Mitsubishi Estate Company, Limited History

Otemachi Building
6-1, Otemachi 1-chome
Chiyoda-ku, Tokyo 100-8133

Telephone: (03) 3287-5100
Fax: (03) 3212-3757

Public Company
Incorporated: 1937
Sales: $4.76 billion (2002)
Stock Exchanges: Tokyo Osaka Nagoya Kyoto Hiroshima Fukuoka Sapporo Niigata
NAIC: 531110 Lessors of Residential Buildings and Dwellings; 531120 Lessors of Nonresidential Buildings (Except Miniwarehouses); 531190 Lessors of Other Real Estate Property; 531210 Offices of Real Estate Agents and Brokers; 531320 Offices of Real Estate Appraisers; 531311 Residential Property Managers; 531312 Nonresidential Property Managers; 233320 Commercial and Institutional Building Construction

Company Perspectives:

We will strive to create a truly meaningful society through the development of a secure, safe, comfortable, and appealing urban environment in each of our locations, acting as representatives of the people who live, work, and seek leisure there.

Key Dates:

Mitsubishi acquires land in the Marunouchi district of Tokyo.
Mitsubishi starts construction in the Marunouchi district.
Mitsubishi establishes its first real estate unit.
Mitsubishi Estate Company, Limited is founded.
Mitsubishi Development Corporation is established.
Mitsubishi Estate Company founds MEC Hawaii Corporation.
The company sets up Mitsubishi Estate New York Inc. and forms Morgan Mitsubishi Development with Morgan Stanley & Co.
MEC USA, Inc. is formed, and Nagoya Dai-ichi Hotel opens.
Mitsubishi Estate Company establishes MEC UK Ltd.
The company buys a controlling interest in the Rockefeller Group.
MEC gives up its stake in Rockefeller Center.
The company posts a net loss for the first time in its history.
The Marunouchi Building is completed.

Company History:

A unit of the Mitsubishi Group, Mitsubishi Estate Company, Limited (MEC) is one of the foremost real estate management, leasing, sales, and development firms in Japan. 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. MEC constructs and owns a vast array of real estate, including office buildings, shopping centers, golf courses, hotels, and residential projects. It also offers architectural and civil engineering services as well as a real estate brokerage.

Building a Modern Tokyo: Late 1800s-Early 1900s

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 that 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 that 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 percent 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.

Continued Growth and International Expansion: Mid-1900s

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 antimonopoly 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 longstanding 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 percent 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, contains 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 percent of MEC's income. In 1988, MEC began construction of the Park Town Tamagawa condominium project in Tokyo.

Diversification in the 1980s-Early 1990s

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 operated 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 the 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 Inc. (RGI), 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 percent of the group, or 627,000 shares of Rockefeller common stock held by trusts established by John D. Rockefeller in 1934. In 1985, the RGI had sold a mortgage on Rockefeller Center to a real estate investment trust, Rockefeller Center Properties, Inc. The trust's holdings could be converted at its option to a 71.5 percent interest in the group in the year 2000, which would leave MEC with 51 percent of the remaining 28.5 percent of the group. MEC considered the investment a long-term proposition, and acquired an additional 6.6 percent 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 percent increase in revenue over 1989. The office building division contributed 55.1 percent 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 the spring of 1993. MEC was the largest private-sector landowner to participate in the redevelopment of Yokohama's coastal region.

Hard Times and Financial Woes: Mid 1990s-Early 2000s

Rapid construction continued in the mid-1990s. In 1993 Akasaka Park Building and Yokohama's Landmark Tower were completed. The following year marked the completion of Hamamatsu Act Tower, and the Osaka Amenity Park (OAP) began operations in early 1996. MEC announced plans to rebuild the historic Marunouchi Building in 1995.

