* Mitsubishi Estate cuts annual profit outlook by 23 pct
* Mitsui Fudosan lowers annual forecast by 11 pct
* M'bishi Estate shares close down 1.4 pct after results
* Mitsui Fudosan stock up 1.7 pct before announcement
(Adds analyst comment, details)
By Mariko Katsumura
TOKYO, Feb 5 Japanese property developers Mitsui
Fudosan Co (8801.T) and Mitsubishi Estate Co (8802.T) cut their
annual profit outlooks on Thursday as the economic recession and
falling land prices led to weak apartment sales.
The property market is mired in a slump as a deepening
recession hits demand for houses and apartments. In 2008, nearly
600 real estate firms collapsed after hard-pressed banks reined
in lending to the sector, one of the most highly leveraged in
Citing real estate firms' growing financing woes, Mitsubishi
Estate said it would make subsidiary Towa Real Estate Development
Co 8834.T wholly owned through a stock swap and by buying new
shares in a deal worth about 29 billion yen ($324 million).
The gloomy residential property market has not left Mitsui
Fudosan, Japan's biggest developer, and second-ranked Mitsubishi
Although the two generate about half of their profits from
office leases, which have so far been stable during the downturn,
they have suffered from weak apartment sales and falling property
prices that led to valuation losses.
"The apartment market is facing an extremely tough time,"
said Nobuyuki Iizuka, Mitsubishi Estate deputy president, after
the company cut its annual profit outlook by nearly a quarter.
At Mitsui Fudosan, property sales to investors have slumped
as buyers become more selective, forcing it to review its sales
strategy, said executive managing officer Seizo Kuramoto.
"This market is temporarily not functioning. Even when there
are buyers, we can't justify their offering prices" compared with
their market values, Kuramoto told reporters at a briefing.
Mitsui Fudosan, the world's No. 4 developer by market
capital, cut its operating profit outlook for the year to March
31 by 11 percent to 170 billion yen, below the 187.6 billion yen
consensus view of 17 analysts polled by Reuters Estimates.
Mitsubishi Estate, which owns the U.S. Rockefeller Group as
well as more than two dozen buildings in Tokyo's prime Marunouchi
business district, cut its group operating profit forecast for
the year to March by 23 percent to 141 billion yen, missing the
market consensus of 180.4 billion yen.
The real estate sector was jolted again on Thursday as Japan
General Estate Co 8878.T filed for bankruptcy protection with
$2.2 billion debts, suggesting government efforts to support
troubled property firms are not bearing fruit. [ID:nTFA004278]
Among Mitsubishi Estate's businesses, the hardest hit was the
residential segment, which posted an operating loss of 9 billion
yen. The company had 573 unsold residential units, more than
double the 248 as of last March.
Daiwa SB Investments senior portfolio manager Katsuhiko Mori
said he was surprised that the apartment sales slump had eaten
into profits at Mitsubishi Estate, which has a relatively small
exposure to the residential market.
"I can see their business has rapidly deteriorated in the
past six months. I'm concerned how much longer this
deterioration, at this speed, will last," Mori said.
Mitsui Fudosan had 742 unsold residential units as of
December, up from 568 last March. Its office vacancy rate in
metropolitan Tokyo rose to 2.5 percent from 1.3 percent in March.
For the October-December quarter, however, Mitsui Fudosan had
an operating profit of 54.9 billion yen, up from 38.4 billion yen
in the same period last year thanks to a solid leasing business.
Mitsubishi Estate had an operating profit of 30.0 billion yen
in the three months to Dec. 31, down from 33.9 billion yen a year
Shares of Mitsubishi Estate closed down 1.4 percent at 1,241
yen after it announced the results during midafternoon trade.
The shares have fallen about 48 percent so far this business
year, almost in line with a 45 percent slide in Tokyo's real
estate industry subindex .IRLTY.T.
Mitsui Fudosan shares ended up 1.7 percent at 1,297 yen
before its announcement.
(Reporting by Mariko Katsumura; Editing by Chris Gallagher)