Mitsubishi Estate eyes J-REIT, U.S. property fund

By Mariko Katsumura and Emi Emoto

TOKYO (Reuters) - Mitsubishi Estate Co (8802.T) is interested in buying a real estate investment trust (REIT) in Japan and is preparing to launch a property investment fund in the United States, its CEO and president said on Wednesday.

Keiji Kimura said Japan's second-biggest developer is keen to buy a real estate investment management company overseas as it aims to raise its global profile.

Kimura said the planned U.S. fund would initially target office buildings in New York. Although its size is undecided, Mitsubishi plans to use resources from the U.S. Rockefeller Group, which it took control of in 1989 for $2 billion.

Japan's property market has been hit hard as the nation's worst recession since World War Two saps demand for houses and office space and hard-pressed banks rein in lending to the sector, one of the most highly indebted in Japan.

Kimura said Japan's residential market, which has been in a slump, would probably not fully recover until the latter half of the year to March 2011.

Mitsubishi Estate's apartment business has seen stronger than expected sales since the start of this year thanks to lower pricing and housing tax relief. But the move is not leading to profits, Kimura said.

As of March, Mitsubishi Estate had 895 unsold apartment units, quadruple the level a year earlier, and expects profit margins on apartment sales to slide to 11.1 percent this year from 21.7 percent last year as it sells apartments at a discount.

"I've told (staff) that our first priority now is collecting cash," Kimura said. But he said he sees little possibility of incuring more appraisal losses from unsold apartments this year after booking a 33 billion yen loss last year.

Mitsubishi Estate has fared better than smaller real estate companies because it relies more on the office leasing business. But it has been eyeing overseas expansion as cross-border property investments accelerate around the world.

Kimura said he wanted to launch the U.S. property fund as early as possible. "I see some moves in the property market there," he told Reuters.

In Japan, Mitsubishi Estate already sponsors Japan Real Estate Investment Corp (8952.T), which invests only in office buildings. But Kimura said it would make sense to own or sponsor another one which invests in commercial or residential properties.

"It could be M&A, or we might launch an original one," Kimura said in an interview ahead of the Reuters Global Real Estate Summit.

Mitsubishi Estate's shares, owned 38.4 percent by foreign investors, ended Wednesday's session down 0.4 percent at 1,560 yen ahead of the interview.

(Editing by Michael Watson and David Holmes)