Although MEC continued to expand, it faced major growing pains, the worst from its stake in the Rockefeller Center. After acquiring a majority interest in the building, the New York property market fell, which led to the lowering of commercial rents and a decline in property values. The difference between MEC's mortgage payments and its rental income grew to a staggering $460 million by late 1994. In May 1995 MEC's losses had climbed to $600 million. Unable to make its mortgage payments, MEC filed for bankruptcy protection. The company's initial hope was that it would be allowed to renegotiate terms for its $1.3 billion loan. In September, however, MEC gave up its ownership to Rockefeller Center Properties, the real estate investment trust, which then made a $250 million deal with an investment group that included real estate executive Sam Zell, Merrill Lynch & Co., Walt Disney Company, General Electric Company, and later Goldman, Sachs & Co.

For the fiscal year ended March 31, 1996, for the first time in its history MEC reported an annual loss: ¥99.5 billion ($934 million). The company took a special charge because of its investment in the Rockefeller Center, and that reduced MEC's earnings by some $1.4 billion.

Despite the Rockefeller Center fiasco, MEC maintained confidence in its RGI unit, and in February 1997 MEC made RGI a wholly owned subsidiary by acquiring the remaining 20 percent interest. RGI owned New York City's Time & Life Building as well as a 55 percent stake in the McGraw-Hill Building.

MEC faced another crisis in late 1997 when the company was raided by the police and accused of making illegal payments to a corporate racketeer. The racketeer in question was what is known as a "sokaiya," someone who purchases a certain number of shares in a company and then threatens to shame the company and its executives by attending shareholder meetings and making a scene. Corporate executives often pay off the sokaiya in order to avoid embarrassment. Although such payoffs had been made illegal since the early 1980s, the practice continued. Two MEC executives were arrested, and Chairman Jotaro Takagi, who had been chairman since 1994, resigned.

In 1998 MEC restructured its overseas subsidiaries. In the United States the company made MEC U.S.A. Inc. a subsidiary of RGI. The strategy appeared to work, as MEC reported an increase in its group pretax profit for the fiscal year ended March 31, 1999. Its pretax profit was helped greatly by a strong performance by RGI. MEC's sales increased 3 percent to ¥565.26 billion, up from ¥548.73 billion the previous year.

In the domestic condominium market MEC had in the past concentrated on low-rise units of about three or four stories. Heading into the 21st century, however, MEC said it would change its focus to high-rise condominiums. The company hoped to cash in on the rising demand for condominiums in the metropolitan Tokyo area and planned to triple the number of units offered in the early 2000s. By the end of March 2001 MEC had about 2,400 condominiums on the market, the highest number the company had ever offered.

MEC also planned to expand aggressively in the hope of increasing group operating profit by 55 percent between 2002 and 2005. To reach that goal, however, MEC had to reorganize and clean up some past decisions. For the fiscal year ended March 31, 2002, MEC took a special loss of ¥176.8 billion to reflect declining property values and inventory losses. This resulted in a net loss of ¥71.06 billion ($572 million). During the previous fiscal year, MEC reported a net profit of ¥19.8 billion. Despite the loss, MEC believed it was poised to return to profitability by the following fiscal year.

The rebuilding of the Marunouchi Building that began in April 1999 was completed in September 2002 with much fanfare. The 37-story building housed numerous restaurants, offices, and shops and proved to be a winner for MEC. Sales from the Marunouchi Building were better than anticipated, contributing some ¥6 billion to MEC's revenues for the fiscal year ended March 31, 2003. MEC managed to report a net income of ¥36.04 billion that year with sales of ¥681.73 billion. The company's strategy of building more condominiums also had paid off, and its housing development sector saw sales rise 15.4 percent.

MEC suffered through some difficult times in the 1990s, but it proved it was a survivor. Determined to continue its success well into the 21st century, the company planned to continue expansion while shedding unprofitable properties. MEC also planned to listen to consumer demand and to perhaps take more risks--its innovative Marunouchi Building was more successful and popular than expected. Shigeru Takagi, president of MEC since 2001, believed an open mind was just what MEC needed and told Nikkei Weekly, "Discarding this idea that we are 'king of the hill' and rekindling 'the mind of a developer' are absolutely essential."

