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Mitsubishi Estate plans first-ever stock buyback

Property developer pivots to investor returns as earnings improve

Mitsubishi Estate completed the Marunouchi Nijubashi office building in Tokyo last October.

TOKYO -- Japanese property developer Mitsubishi Estate will buy back up to 100 billion yen ($913 million) of its shares, marking the company's first stock repurchase as domestic businesses increasingly look to put their cash piles to effective use.

The buyback will target a maximum of 65 million shares -- or 4.68% of those outstanding apart from treasury stock -- according to Tuesday's announcement. Furthermore, Mitsubishi Estate will aim for a dividend payout ratio of 30%, compared with the previous range between 25% and 30%.

"The return on assets has improved," Director Hiroshi Katayama told reporters, pointing to the dissolution of cross-shareholdings coupled with a priority on growth investments. For the fiscal year ended March, operating cash flow grew to 345.9 billion yen.

In light of that profitability, Mitsubishi Estate "intends to focus on capital efficiency and improve the return on equity," said Katayama.

In addition, the developer will not renew at next month's shareholders meeting a takeover defense first introduced in 2007. This suggests the company is taking up the capital efficiency plan with an eye toward maintaining its share price, according to an official at an international brokerage.

Mitsubishi Estate's share repurchase follows last year's buyback by industry peer Mitsui Fudosan -- also the first in the company's history. This month alone has seen several notable stock repurchase announcements by Japanese corporations. Online service developer DeNA is spending 50 billion yen to buy roughly a quarter of its shares in circulation. Chemical producer Asahi Kasei will conduct its first buyback in 17 years, with candy maker Ezaki Glico signing off on its first repurchase in 11 years.

Consolidated net profit at Mitsubishi Estate rose 12% to 134.6 billion yen during fiscal 2018, its third straight record year. The company cited the sale of condominiums to an affiliated real estate investment trust, with office building leases performing well. Its annual dividend per share was raised 4 yen to 30 yen.

Operating profit climbed 8% to 229.2 billion yen, while operating revenue grew 6% to 1.26 trillion yen. The vacancy rate of Mitsubishi Estate office buildings nationwide stood at just 1.8% at the end of March, and the average lease payment increased 2% from a year earlier.

"Highly competitive properties in such places as Marunouchi have potential for growth in lease revenue," said Katayama, referring to central Tokyo's business district where the developer recently completed the Marunouchi Nijubashi building. Mitsubishi Estate projects net profit will rise 2% to 137 billion yen this fiscal year, as operating revenue climbs 8%.

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