Plummeting land prices drowning waterfront project

Three companies jointly founded by the Tokyo Metropolitan Government and the private sector for a waterfront development project are close to financial collapse.

The accumulated debt of the three office-renting firms in the Tokyo Bay development area are soon expected to exceed their total capital of about 53 billion yen. The metropolitan government is considering restructuring the companies, probably by merging them, government officials said.

But because a merger alone will not be enough to improve the finances of the deficit-ridden companies, the local government is considering other options, including a bailout with taxpayers’ money and allowing the three firms to use the government-owned land their buildings stand on free of rent. But providing free use of the land would mean an annual government loss of up to 2.47 billion yen.

“During the bubble economy, nobody thought that rents would fall like this,” said a senior official at the metropolitan government, echoing a phrase that almost all officials use when they explain the project’s failure. During the boom years of the late 1980s, office rental prices in Tokyo skyrocketed, and government officials looked to the waterfront development area with yen in their eyes.