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SCMP Reporter

MINORU Mori's conservative investment strategy is as safe as the high-rises he prides himself in building.

  As much as Mori Building Co's structures are built to withstand earthquakes, the group's approach to business has also shaken off the tremors brought about when the Japanese 'bubble' economy of inflated prices in the late 1980s burst.

  Land prices dived and developers are still feeling the effects since the Tokyo property market crashed at the beginning of this decade.

 Mori, set up in 1959, survived the crash and is reputed to be the third largest developer in Japan today, and its founder, Taikichiro Mori, is ranked the world richest person by Forbes magazine.

  Day-to-day running is now handled by his sons - Minoru and Akira. Minoru Mori became president and chief executive three years ago.

  Mr Mori's sombre black suits and careful answers may be telling signs of the cautious businessman he is and denote his 'better safe than sorry' approach to life.

  Under his leadership, the company has broken away from tradition and spread its wings overseas, concentrating on the China market.

  Through its fully owned subsidiary Forest Overseas Co set up in 1994, it will build the 95-storey Shanghai World Financial Centre in Pudong New Area that will become the world's tallest building early next century.

  While the Japanese property market is still in the doldrums, he believes now is the right time to start building again, especially long-term projects that fit in with the rezoning plan of the Tokyo metropolitan government.

   These two factors underline Mori's development strategy.

  'With the slump, we can keep working on these projects steadily. Because of the slump, land prices and construction costs are lower, as well as lower interest rates,' Mr Mori said.

  He said there was no intention to speed up the development pace because rents had slid.

  'We do not want to increase our office supply to confuse the market. We keep supply of office buildings to meet demand,' he said.

  Rental income accounts for the bulk of the group's consolidated revenue.

  Of the 101.6 billion yen (about HK$7.36 billion) in consolidated revenue earned in 1994, 90.8 billion yen was generated from the leasing of the group's 89 buildings mainly in Tokyo's Minato-ku.

  Despite declining rents, the group expects an increase in profit for last year because of an expected decline from the current 600 billion yen in interest payments on debt.

  Recurring profit for 1994 was almost 10 billion yen.

  Mr Mori said the main development theme was integration with the development of the city, 'making the town fit into the new age'.

  The latest project the company plans to undertake involves transforming an 11-hectare site in Roppongi area, famous for its night life, into a 'new age urban cultural centre' by 2001.

   Costing 360 billion yen, it will include a hotel, a 58-storey office tower, flats, a broadcasting centre and cultural facilities.

  Construction work will start next year.

  'We have a concept of making this area a cultural centre of Tokyo, with the largest theatre, museum and showrooms,' Mr Mori said.

  'The offices will cater to companies from the information technology, publishing and design industries.

  'We think most cultural activities of Tokyo will move to this area.'   Showing the way, Mr Mori will set aside space in the Roppongi project to exhibit his prized collection of works by the Bauhaus artist, Le Corbusier.

  He now has between 12 and 13 pieces but when the project is finished, his collection will have been completed with the number doubled.

  Mr Mori's belief that art should be linked with property development is also reflected in the group's previous urban redevelopment projects in Ark Hills and Shiroyama Hills in the Minato-ku and Gotenyama Hills project in Shinagawa-ku.

  'As a developer, we have to seek a balance between functionality and beauty,' he said.

  Another task facing the group is to redevelop old buildings that are not up to current safety standards.

  Mr Mori said about 80 per cent of their properties were built according to the highest standards, the older buildings were designed to old standards.

  Last year's Hanshin earthquake in the Kansai region served as an awakening to developers and became a major driving force to redevelop the city's old buildings.

  Mr Mori said the future of the Japanese market for buildings hinged on the economy's growth rate which he predicted would move at a steady pace.

  'The market is reaching maturity and one cannot expect too big an increase in demand,' he said.

  'But there is a demand for safe buildings.'   For now, he said the Japanese property market was in a 'bad slump'.

  'Rents and land prices have not stopped declining and banks face a serious problem of bad loans,' he said.

  'But areas within the radius of five kilometres from the central Tokyo station are seeing a revitalisation of activities.'   At the same time, he said the Japanese were becoming globally active and domestic companies are securing construction contracts overseas.

  Mr Mori said the firm wanted to invest in a market with the most potential growth - China.

  'Japanese corporations are going into the Chinese market and there is a growing demand for better office space by these companies,' he said.

  He said there was an oversupply of high-quality commercial developments and a short-term gap between supply and demand.

  'By 1999, the supply and demand will reach a balance,' he said.

  'The Chinese corporations themselves are also expected to [eventually] demand better quality offices.'   Mori Building has three projects in China.

  The group is building the 24-storey Senmao Building in Dalian, Liaoning province, which is due for completion in November.

  Costing 6.5 billion yen, the building will have a floor space of 499,449 sq ft.

  In Shanghai, the group is constructing two office buildings in Pudong New Area's Lujiazui Finance and Trade Development Zone.

  The 46-storey Shanghai Senmao International Building, with a floor space of 1.2 million sq ft and costing 21 billion yen, is scheduled for completion in the spring of 1998.

  It was the plan to build the 95-storey Shanghai World Financial Centre that made headlines.

  At 460 metres, it will tower over the 443-metre Sears Tower in Chicago which now holds the world crown.

  The 75-billion yen building, which will have a floor space of 3.4 million sq ft, has gained support from major Japanese banks. It is scheduled to be completed in 2001.

  With a smile, Mr Mori said he was proud to be 'making the world's largest and tallest building in the early part of next century'.

  'It saves us a lot of advertising costs,' he said.

  How does he feel about being the son of the world's richest person?   'The richest man has to have cash, I have only assets.' 



Mori Building chief looks to China market