BAKU, Azerbaijan, October 30. International
rating agency Fitch Ratings has affirmed the Long-Term Foreign- and
Local-Currency Issuer Default Ratings (IDRs) of Japan's Mitsui
Fudosan Co., Ltd. at 'A', with a Stable Outlook, citing the
company's high-quality real estate portfolio, stable rental income
and solid financial position.
This was reflected in a publication issued by Fitch Ratings
yesterday.
According to Fitch, Mitsui Fudosan's portfolio, valued at 11
trillion yen ($69.8 billion), comprises more than 100 properties,
including Grade A and A- offices in central Tokyo, shopping
complexes, logistics facilities and hotels. The company's occupancy
rate stood at 97.3% at the end of June 2026, while that of its
Tokyo offices reached 99.1%. The agency expects strong leasing
activity to support further rental growth.
Fitch also highlighted Mitsui Fudosan's leverage and exposure to
rising borrowing costs. The company's loan-to-value (LTV) ratio
stood at 40% in FYE26, a relatively high level for its rating
category. The agency expects it to remain within rating-sensitive
thresholds, supported by disciplined financial management, asset
disposals and reinvestment of proceeds.
Fitch forecasts that the Bank of Japan's policy rate will rise
to 1.5% by the end of 2026 and 2% by the end of 2027. Against this
backdrop, the company's recurring EBITDA interest coverage ratio is
projected to decline from 5.4x in FYE26 to 4.6x in FYE27 and 4.1x
in FYE28, remaining above the agency's negative rating sensitivity
threshold of 4.0x through FYE30, the publication said.
Another factor supporting the rating is Mitsui Fudosan's ability
to sell completed or mature properties to sponsored real estate
investment trusts (REITs), investment funds and institutional
investors, and reinvest the proceeds in new projects. Fitch
considers this asset-recycling model an important mechanism for
managing leverage and financing the company's development
pipeline.
At the end of FYE26, Mitsui Fudosan had available liquidity of
712 billion yen ($4.5 billion), comprising 82 billion yen ($520.5
million) in cash, 102 billion yen ($647.5 million) in marketable
securities and 528 billion yen ($3.4 billion) in undrawn committed
credit facilities. Although this was below its short-term debt of
956 billion yen ($6.1 billion), Fitch noted that additional
uncommitted borrowing facilities, together with available
liquidity, exceeded short-term obligations.
Long-term debt accounted for 90.8% of corporate debt, while
fixed-rate debt represented 81%, excluding non-recourse debt. Bank
borrowings constituted 74% of corporate debt, reflecting the
company's established access to financing.
Fitch expects Mitsui Fudosan's revenue to grow at low
single-digit rates in FYE27-FYE30, with an average EBITDA margin of
20%. Capital expenditure is projected to average 11% of revenue
over the same period. The agency also assumes total shareholder
returns of 47%, including a dividend payout ratio of 33%, with the
remainder allocated to share buybacks.
The rating could come under downward pressure if the recurring
EBITDA interest coverage ratio remains below 4.0x or the LTV ratio
stays above 40% for a sustained period. Fitch does not expect an
upgrade over the next 12-18 months, citing the company's weaker
financial structure compared with peers in the 'A' rating
category.
Mitsui Fudosan is Japan's largest real estate company by
revenue. Its operations include property leasing, development and
sales, construction, brokerage, property management and asset
management, with leasing remaining its core business.
