The developer, one of the two companies descended from the Mori real-estate empire, has said it will invest ¥1.2 trillion ($7.8 billion) in projects through the fiscal year starting April 2030. A move into condo hotels is part of that spending plan. Those are condominiums typically with luxury hotel-like facilities — such as concierge desks and room service — that owners can rent out when they are away.
“We’ll be working with foreign hotel operators, and we’re thinking not only about urban areas but also regional properties” including resorts, said Miwako Date, the closely held Tokyo-based company’s president and CEO. She declined to comment further on potential partners.
Mori Trust is trying to reap more profits by getting deeper into businesses that benefit from a jump in tourists traveling to Japan. The nation has already seen more than 30 million visitors in the year through September, the most ever for the period, according to Japan National Tourism Organization data. The government’s goal is to attract 60 million visitors annually by 2030.
The developer has collaborated with Hilton Worldwide Holdings, opening a condo hotel in Okinawa Prefecture in 2021 with the U.S. hotel operator.
Condo hotels, one of Mori Trust’s target investments, have been around for several decades in the United States. They gained popularity in the early 2000s, but demand weakened around 2008 as the global financial crisis raged, according to real-estate advisory firm Luxury Hospitality Advisors. Real-estate firms selling the properties have generally targeted wealthy investors, pitching units as second homes on which buyers can earn extra rental income.
Date is the granddaughter of company founder Taikichiro Mori, an economics professor who made a successful career change to real-estate development that at one point made him the world’s richest person in the early 1990s according to Forbes magazine. Miwako Date took over as CEO from her father, Akira Mori, in 2016, according to the company’s website.
One of the major challenges facing Japan’s real-estate industry is the rising cost of construction, as inflation nears decades-high levels reached earlier this year. The average price of building materials jumped by 37% as of August compared with January 2021, while total construction costs including labor expenses rose by 25% to 29% during the period, according to Japan Federation of Construction Contractors data.
Mori Trust has been trying to respond to rising costs by looking for ways to reduce expenditures and improve product quality, the CEO said.
“We’ve been doing checks like that over and over, but even as we do that, costs keep on going up,” Date said. “It’s like a cat-and-mouse game.”
The developer is aiming for operating profit of ¥70 billion on sales of ¥330 billion by fiscal 2030, from ¥30.3 billion in profit and ¥140.2 billion in revenue in fiscal 2016 when it released its mid- to long-term business plan. That compares with operating income of ¥372.7 billion in the fiscal year ended March at Mitsui Fudosan, a top listed Japanese real-estate firm.
Mori Trust has developed 35 hotels in Japan including Conrad Tokyo and the Tokyo Edition, Ginza, and office buildings such as Marunouchi Trust Tower Main and North in the Japanese capital’s banking district.
Date said that while the office real-estate market is doing well, sharp increases in rents aren’t really possible. It’s easier to pass on higher building costs to hotel customers, “so what we’re looking at is how much new hotel development should occupy our portfolio,” she said.
By Ryo Horiuchi
BLOOMBERG
