Mitsubishi Estate Nine-Month Profit Drops 24.6% as Capital Gains Shrivel 

Mitsubishi Estate posted a 24.6 percent year-on-year decline in attributable profit to JPY 77.5 billion ($520 million) for the fiscal nine months to December as the absence of large capital gains ate into earnings.

Despite a 2.2 percent rise in operating revenue to JPY 926.5 billion during the period, operating profit slid 26.6 percent to JPY 146.8 billion, the Japanese developer said in financial results released late last week.

Operating profit in the commercial property business jumped 10 percent, driven by higher office building rents and an improving environment for hotels. But the group’s international business operating profit plunged 61.3 percent from a high year-earlier base, with the bulk of the current fiscal year’s capital gains set to kick in during the March-ending quarter.

“Domestic and overseas capital gains are progressing well toward the full-year forecast,” said Mitsubishi Estate, which expects an attributable profit of JPY 166 billion for fiscal 2023, up marginally from the previous year’s JPY 165.3 billion.

Tokyo Office Upswing

The vacancy rate for Mitsubishi Estate’s office portfolio in Tokyo’s Marunouchi business district is expected to improve to about 2.5 percent by the end of the fiscal year from 2.88 percent at the end of December on strong leasing activity, the developer said.

In addition to rent negotiations with existing tenants, the group has been rolling out flexible offices with stepped-up services in a bid to increase rent in Marunouchi. Mitsubishi Estate acquired the master franchise in Japan of flex space giant IWG in late 2022, giving the group exclusive rights to the use of brands like Regus and Spaces in the country.

Overseas, the Tokyo-based builder wrapped up construction of its 8 Bishopsgate redevelopment project in the City of London last June, with the 50-storey tower having leased more than 80 percent of its 51,500 square metres (554,341 square feet) of office space as of December.

Mitsubishi Estate last month announced the full opening of One City Centre in Bangkok with a total leasable area of 61,000 square metres. At 276 metres (905.5 feet) in height, the 61-storey tower reigns as Thailand’s tallest office building.

Sydney and London Deals

To bolster its foreign investment portfolio, Mitsubishi Estate in October teamed with a local firm to acquire 60 Margaret Street in Sydney from Blackstone and Mirvac for A$777 million ($494 million), clinching Australia’s largest single-asset real estate deal of 2023.

Mitsubishi Estate and AsheMorgan took ownership of the downtown complex in November, controlling 40,000 square metres of office space across 36 levels and 6,400 square metres of retail in the three-storey MetCentre section.

In December, Mitsubishi Estate and Dutch developer Edge acquired 125 Shaftesbury Avenue in London’s posh West End for £150 million ($189 million) — almost 44 percent less than what the seller, a joint venture of Savills Investment Management and South Korea’s Vestas Investment Management, had paid to acquire the office block in 2018.

The 1982-vintage building was refurbished six years ago and has a gross floor area of 180,000 square feet (16,723 square metres), comprising 140,000 square feet of office space and 40,000 square feet of retail.