March 5, 2014 2:15 am JST

Sumitomo Realty poised to post record profit in fiscal 2013

TOKYO -- Sumitomo Realty & Development Co. is expected to log an all-time-high group pretax profit of about 127 billion yen ($1.23 billion) for the year ending March 31, up 11%, as the firm sells more condominiums and enjoys higher office occupancy rates.

     The figure beats the current forecast calling for 125 billion yen and would be the first record sum since the 125.1 billion yen of fiscal 2007. With real estate prices expected to rise down the road, the Japanese developer is apparently moving more previously owned properties as well as new apartment buildings.

     Sales are expected to climb 4% to around 765 billion yen, outstripping the current forecast by 5 billion yen. With Tokyo to host the 2020 Olympics, sales are brisk for high-rise apartment buildings along Tokyo Bay. The firm is also selling more properties in such places as greater Osaka and the outskirts of the Tokyo metropolitan area. The company is likely to deliver around 5,000 units, 8% more than in fiscal 2012.

     In addition, profit will get a boost from lower-than-expected advertising costs and other expenses.

     Subsidiary Sumitomo Real Estate Sales, which handles brokerage services, is also enjoying a steady business. The firm is turning over more properties, as rising prices for newly built housing prompt more individuals to opt for relatively less-expensive previously owned condominiums. The average value of brokered sales will tick up thanks to big deals for investors, helping push up average commission revenue and contributing to higher profit.

     Demand for office space, meanwhile, is trending higher on the back of improving business sentiment. Sumitomo Realty & Development saw the vacancy rate at its office buildings fall from 7.1% at the end of March 2013 to 6.3% at the end of December. The figure is expected to continue improving in the last quarter of fiscal 2013, and approach the 5% mark considered favorable to owners in rent negotiations. The firm is raising rents, mainly for new tenants.

     Thanks to a housing boom ahead of the consumption tax hike on April 1, the home-remodeling business is growing. It ended 2013 with just over 6,300 orders, up 13% from a year earlier. The firm expects to deliver 7,600 finished properties, up 5%.