Nomura Real Estate Expects 18% Rise in Apartment Sales as Inventories Dip

Nomura Real Estate Holdings Inc. (3231), Tokyo’s third-largest developer, plans to boost its home sales by about 18 percent next year as a drop in housing inventories signal a rebound after the March 11 earthquake.

The developer aims to sell 4,000 apartments for the year ending March 2013, up from a 3,400 target for the current business year, Kamezo Nakai, president of Nomura Real Estate, said in an interview. The company was left with 42 unsold apartments in the three months ended September, the lowest in more than four years, according to its website.

Nomura Real Estate is expecting a rebound after it sold all of the 250 units in the first phase of sales at a high-rise, 600-unit tower by Tokyo Bay earlier this month. The unit of Japan’s biggest stockbrokerage has sufficient land holdings for about 4 1/2 years of projects to supply 4,000 units annually and meet the expected demand in the coming years, Nakai said.

“Our residential business is extremely sound based on the number of inventories,” Nakai said on Dec. 27. “We have acquired plenty of landbank that will enable us to supply new apartments, depending on the market conditions.”

The company doubled the total number of apartments sold in 2010 from a year earlier and was ranked the third biggest by sales in Tokyo, according to Real Estate Economic Institute Co.

Source: Nomura Real Estate Holdings Inc. via Bloomberg

An undated handout illustration shows a residential building developed by Nomura Real Estate Holdings Inc. in the Shinonome area of Tokyo. Close

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Source: Nomura Real Estate Holdings Inc. via Bloomberg

An undated handout illustration shows a residential building developed by Nomura Real Estate Holdings Inc. in the Shinonome area of Tokyo.

Even as it gained market share in the condominium market in Tokyo, the developer is seeking to reduce debt amid rising uncertainties in the global market.

‘Unpredictable’

“Everything is unpredictable and can change anytime,” said Nakai. “We would like to slightly decrease the size of our balance sheet and strengthen our financial structure.”

The company may cut its interest-bearing loans by about a quarter to 600 billion yen ($7.7 billion) over the next three years, said Nakai. It also aims to reduce its debt-to-equity ratio to about 1.7 times from about 2.5 times in a three-year plan that will be released in May, he said.

The developer also may set up a structure to evaluate various risks from pricing and interest rates to its projects and investments from next year, Nakai said.

The developer’s shares were unchanged at 1,124 yen in Tokyo, while the 44-member Topix Real Estate (TPREAL) Index fell 1.3 percent to 623.11, the lowest level in more than 2 1/2 years. Nomura’s shares declined 24 percent this year, compared with the 26 percent retreat of the index.

Nomura Real Estate on Oct. 28 raised its net income forecast by 15 percent to 15 billion yen for the year ending March 2012 on higher home sales, according to a statement. The company expects sales to rise 12 percent to 438 billion yen, it said.

Rebound

The expectations of a rebound next year follow a forecast for a 24 percent decline in apartment sales in the year ending March, according to the company. Sales stalled immediately after the March temblor before picking up. Nomura Real Estate also plans to expand its homebuilding business with the aim of developing 1,000 houses a year, Nakai said.

The number of apartments put up for sale in Tokyo next year may reach the highest since 2007, according to an estimate by the Real Estate Economic Institute on Dec. 20. New supply may increase 18 percent in 2012 to 53,000 units from about 45,000 units this year because of delays of sales after the quake and rising construction, it said.

Nomura Real Estate and other large builders are gaining market share as small developers struggle. Japan’s seven-biggest real estate companies, including Nomura Real Estate, took a 51 percent share of the condominium market in 2010, up from 30 percent three years earlier, according to Credit Suisse Group AG.

“Some people may think that buyers will refrain from purchasing homes after the quake, but it’s the opposite,” Nakai said. “People want to move in to apartments they deem safe.”

To contact the reporters on this story: Kathleen Chu in Tokyo at kchu2@bloomberg.net; Katsuyo Kuwako in Tokyo at kkuwako@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net

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