Mitsubishi Estate Company,Limited Business Information, Profile, and History

History of Mitsubishi Estate Company,Limited

Mitsubishi Estate Company, Limited (MEC) is one of the foremost real estate management, leasing, sales and development firms in Japan. The company is one of 28 core firms in the powerful Mitsubishi group. MEC is the largest holder of office space in Tokyo, much of it centered in the Marunouchi district. The company has undertaken urban development programs in Tokyo and residential projects throughout Japan and has pursued real estate investments internationally.

Although MEC was incorporated in 1937, its history of operations began in 1890. In March of that year, during the Meiji era, the Mitsubishi zaibatsu acquired 353,000 square meters of land owned by the Department of War at Marunouchi, Tokyo. Investing in land was seen as an innovative move for a company which up to that time was concerned primarily with shipping. Of the & 2.4 million the company invested in the late 1880s and early 1890s, almost & 2 million was spent on land in Tokyo.

The most notable purchase, the Marunouchi district, was a vast area which consisted of a grass plain and military drill field running from the moat outside the Imperial Palace east toward the merchants' district. It also contained military barracks and some government offices. In the late 1880s the army decided to sell the land. Yanosuke Iwasaki, then leader of Mitsubishi and younger brother of Mitsubishi's founder Yataro Iwasaki, was strongly urged to buy the land by two of his managers who had recently spent time in London. They envisioned building a modern office center in Tokyo for Mitsubishi, similar to those they had seen in England. The company was abetted in this aim by the government, which wanted to sell the Marunouchi land to a single buyer, making the price prohibitive for many. Mitsubishi was able to acquire the property in March 1890 for ¥1.28 million.

Construction planning for the office center began soon after the purchase in the Marunouchi district. Marunouchi Design Office of Mitsubishi Company, the predecessor of today's architectural division of Mitsubishi Estate, was founded that same year. In 1892, Mitsubishi began construction on Marunouchi's modern, Western-style, red brick business avenue, still the heart of Mitsubishi operations. After the development was completed, the government agreed to locate Tokyo's central railroad in the district, placing Mitsubishi squarely at the core of the Tokyo business district.

In 1893, Yanosuke Iwasaki initiated a reorganization of Mitsubishi in line with its diversification from shipping, changing its name to Mitsubishi Goshi Kaisha, Ltd. One year later, Mitsubishi's first building at Marunouchi was completed. It was Japan's first office rental building. Also in 1894, the office building division established its first office. By this time, real estate constituted 38.8% of Mitsubishi's company assets. In 1895, Mitsubishi's second building was completed. Building number three, finished in 1896, housed the head office of Nippon Yusen Kaisha (NYK), a leading shipping enterprise, created through the merger of Mitsubishi Shokai and its leading competitor, Kyodo Unyu Kaisha (Cooperative Transport Company), in 1885.

Mitsubishi set up its first real estate section in 1906. The company's accelerated growth began about 1917 when business divisions were incorporated and Mitsubishi Goshi Kaisha began to act as holding company and controller. The company continued to build in the Marunouchi district through World War I and the depression of the 1920s while pursuing its activities in mining, shipping and trading. The Marunouchi Building was completed in 1923. In 1929, the Marunouchi Garage Building, the first parking structure in Japan, was completed. Mitsubishi's real estate and architectural design and supervision activities were consolidated when Mitsubishi Estate Company, Limited was established on May 7, 1937.

After World War II the four largest zaibatsu, including Mitsubishi, held almost one-third of the paid-in capital in heavy industry in Japan. During the postwar occupation, the zaibatsu were disbanded under American-style anti-monopoly laws. Mitsubishi was divided into 139 independent companies. These strictures were eased by 1950, and MEC reestablished ties with other Mitsubishi firms by 1954. Group cohesiveness was further strengthened in 1970 when Mitsubishi Development Corporation was formed. Its primary mission was to undertake long-term housing, city and regional development plans for which no single member of the group had the resources. It was capitalized by 33 group companies. The company's president was also president of Mitsubishi Corporation and its chairman, the chairman of MEC.

MEC's influence in Japan and its long-standing ties with government were demonstrated in the mid-1950s. The governor of Tokyo, Seiichiro Yasui, asked Minoru Higuchi, retired president of MEC, for his advice on easing congestion in Tokyo's business district. Higuchi recommended that the governor allow private industry to build a roadway over income-producing properties, which would help pay for its construction and maintenance. Higuchi and 38 prominent members of the business community contributed $333,000 and formed the Tokyo Express Highway Co., Ltd. Higuchi was elected president. Construction of the seven-eighths of a mile roadway began April 1, 1953. Eventually the roadway ran from the financial district to the Ginza.

In 1959, the office building division set up the Marunouchi Reconstruction Program, a plan for the renewal of the Marunouchi district, often referred to as Mitsubishi Village due to the concentration of Mitsubishi firms headquartered there. Under the program, the Marunouchi Park Center was established in 1960, and a number of new buildings were built between 1965 and 1973. This renewal process continues. Through the 1980s, rents from these and other buildings in Tokyo accounted for about 70% of MEC's income.

