Business | FOCUS

Mitsui Fudosan, Mitsubishi Estate among foreign developers grabbing major N.Y. deals

by Keiichiro Otsuka


Mitsui Fudosan Co., Mitsubishi Estate Co. and a handful of other foreign developers are taking stakes in major real estate projects such as high-rises and commercial properties in New York as the U.S. economy recovers.

The foreign-backed deals are expected to further spur growth in America’s largest city by drawing businesses to new offices and facilities equipped with up-to-date amenities.

They will also likely be a magnet for tourists and shoppers by offering attractions such as shopping malls bristling with brand names.

The latest round of development is reminiscent of the liquidity boom of the late 1980s, the period of the so-called bubble economy, when Japanese investors snatched up real estate and companies one after another, a source at a U.S. financial institution said.

In New York, strong demand from tenants has been lifting office leasing charges. An executive at a Japanese company which owns buildings in the city said that “high investment returns are one of the attractions.”

Japanese developers are hoping their track record of business in the city will eventually help them expand in other parts of the world, when growth of the property market in their home country is constrained by a declining population.

Mitsui Fudosan America Inc. is participating in the development of Fifty Five Hudson Yards, a 51-story office building project costing approximately $1.4 billion in west Manhattan.

Construction began this year and is scheduled for completion in 2018. It will offer a gross floor area of about 117,600 sq. meters, making it one of the largest development ventures overseen by a Japanese company in Manhattan.

Mitsui’s undertaking is part of a much larger redevelopment project, dubbed the Hudson Yard, led by Canadian developer Oxford Properties Group and Related Companies, an international real estate firm. It stretches over the land lot used for a railway depot near the Hudson River that runs along the western side of Manhattan.

The Hudson Yard will include commercial properties housing the Neiman Marcus department store, the luxury retailer’s first store in Manhattan, as well as more than 100 fashion boutiques and restaurants. A luxury hotel and high-rise housing units will also be featured.

This redevelopment zone is located close to Times Square, the world-famous commercial and entertainment district. It is also within walking distance of Penn Station, a major commuter and long-distance rail hub.

The new district is also expected to host a new subway station after the No. 7 line of the Metropolitan Transportation Authority is extended.

Brand-new high-rises in the area that will feature greenery and space for relaxation will likely attract shoppers, tourists and commuters to nearby areas.

Mitsui Fudosan’s focus in the United States has long been on acquiring existing office buildings in New York, Washington D.C. and other cities. In recent years, however, its interest has expanded to include development projects.

Mitsui Fudosan America is also taking part in the development of 160 Madison, a 42-story building featuring 318 rental apartment units on Madison Avenue in central Manhattan. The project is slated for completion this fall.

Among all of its invested deals, Mitsui Fudosan considers Fifty Five Hudson Yards as “a flagship building that will be at the core of our portfolio for future overseas business,” the company said.

Fellow realtor Mitsubishi Estate is undertaking the Flushing Commons project, combining offices, residential units and commercial facilities in the Flushing neighborhood in Queens through its U.S. subsidiary, Rockefeller Group International Inc.

Covering 19,600 sq. meters, the entire development won’t be done until around 2022.

In the first phase, now underway, a 13-story office tower with retail outlets and a 17-story residential unit are scheduled for completion by April 2017.

Flushing, a commercial district known for its Chinatown, offers convenient access, including a subway link and LaGuardia Airport, one of the three major air hubs for the New York area.

Mitsubishi Estate estimates commercial facilities in this neighborhood affect a market with a population of roughly 200,000.

“We expect this development project to further enliven the district by drawing more businesses and people,” the company said.

Other overseas players are active in major projects in the city, such as Singapore’s Pontiac Land Group, which is taking part in the construction of an 82-story condominium. China’s Greenland Group Co. is leading a luxury residential development project in Brooklyn.

At the peak of Japan’s bubble economy in the late 1980s, Japanese companies went on a shopping spree of iconic U.S. businesses, causing anxiety in some quarters that Japanese were “buying the soul of America.”

In 1989, Mitsubishi Estate took control of the real estate company that owned the Rockefeller Center and other properties. It was also the year Sony acquired Colombia Pictures Entertainment Inc., which is now called Sony Pictures Entertainment Inc.

The latest phase of property development acquisitions in New York is driven by “Chinese companies and Middle East funds backed by oil money,” according to an official of the New York real estate industry.

In October, China’s Anbang Insurance Group announced an agreement to buy the Waldorf Astoria New York, a flagship luxury hotel of the Hilton Worldwide chain, for $1.95 billion.

Japanese companies don’t appear to have the momentum they did during the bubble period. An official at a Japanese company that has a New York building in its portfolio said they are keeping a low profile.

“We should probably refrain from ostentatious acquisitions that could aggravate sentiment toward Japan, but rather go through making investments jointly with U.S. partners,” the official said.

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