417 7,163 85,931Net assets attributable to share of
common stock ¥205,073 ¥184,937 $2,375,739 The number of shares of common stock used for the calculation of net assets per share (thousands) 430,618 430,629
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43
25. Subsequent Events (Issuance of Straight Bonds) The Company decided to issue unsecured straight corporate bonds on March 8, 2013 based on the limits and outline of the issuance of the unsecured straight corporate bonds resolved at a meeting of the Board of Directors held on December 27, 2012. The bonds were issued on March 18, 2013. Details are as follows: 16th series of unsecured straight bonds
1. Total issue amount: ¥10,000 million ($115,848 thousand)
2. Issue price: 100 yen ($1.158) per face value of 100 yen ($1.158)
3. Interest rate: 0.83% per annum
4. Maturity date: March 16, 2018 (bullet maturity)
5. Payment date and issue date: March 18, 2013
6. Use of proceeds: To be appropriated to funds to redeem corporate bonds and repay borrowings
17th series of unsecured straight bonds
1. Total issue amount: ¥15,000 million ($173,772 thousand)
2. Issue price: 100 yen ($1.158) per face value of 100 yen ($1.158)
3. Interest rate: 1.30% per annum
4. Maturity date: March 18, 2020 (bullet maturity)
5. Payment date and issue date: March 18, 2013
6. Use of proceeds: To be appropriated as funds to redeem corporate bonds and repay borrowings
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Tokyo Tatemono Co., Ltd.
REPORT OF INDEPENDENT AUDITORS
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MANAGEMENT
CORPORATE DATA
Chairman & DirectorsMakoto Hatanaka
Representative Director President & Chief Executive OfficerHajime Sakuma
Representative Director Senior Executive Managing OfficerKazumasa Kato
Director Senior Executive Managing OfficerHisao Shibayama
Director Executive Managing OfficerHitoshi NomuraMasami Kamo
Director Managing OfficerShinji Yoshida
DirectorHirokazu Ishikawa *
Audit & Supervisory Board MemberJunichiro OokawaMitsuyoshi TohyamaTetsuya KawagishiTatsuo Ogoshi
Managing OfficerYoshiki YanaiIchiro KounoTsutomu HanadaKengo FukuiTakashi KikuchiFumio Inada
(as at March 28, 2013)
Tokyo Tatemono Co., Ltd.Date of EstablishmentOctober 1, 1896
Capital¥92,451 million
Number of Employees442
Number of Shareholders17,868(as at December 31, 2012)
Head Office9-9, Yaesu 1-chome, Chuo-ku,Tokyo 103-8285 JapanTel. +81-3-3274-0111Fax. +81-3-3274-0256
BranchesKansai Branch7-12, Kitahama 3-chome, Chuo-ku,Osaka-shi, Osaka 541-0041 JapanTel. +81-6-6202-0111Fax. +81-6-6202-0298Sapporo Branch2-6, Kitananajyonishi 1-chome, Kita-ku,Sapporo-shi, Hokkaido 060-0807 JapanTel. +81-11-717-0111Fax. +81-11-717-5330Kyushu Branch8-49, Tenjin 2-chome, Chuo-ku,Fukuoka-shi, Fukuoka 810-0001 JapanTel. +81-92-761-0110Fax. +81-92-736-6586Nagoya Branch20-8, Nishiki 2-chome, Naka-ku,Nagoya-shi, Aichi 460-0003 JapanTel. +81-52-202-0301Fax. +81-52-202-0302
Principal SubsidiariesTokyo Tatemono Real Estate Sales Co., Ltd.25-1, Nishishinjyuku 1-chome, Shinjyuku-ku,Tokyo 163-0647 JapanTel. +81-3-3342-6277Fax. +81-3-3349-0822Tokyo Tatemono Techno-Build Co., Ltd.1-3, Taihei 4-chome, Sumida-ku,Tokyo 130-0012 JapanTel. +81-3-5608-7652Fax. +81-3-5608-7534Tokyo Tatemono Amenity Support Co., Ltd.1-3, Taihei 4-chome, Sumida-ku,Tokyo 130-0012 JapanTel. +81-3-3621-3232Fax. +81-3-3621-7262Tokyo Tatemono Resort Co., Ltd.9-9, Yaesu 1-chome, Chuo-ku,Tokyo 103-8285 JapanTel. +81-3-3274-0865Fax. +81-3-3275-1440Nihon Parking Corporation10-5, Nibancho, Chiyoda-ku,Tokyo 102-0084 JapanTel. +81-3-3222-0015Fax. +81-3-3222-0029
* Outside Director
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Printed in Japan
http://www.tatemono.com
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