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

Wed Dec 5, 2012 1:16am EST

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(The following was released by the rating agency)

TOKYO (Standard & Poor's) Dec. 5, 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 112 and 113 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 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 low profitability in the company's residential and commercial property development businesses. In particular, we believe an improvement in the profitability of the commercial property development business will take time because the real estate investment market has yet to recover. We also expect the company to actively invest over the next two to three years, likely keeping the company's debt at a high level and constraining our ratings.

RATINGS ASSIGNED

Issue Rating

Series 112, JPY15.0 bil., 0.577% bonds, due Dec. 25, 2020 A+

Series 113, JPY10.0 bil., 1.067% bonds, due Dec. 27, 2024 A+

RELATED CRITERIA AND RESEARCH

Key Credit Factors: Global Criteria For Rating Real Estate Companies, June 21, 2011

2008 Corporate Criteria: Analytical Methodology, April 15, 2008

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