Japan's top real estate firms notch record pretax profits
BOJ's negative interest rates push up property prices
TOKYO -- Mitsui Fudosan and two other top real estate companies are expected to report all-time-high pretax profits for the April-December period, underpinned by a property boom triggered by the central bank's negative interest rate policy.
Mitsui Fudosan's pretax profit likely grew 10% on the year to around 160 billion yen ($1.39 billion), its third straight year of record earnings for the nine-month period. Sumitomo Realty & Development and Mitsubishi Estate also each likely saw pretax profits of around 130 billion yen, up 10-20% for their second year of record earnings in the period.
Solid sales of logistics facilities and condominiums supported the companies' earnings. Mitsui Fudosan likely raked in gains of 20 billion yen from selling logistics facilities and data centers to real estate investment trusts. Additionally, the company sold part of its holdings in the LaLaport Shin Misato shopping complex. Mitsubishi Estate likely saw a 10 billion yen profit boost in proceeds from sales of properties as rental housing.
The Bank of Japan's negative interest rate policy was the biggest tailwind. Ultralow interest rates prompted investors to shift money into real estate-related financial products, which offer higher returns. Property prices rose as a result, and enabled the developers to sell properties at historical highs. Sumitomo Realty's condominium sales surged around 40% in unit terms thanks to low mortgage rates.
Rental revenue also climbed as new office buildings started to open beginning last fiscal year. For Sumitomo Realty, three office buildings, including Roppongi Grand Tower, padded results. New offices and commercial facilities supported profits at Mitsui Fudosan and Mitsubishi Estate. And rents generally continued to rise, though by small margins.
For the full year ending in March, Mitsui Fudosan and Sumitomo Realty expect record pretax profits. Mitsubishi Estate expects profit to approach the record 162.1 billion yen from the year ended March 2008.
But projecting earnings over the medium-to-long term is becoming harder because they are increasingly swayed by monetary policy.