In the 1960s, while MEC was rapidly increasing its holdings in Japan, it also began expanding overseas. Since 1962 MEC has invested in real estate operations in Houston, Atlanta, Detroit, Florida, Oregon and New York in the United States and in London, England. By the 1970s, MEC began to establish local affiliates. In 1971 MEC founded MEC Hawaii Corporation. In 1972, the company established Mitsubishi Estate New York Inc. Also in 1972, MEC and Morgan Stanley & Co., an investment banking firm, formed Morgan Mitsubishi Development, a New York-based partnership to develop real estate in the United States. MEC USA, Inc. followed in 1983, and in 1984 MEC built the Pacwest Center Building in Portland, Oregon. In 1985, MEC acquired Atlas House in London and established MEC UK Ltd. in 1986. Until the late 1980s, however, MEC's presence in the United States was comparatively small, standing at $24 million in September 1983.

MEC has been active in residential development since the 1970s, with developments in the Sapporo, Sendai, Tokyo, Yokohama, Osaka, and Hiroshima areas. Its Izumi Park Town in Miyagi-ken, the largest private-sector development project in Japan, comprises 12,000 homes on 1,030 hectares with a population estimated at 48,000. Construction on the first stage of this project began in 1972. By 1983 revenues from house sales accounted for 20% of MEC's income. In 1988, MEC began construction of the Park Town Tamagawa condominium project in Tokyo.

In 1983 MEC diversified into the hotel business by opening the Nagoya Dai-ichi Hotel. Three years later, it opened the Atsugi Royal Park Hotel near Tokyo and then ventured into resort operations, opening the resort park Hotel Onikobe in 1987. In 1989, MEC and an affiliated company opened the Royal Park Hotel adjoining the Tokyo City Air Terminal. The company also operates ski slopes, hotels, and resort villas on the Onikobe Highlands and golf courses at the foot of Mount Fuji. The resort park Izu Atagawa's country houses, under development in 1990, were equipped with hot springs.

In the 1980s land prices skyrocketed in Tokyo and other major cities in Japan. Between 1986 and 1988 alone, speculation in real estate helped double the price of Tokyo property. MEC's holdings similarly increased in value. In terms of assets, MEC was the largest real estate firm in Japan. By tne end of the 1980s, under the direction of leaders like Chairman Otakazu Nakada, in office through 1987, President Tatsuji Ito, in office through 1988, and his successor, Jotaro Takagi, MEC became a world competitor.

Beginning in 1987, MEC worked jointly with local developers to build 2,500 homes outside Los Angeles. In 1988 MEC began construction of the 53-story 777 Tower in Los Angeles, and expanded residential and resort facilities in Palm Desert, California.

In 1989 MEC made a major acquisition, a controlling interest in the Rockefeller Group, owner and manager of 14 buildings in New York City, including Rockefeller Center, Radio City Music Hall, the General Electric--formerly the RCA--Building, and the Warner Communications Building. The financial arrangements were complex. MEC's price of $846 million in cash bought 51% of the group, or 627,000 shares of Rockefeller common stock held by trusts established by John D. Rockefeller in 1934. In 1985, the Rockefeller Group had sold a mortgage on Rockefeller Center to a real estate investment trust, Rockefeller Center Properties. The trust's holdings could be converted at its option to a 71.5% interest in the group in the year 2,000, which would leave MEC with 51 % of the remaining 28.5% of the group. MEC considered the investment a long-term proposition, and acquired an additional 6.6% stake for $110 million in July 1990.

The sale set off considerable controversy. It followed pleas by the Japanese government and leading business organizations for companies to refrain from purchasing highly visible properties in the United States, for fear of public resentment. For MEC, the purchase placed it in the forefront of Japanese real estate investors overseas.

In 1990, MEC celebrated its 100th anniversary, as well as the 14th consecutive year of significant growth in both revenue from operations and net income. Full occupancy in its buildings contributed to a 14.8% increase in revenue over 1989. The office building division contributed 55.1% of MEC's total revenue.

In February 1990, MEC participated in the redevelopment of Paternoster Square next to St. Paul's Cathedral in London in partnership with U.S. and British developers. In March 1990, construction began on what would be Japan's tallest building, the 70-story Landmark Tower, in the Block 25 district at the Minato Mirai 21 development in Yokohama, Japan's largest port and second-largest city. MEC planned to open an international hotel on the upper floors of Landmark Tower by spring 1993. MEC was the largest private-sector landowner to participate in the redevelopment of Yokohama's coastal region. As MEC moved toward the 21st century, it stood in excellent financial shape to continue to take full advantage of opportunities in Japan or overseas.

Principal Subsidiaries: Mitsubishi Estate Housing Co., Ltd.; Ryoei Kanko Development Co., Ltd.; Ryowa Fudosan Co., Ltd.; Meiryo Daiichi Kaihatsu Co., Ltd..