Tokyo, December 05, 2012 -- Moody's Japan K.K. has assigned an A1 rating to the domestic bonds issued by Mitsubishi Estate Co. Ltd.

The rating outlook is negative.

The issuance is a takedown from the company's JPY300 billion domestic shelf registration (effective 12 August 2012), which is rated (P)A1.

The bond issuances are:

o JPY15 billion, Series 112, Senior Unsecured Bond, due 2020

o JPY10 billion, Series 113, Senior Unsecured Bond, due 2024

RATINGS RATIONALE

Mitsubishi Estate's A1 rating reflects its leading position in the domestic real estate market and its superior leasing asset portfolio in central Tokyo.

The rating also takes into account the financial flexibility that the company gets from its solid relationships with its major lenders, especially the Mitsubishi Group financial institutions, and which results in a two-notch lift to its rating.

The rating outlook is negative because the company's leverage may not improve in a timely manner, given the prolonged weakness in Tokyo's office leasing market, lackluster earnings from condo sales, and a high level of investments.

Given the negative outlook, MEC's ratings are unlikely to be upgraded in the short term. However, its ratings will be pressured upward if its leverage and balance sheet improve significantly as a result of a strong recovery in earnings and cash flow in its major segments and a reduction in debt.

For instance, the rating outlook could be changed to stable if the company maintains its adjusted debt-to-EBITDA below 8.5x, adjusted debt-to-gross-assets below 40%, and adjusted EBITDA-to-interest-expense maintained above 6x.

If weak market conditions hinder a timely recovery in earnings, thereby delaying an improvement in MEC's leverage, or if its balance sheet worsens due to changes in its investment and financial policies, MEC's ratings could be negatively pressured.

For example, if it appears that MEC's adjusted total debt-to-EBITDA stays above 8.5x, adjusted debt-to-gross-assets remains above 40%, or adjusted EBITDA-to-interest expense is below 6x on a sustained basis, its ratings could be downgraded.

Moody's will continue to monitor the development of the property market and its impact on MEC. If Moody's sees MEC maintaining its current high debt leverage, its ratings could be reviewed for further action.

The ratings will also be negatively affected if business risk increases due to the company's growing exposure to more volatile businesses, such as residential, urban development, and international businesses.

The principal methodology used in this rating was "Global Rating Methodology for REIT's and Other Commercial Property Firms " published on 1 October 2010, and available at www.moodys.co.jp.

Mitsubishi Estate Co. Ltd., headquartered in Tokyo, is a leading property developer in Japan.

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Takahiro Okubo Vice President - Senior Analyst Structured Finance Group Moody's Japan K.K. Atago Green Hills Mori Tower 20fl 2-5-1 Atago, Minato-ku Tokyo 105-6220 Japan JOURNALISTS: (03) 5408-4110 SUBSCRIBERS: (03) 5408-4100 Koji Kumamaru MD - Structured Finance Structured Finance Group JOURNALISTS: (03) 5408-4110 SUBSCRIBERS: (03) 5408-4100 Releasing Office: Moody's Japan K.K. Atago Green Hills Mori Tower 20fl 2-5-1 Atago, Minato-ku Tokyo 105-6220 Japan JOURNALISTS: (03) 5408-4110 SUBSCRIBERS: (03) 5408-4100 Copyright 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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