One of the major Fukuoka developers went down last week, adding to continued negative industry news.
Dix Kuroki announced filing for rehabilitation proceedings last Friday the 14th, with JPY 18.1 Billion (abt USD 172M) in liabilities and 105 employees. This is another case being similar to Urban Corp and this type of incidence is locally being referred to as totsuzenshi or `sudden death`, in that the company`s financial situation looks fine on paper – last 5 yrs of fiscal reports showed strong growth in both sales and profits:
Dix Kuroki Unconsolidated Accounts JPY Millions
FY2004 FY2005 FY2006 FY2007 FY2008 (fiscal yearend is March 31)
Sales 15,646 20,226 22,474 26,098 26,801
Operating Profit 460 865 1,444 1,734 1,962
Recurring Profit 303 590 1,136 1,486 1,525
Net Profit 138 311 599 826 854
Dix Kuroki has seen strong growth after listing by taking on larger projects with fund takeout promises, an extension of their local knowledge and long track record of building small 50-100 unit residential blocks for sale as income-producing investment properties to local individual owners.
The problem Dix ran into is that they stocked up on land, particularly in secondary Kyushu cities and Sapporo last year, which now is undevelopable and unsellable due to cuts in development financing allocation by banks and lost exits, also similar to Urban but on a smaller scale and regional assets instead of mainly Tokyo.