Mitsubishi Heavy Said to Abandon Sale of Tokyo Base

Jan. 7 (Bloomberg) -- Mitsubishi Heavy Industries Ltd., Japan’s largest heavy-machinery maker, canceled a plan to sell its Tokyo headquarters because bids for the property failed to meet expectations, two people familiar with the sale said.

The sale of the 28-story building was scrapped in October, the people said, declining to be identified because the information wasn’t public. The company had aimed to sell the property for about $800 million, according to one of the people.

Mitsubishi Heavy joins other Japanese companies seeking to reduce non-revenue producing assets and instead expand its power equipment and aerospace business. The company, which makes everything from ships to nuclear reactors and wings for Boeing Co.’s 787 Dreamliner jet, is developing Japan’s first passenger jet, slated to come into service in 2013.

“As general practice of our company, Mitsubishi Heavy periodically evaluates its assets, including real estate,” spokesman Hideo Ikuno said by telephone. He declined to discuss the Tokyo building.

Mitsubishi Heavy is spending 235 billion yen ($2.5 billion) on facilities and equipment each year to March 2011, 28 percent more than the average of the past two years, it said last year.

Lack of Capital

Other Japanese companies have started to sell off properties or real estate units to focus on their main businesses. Banks including Resona Holdings Inc., Shinsei Bank Ltd. and Citigroup Inc. sold their Tokyo headquarters last year to raise capital.

The Mitsubishi Heavy Industries Building is located in Shinagawa, southwest of central Tokyo. The tower, completed in March 2003, has space of 227,527 square meters (2.4 million square feet). The company occupies about one third of the property.

Shinagawa Mitsubishi Building, a 32-story tower next to Mitsubishi Heavy’s headquarters, was sold to Morgan Stanley’s real-estate fund for 140.2 billion yen in January 2005.

A lack of financing forced 25 public traded real estate and construction companies to file for bankruptcy in Japan in 2008. The less a potential buyer of a building can borrow, the less they can pay.

The banking units of Japan’s top four lenders -- Mitsubishi UFJ Financial Group Inc., Mizuho Financial Group Inc., Sumitomo Mitsui Financial Group Inc. and Resona -- cut commercial real estate lending by almost 770 billion yen in the six months through September, compared with the end of March, according to earnings statements published in November.

To contact the reporter on this story: Kathleen Chu in Tokyo at kchu2@bloomberg.net; Masumi Suga in Tokyo at msuga@bloomberg.net.

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