Mitsui Fudosan's Profit Declines 72% as Japan Office Vacancies Increase
Mitsui Fudosan Co., Japan’s biggest property developer, said first-quarter profit slid 72 percent because the company sold fewer apartments and had less leasing revenue due to an increase in vacancy rates.
Net income dropped to 4.49 billion yen ($51 million) in the three months ended June 30 from 16.1 billion yen a year earlier, the Tokyo-based company said in a statement today. Sales declined 9.2 percent to 282.9 billion yen in the quarter from 311.5 billion yen a year ago.
Japanese developers face a slump in demand for Tokyo’s condominium market and record-high office vacancies as the country’s unemployment rate remains above 5 percent and companies cut spending. Mitsui Fudosan said today sales of homes and apartments in the quarter dropped 35 percent from year ago.
The company’s division comprising housing, office buildings and land sales had an operating loss of 1.9 billion yen in the quarter compared with a profit of 15.8 billion yen a year ago, the firm said.
Mitsui Fudosan sold 885 condominiums and single houses to individuals in the quarter, fewer than the 1,355 it sold in the same period last year, the company said. Its inventory of condominiums and houses fell to 837 at the end of June from 912 in the previous quarter.
Mitsui Fudosan’s shares, which dropped by 15 percent this year, declined 1.5 percent to close at 1,332 yen on the Tokyo Stock Exchange. The earnings results were released after the close of trading.
Annual Target Kept
Mitsui Fudosan maintained its full-year profit forecast of 50 billion yen on sales of 1.44 trillion yen.
Mitsui Fudosan plans to sell 5,400 condominiums in the current business year through March 2011. The firm said today it has secured sales contracts amounting to about 55 percent of the annual target.
Condominiums put up for sales in Tokyo region declined for a fifth straight year in 2009, to 36,376 units, according to the Real Estate Economic Institute Co., a Tokyo-based industry publisher.
Operating profit, sales minus operating costs, from leasing, the company’s biggest division, fell 2.7 percent to 23.7 billion yen in the period as vacancy rates for office and commercial buildings in Mitsui Fudosan’s portfolio rose to a six-year high of 3.3 percent in the quarter from 3.1 percent in March.
Mitsui Fudosan expects a decline of 4.8 percent in operating profit for its leasing business this fiscal year due to the office vacancies and the cost of redeveloping existing properties, the company said on April 30.
Tokyo’s office vacancy rate rose to 9.1 percent in June, the highest since Miki Shoji Co., a privately held office brokerage company, started compiling monthly data in January 2001.
To contact the reporters on this story: Kathleen Chu in Tokyo at Kchu2@bloomberg.net; Katsuyo Kuwako in Tokyo at kkuwako@bloomberg.net
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