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Review of Operations
Tokyo Station Yaesu Area Development Project
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Toranomon 4-chome Project
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Akihabara Crossfield
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ThinkPark Tower
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The real estate development business includes the standard
sales and leasing of property, as well as more sophisticated development and financing
schemes. Real estate operations help to diversify earnings sources, and have a
spillover effect for construction. The business is nearly on par with construction
in terms of earnings.
Market Situation
The appraised value of all land in Japan as of January 2005
declined for the 14th consecutive year, but an increasing number of sites in the
three major metropolitan areas of Tokyo, Nagoya and Osaka appreciated in value,
reflecting a recovery trend in central urban areas. Both the office and condominium
markets in urban areas continued to return to a more normal condition. Although
the completion of several large office buildings in 2003 resulted in slightly
lower occupancy rates, they have since recovered and stabilized at reasonably
high levels. The supply of inner-city condominiums grew rapidly, with over 80,000
units a year added for six consecutive years, but this market has been supported
by strong demand from second-generation baby boomers, who are now reaching the
age when they purchase housing. Overall, market conditions were favorable.
Performance
Kajima's real estate development business performed strongly,
despite fierce competition. Results were well above initial targets, with contract
awards totaling ¥145.1 billion, and revenues of ¥158.2 billion.
The office leasing business maintained an occupancy rate greater
than 95% for the 60 buildings it manages. In the investment properties business,
Kajima decides to either hold or sell a certain portion of a high-earnings portfolio,
carefully monitoring and weighing the prevailing market conditions. An example
of this strategy is the Shinagawa Seaside Forest and six other lease properties,
which were sold to investors ahead of the original schedule to take advantage
of a favorable market opportunity. In the condominium business Kajima sold 475
units (nearly 100% of those for sale) in the fiercely competitive downtown areas,
drawing praise for its technology and product planning.
In February 2005 Kajima set up the Kajima Real Estate Fund, a
private placement fund for four lease properties it had developed. The fund will
hold approximately ¥30 billion, and has an expected dividend yield of 7% to
8%. Kajima will act as the asset manager.
Strategies for Growth
The real estate development business is generating healthy
returns, and Kajima will take steps to ensure that it continues to perform strongly.
Kajima will maintain its focus on the complex, large-scale development projects
in and around urban areas and transportation hubs that allow it to fully utilize
its development capacities. Investment efficiency will also be improved, and a
sound financial position ensured through off-balance-sheet financing and other
measures.
For the financial year to March 2006 the real estate development
business is forecasting revenues of ¥80.0 billion. Acquiring select tenants
for large-scale office developments currently in progress (mainly Tokyo Station
Yaesu, Akihabara UDX [Akihabara Crossfield] and the Toranomon 4-Chome Project)
will increase their value. In the condominium market, Kajima will focus its sales
efforts in Toranomon, Mejiro and Koraku.
As the asset manager of the Kajima Real Estate Fund, Kajima not
only has the obligation to generate the return expected by investors, but also
needs to accumulate expertise in both asset and property management, thereby reinforcing
the solid foundation for the future sources of income from fee-based business
opportunities.
