TEXT-S&P: Japan-Based Mitsubishi Estate's Domestic Bonds Rated 'A+'

Fri Sep 7, 2012 2:14am EDT

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(The following was released by the rating agency)

TOKYO (Standard & Poor's) Sept. 7, 2012--Standard & Poor's Ratings Services today assigned its 'A+' long-term debt rating to Japan-based real estate company Mitsubishi Estate Co. Ltd.'s (A+/Stable/A-1) series 110 and 111 domestic senior unsecured bonds.

The ratings on Mitsubishi Estate reflect the high quality of the company's assets in Tokyo's Marunouchi central business district and the low average vacancy rate of all the company's assets, even amid a sluggish office leasing market. Mitsubishi Estate's reconstruction of its buildings also bolsters the competitiveness of its Marunouchi property portfolio and underpins the high profitability of its building business. Furthermore, the company's rents have relatively low susceptibility to economic cycles, owing to the strong credit quality of its tenants and its conservative approach to negotiating lease agreements.

In our view, a key constraint on the ratings is that profitability in the company's residential and commercial property development businesses remains low. In particular, we believe a recovery in profit in the commercial property development business will take time because the real estate investment market remains stagnant. Another factor constraining the ratings is Mitsubishi Estate's already high level of debt, which may increase as the company steps up its investments over the next two years.

RATINGS ASSIGNED

Issue Rating

Series 110, JPY10.0 bil. 0.571% bonds, due Sept. 13, 2019 A+

Series 111, JPY10.0 bil. 0.929% bonds, due Sept. 14, 2022 A+

RELATED CRITERIA AND RESEARCH Key Credit Factors: Global Criteria For Rating Real Estate Companies, June 21, 2011

Principles Of Credit Ratings, Feb. 16, 2011

2008 Corporate Criteria: Analytical Methodology, April 15, 2008

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