Principal Subsidiaries: Marunouchi Direct Access Limited; Jyoni Shoji Co., Ltd.; IMS Co., Ltd.; Aqua City Co., Ltd.; Yokohama Sky Building Co., Ltd.; Keiyo Tochi Kaihatsu Co., Ltd.; Tokyo Kotsu Kaikan Co., Ltd.; Chelsea Japan Co., Ltd.; Act City Corporation; Mitsubishi Estate Building Management Co., Ltd.; Ryoei Building Management Co., Ltd.; MEC Building Management Co., Ltd.; MEC Building Facilities Co., Ltd.; Marunouchi Tatemono Kanri Co., Ltd.; Chiyoda Tatemono Kanri Co., Ltd.; Hokuryo City Service Co., Ltd.; Hibiya City Co., Ltd.; Yuden Building Kanri Co., Ltd; O.A.P. Management Co., Ltd.; Marunouchi Parking Co., Ltd.; Grand Parking Center Co., Ltd.; Hibiya City Parking Co., Ltd.; Tokyo Garage Co., Ltd.; Marunouchi Heat Supply Co., Ltd.; O.A.P.D.H.C. Supply Co., Ltd.; Minato Mirai 21 D.H.C. Co., Ltd.; Mitsubishi Jisho Sekkei Inc.; MEC Design International Corporation; Ascott International Management Japan Co., Ltd.; Royal Park Hotels and Resorts Co., Ltd.; Ryoei Kanko Development Co., Ltd.; Royal Park Inn Nagoya Co., Ltd.; Tohoku Royal Park Hotel Co., Ltd.; Yokohama Royal Park Hotel Co., Ltd.; Royal Park Hotel Co., Ltd.; Okayama International Hotel Co., Ltd.; Higashinihon Kaihatsu Co., Ltd.; MEC Urban Resort Tohoku Co., Ltd.; Liv Sports Co., Ltd.; Kume Country Club, Co., Ltd.; Fuji International Speedway Co., Ltd.; Mitsubishi Estate Home Co., Ltd.; Mitsubishi Estate Housing Component Co., Ltd.; Kanto Gang-Nail Truss Co., Ltd.; Mitsubishi Jisho Investment Advisors, Inc.; Japan Real Estate Asset Management Co., Ltd.; Rockefeller Group, Inc.; MEC Finance Co., Ltd.; MEC Information Development Co., Ltd.; MEC Human Resources, Inc.; Tsunagu Network Communications, Inc.; Super Regional, Inc.; Ryoei Life Service Co., Ltd.; Mitsubishi Real Estate Services Co., Ltd.; Otaru Toshi Kaihatsu Kosha Co., Ltd.; Izumi Park Town Service Co., Ltd.; Daiya Community Co., Ltd.

Principal Competitors: Daikyo Incorporated; Mitsui Fudosan Co., Ltd.; Tokyu Corporation; Sumitomo Realty & Development Co. Ltd.

Further Reading:

  • Cole, Robert J., "Japanese Buy New York Cachet with Deal for Rockefeller Center," New York Times, October 31, 1989.
  • Halverson, Guy, "Japan's Investments in U.S. Lose Jewel-Like Lustre," Christian Science Monitor, May 15, 1995, p. 3.
  • Kennard, Mary, "The Beginning of a Marunouchi Renaissance," Daily Yomiuri, September 12, 2002, p. 17.
  • "Mighty Mitsubishi," Business Week, September 24, 1990.
  • "Mitsubishi Estate Gets Dose of Fresh Thinking," Nikkei Weekly, November 25, 2002.
  • Pitman, Joanna, "Mitsubishi Shaken to Its Foundations," Times, November 25, 1994.
  • Rubenfein, Elisabeth, "Investor in Rockefeller Center Took Risk," Wall Street Journal, November 1, 1989.
  • Usborne, David, "Mitsubishi Misfortune Signals End of Great Japanese Spree," Independent--London, May 15, 1995, p. 29.

Source: International Directory of Company Histories, Vol.61. St. James Press, 2004.