Business

Fri Jul 04 03:25:00 PDT 2008

By Taiga Uranaka

TOKYO, July 4 (Reuters) – Shares of Japanese apartment developer Urban Corp and other mid-sized property companies plunged on Friday amid growing worries about credit risks in the sector.

Investors have been jittery over the health of Japan’s real estate sector after Suruga Corp fell into bankruptcy last month, and speculation has been abundant about which company might be next.

"I don’t know what kind of information people are basing their sell-off on, but at this point, a lot of people are selling on worries about credit risks," said Credit Suisse analyst Masahiro Mochizuki.

Urban took the biggest beating, sliding 28 percent to 189 yen. The stock has lost 45 percent since last Friday when it announced it would raise 30 billion yen ($281 million) by issuing convertible bonds to French bank BNP Paribas.

Atsushi Tagawa, an official at Urban’s business planning division, said some investors had contacted the company and expressed worries over the convertible bond (CB), which is scheduled to be sold on July 11.

"There is no truth that our CB issue has been canceled," Tagawa said, adding that Urban was financially sound. "We have no idea why our shares are falling."

Investors fled other mid-sized property shares, with Joint Corp falling 12.7 percent to 483 yen, and Kenedix Inc sliding 7.9 percent to 105,000 yen.

"Investors’ confidence towards real estate developers has been extremely shaky these days, especially after Suruga went bust," said Teruhisa Ishikawa, manager of the investment information department at Mizuho Investors Securities.

Japan’s residential market has been hit by a slowing economy and stricter construction rules introduced last year. Adding to woes of mid-size real estate firms, financial institutions have tightened lending conditions amid credit market turmoil.

Suruga filed for court protection from creditors after it was unable to secure new financing from banks following the arrest of staff members of land-purchasing firms in March for alleged illegal operations.

Zephyr Co which announced the bankruptcy of subsidiary Kondo Sangyo in May, dropped 6.3 percent to 19,800 yen.

Kondo Sangyo, an apartment developer based in Osaka, western Japan, commenced bankruptcy proceedings, citing delays in selling apartments and trouble procuring funding on its own amid tighter credit conditions.

The Tokyo stock exchange’s subindex of real estate stocks IRLTY.has fallen nearly 50 percent from last year’s high hit on May 10, 2007. That compares with a 25 percent decline of the benchmark Nikkei share average over the same period. ($1=106.71 yen)

(Reporting by Taiga Uranaka, Mariko Katsumura, Aiko Hayashi; Editing by Brent Kininmont)

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