Tokyo-based condominium developer Japan General Estate Company, said it was facing financial difficulties caused by the current poor market conditions
Company president Makoto Nishimaru said the developer decided to abandon efforts to drag itself out of debt. 'We were unable to predict the sudden change in the financial situation. The stance on lending to real estate firms was tough,' he said.
The company, which was founded in 1993, expanded rapidly in 2005 when it started actively acquiring land for condominiums and reported record sales last year and employed 649 people.
Its problems began when the financial climate meant it had to borrow money from financial institutions to acquire property and its debts surged. As the financial crisis worsened, the company began to run into financial trouble from about October last year, and it was unable to acquire new loans. It subsequently decided to file for protection under the Corporate Rehabilitation Law.
The news affected the fortunes of other real estate companies who saw their stocks drop as a result. Land Co Ltd suffered a 8.4% decline, Creed Corp 7.5%, Kenedix 7.5% and Hoosiers 6.3%.
And four major developers have cut their profit outlooks as a result of plummeting apartment sales. They include Mitsui Fudosan, Japan's biggest developer, and Mitsibushi Estate, the country's second biggest developer.
'The apartment market is facing an extremely tough time,' said Nobuyuki Iizuka, Mitsubishi Estate deputy president, after the company cut its annual profit outlook by nearly a quarter.
At Mitsui Fudosan, property sales to investors have slumped as buyers become more selective, forcing it to review its sales strategy, said executive managing officer Seizo Kuramoto.
