Japan Real Estate: We Raise Our Valuation for Mitsui Fudosan by 7% on Bright Tourism Outlook

We raise our fair value estimate for Mitsui Fudosan to JPY 3,000 from JPY 2,800 and maintain our fair value estimates of JPY 2,000 for Mitsubishi Estate and JPY 4,000 for Sumitomo Realty after the Japanese developers’ earnings reports. The main reason for our 7% increase in our fair value estimate for Mitsui Fudosan is our increasing optimism for its facility operations segment, which includes hotels and resorts as well as the Tokyo Dome stadium complex it purchased in 2021. There was also a stronger outlook for office leasing at Hudson Yards on the west side of Manhattan than we previously assumed. We think retail leasing and hotels for all the Japanese developers will benefit to some extent now that China is lifting its pandemic-era restrictions on tour groups traveling to Japan, with Mitsui being a larger beneficiary than peers as a result of its higher weighting in these areas.