Mitsubishi Estate to invest ¥100b in Tokyo over three years

TOKYO (Nov 14): Japan's Mitsubishi Estate said on Monday it plans to sharply increase new investments in central Tokyo outside its core district of Maruouchi to about ¥100 billion (RM4.07 billion) over three years as it sees an improvement in the market.

The plans are a rare upbeat sign for Japan's property market and underscore the better position of developers such as Mitsubishi Estate, which unlike overseas investment funds can afford to wait until new buildings begin generating cash flow.

"It's a good time to buy properties for developing office buildings now because prices have come down to a reasonable level, and at the same time we are seeing signs that demand for new buildings will increase in a few years," executive vice president Hiroyoshi Ito told Reuters in an interview.

Mitsubishi Estate is one of the most active players in Japan's still stagnant property market, where no major transactions have been seen since March when Mitsubishi Estate bought an office building complex from US investment fund Lone Star for about ¥90 billion.

The developer also on Monday announced the sale of a 30-story office building in Tokyo for 60.8 billion yen to real estate trust Japan Real Estate Management.

Mitsubishi Estate plans to spend as much as ¥30 billion a year to buy land for developments, while in 2009 and 2010, when the property market plummeted in the wake of the global financial crisis, the developer did not spend more than ¥10 billion each year on new land, Ito said.

This year it targets spending of ¥25 billion for new land and has already achieved 80% of the target, he said.

"From this year we are gearing up for new investments," Ito said.

Tenants increasingly require safer buildings after the March 11 earthquake that devastated coastal areas of northeast Japan, and that will help demand for new buildings increase, Ito said.

Mitsubishi Estate is in a good position to buy properties now because some companies are tempted to sell older office buildings to seek new and safer buildings, Ito said.

It is still hard to buy properties that went under control of lenders for good prices because there is still a gap between sellers and buyers, he said.

"Lenders are also expecting the market to improve in the future so they want to wait to sell properties until then."

In the Marunouchi district, where it dominates office development, Mitsubishi Estate says it plans to spend ¥300 billion over the three years, the same pace as in previous years.

Ito is in charge of new investments outside Marunouchi, a prime business and financial district dominated by Mitsubishi Estate and into which the developer has put most of its resources.

Ito's focus is on properties in the areas surrounding Marunouchi, such as Tokyo's Chiyoda, Minato and Chuo wards. — Reuters