This story is part of Forbes’ coverage of Asia’s Power Business Women 2024. See the full list here.
The Japanese property developer is expanding its portfolio of luxury accommodations to be a third mainstay business alongside office leasing and property sales.
By James Simms, Contributor
As other hotel owners fought for survival, Miwako Date, president and CEO of Tokyo based-Mori Trust, was planning for the future. “While Covid-19 brought tourism to its knees, you could already project inbound tourists returning after a surge of domestic travelers,” she recently said in a local media interview. Today, the privately held property developer, responsible for introducing global high-end brands such as Hilton’s Conrad Hotels and Resorts and the Marriott to Japan, is doubling down on the sector.
As other hotel owners fought for survival, Miwako Date, president and CEO of Tokyo based-Mori Trust Holdings, was planning for the future. Although Covid-19 halted tourism worldwide, she is said to have predicted (rightly) that pent up demand would result in a surge in domestic travel in Japan once the pandemic lifted. Today, the privately held property developer, responsible for bringing high-end hotels to Japan, including several Marriott brands and Hilton’s Conrad, is doubling down on the sector.
With its hotels and resorts business making up no more than about one fifth of annual group operating revenue over two decades, Date is positioning accommodation for a breakout. In the next six years, Mori Trust aims to expand its luxury and premium hotel portfolio until it’s on equal footing with its two mainstay businesses of office leasing and property sales. The idea, says Date, is to hedge against global shocks that have shaken the real estate market with higher returns from luxury lodgings—a third pillar to support profits and growth.
The third-generation property scion opened up to Forbes Asia about her approach behind the rebalancing act from the firm’s headquarters in Tokyo World Gate, a 38-story complex in the bustling Toranomon district that combines green spaces, shops, offices, residences and a hotel from Marriott’s luxury brand, Edition. It builds on the legacy of her late grandfather, Taikichiro Mori, a force majeure whose large-scale urban redevelopments shaped the capital city’s towering skyline in the last half of the 20th century.
SUITE SPOT
Mori Trust looks to capture more income from its hotel portfolio as it targets ¥330 million in operating revenue by 2030.
Date has implemented an ambitious spending program to unlock more value for the Mori group company that her father, Akira Mori, the youngest son of Taikichiro, built into one of the country’s biggest property players. By 2030, Mori Trust is targeting ¥70 billion ($457 million) in operating profit on ¥330 billion in operating revenue, with office leasing, hotels and property sales each contributing ¥100 billion to the top line.
“It’s not enough to just keep doing the same thing,” Date says. “My philosophy is that one must change, and if you have a foundation, you can take risks to gain that something extra. For me, that is hotels.” Japan’s luxury hotel market is projected to see annual compound growth of over 4% over the next eight years, according to India-based consultancy Imarc, as the government looks to position itself as a premium destination for those with cash to spend wanting a unique travel experience.
As part of a ¥1.2 trillion investment across its group businesses, Mori Trust will add 2,000 hotel rooms to the existing 5,300. It has some two dozen hotels under construction or in planning stages across Japan, in addition to the 35 hotels already operating—most managed in partnership with some of the world’s leading hotel chains.
In the fiscal year to March 2024, group income was flat at almost ¥263 billion from a year earlier. But its hotel revenue jumped by half to over ¥66 billion—outpacing earnings growth at the group’s other businesses, providing evidence that Date made the right choice. Office leasing grew almost 8%, while property sales (which mainly consist of condominium units) fell by a quarter. The last two segments are already near ¥100 billion of operating revenue—with property sales in recent years far above that, but hotels still have the most room to expand.
Mori Trust’s hotel “business base is solid, as indicated by the efforts to attract foreign-affiliated luxury hotel brands to Japan ahead of [its] peers,” Tokyo-based Japan Credit Rating Agency analysts Mikiya Kubota and Takeshi Rikawa wrote in an August ratings note. While other major Japanese developers’ hotel units account for a minor percentage of revenue, such as Mitsui Fudosan (9%) and Tokyu Fudosan Holdings (5%), according to the companies, hotels accounted for about a fourth of Mori Trust’s operating revenue of ¥263 billion in fiscal 2024, with office leasing making up 35% and property sales, a third. Interior construction work for offices and commercial spaces accounts for the rest.
Under its latest strategic initiative released in November, dubbed Advance2030, Mori Trust will keep investing in traditional projects along with those going into hotels, with plans to add 379,000 square meters of new office, commercial and retail space—on top of a current 1.1 million square meters—and 800 high-end condo units, financed by a mix of bank loans, bonds and cash, by the end of the decade. Date declined to give an investment breakdown, including its overseas investment—targeted at 20% in a preceding strategic plan—but indicates that offices will account for largest portion of the outlay. “It depends on the opportunities,” she says.
“Offices are a stable business [because of long-term leases]. The hotel business has high volatility, but there’s the potential that it will grow rapidly. Meanwhile, condo sales are a business where investments can be recouped quickly,” she adds. “Balancing these, I thought about making it possible to respond quickly to different economic changes.”
Given its geographic and asset spread—Mori Trust has 64 office buildings, condos and commercial properties in addition to its hotels and resorts, mainly across Japan and the U.S.—there’s no one-size-fits-all approach to navigating global turbulence, says Date. Mori Trust emerged from the pandemic relatively unscathed, with operating revenue up almost 13% between fiscal 2019 and fiscal 2023. But it now faces an aftermath of fluctuating exchange rates, tight labor markets and soaring construction costs. Operating income fell 18% to nearly ¥54 billion in the fiscal year through March 2024 year-on-year on a drop in real estate sales after booking a large office sale the previous year.
The majority of assets are owned by Mori Trust, with some also held by two listed subsidiaries. Tokyo-based Mori Trust Reit consists of 20 office, hotel and retail properties, while Osaka-based Eslead, which Mori Trust acquired in 2013, develops and sells mid-tier to luxury condos. Eslead, which had over ¥80 billion in revenue in the year through March, is focused in the region of Japan’s second-most populous metropolis, and accounts for the majority of Mori Trust’s property sales unit’s operating revenue. Shares of the larger Mori Trust Reit (market cap: ¥217 billion), which haven’t yet recovered to pre-pandemic levels, are down 17% in the past 12 months. A final listed subsidiary, MT Genex, which had ¥3.8 billion in revenue last fiscal year, does interior construction work.
Date says a shift in focus to hospitality not only spreads risk, but also shows investors and lenders that it has a stable earnings base. “Raising funds during good times is a given but being able to during the bad is a must for a company,” she notes. That includes expanding its property portfolio beyond Japan to ensure steady cash flow. Date first began to invest in U.S. real estate in 2016, the year she took the reins as president.
She spent $700 million in 2023 for Mori Trust’s first investment in New York City, a nearly 50% stake in 245 Park Avenue, a 45-story tower in Manhattan, in partnership with New York-based SL Green Realty, which followed a $531 million purchase to buy an office tower in Washington, D.C. in 2022. Other U.S. buys included acquiring an interest in a life science lab and office in Boston last year, two office buildings in Virginia (2022) and an office complex in Silicon Valley (2019), which she has since sold.
More recently she’s looked closer to home. In August, the company announced its investment in a housing development in Bangkok with Thailand’s Major Development, saying it expects the 44-unit gated community to garner ¥9 billion in sales.
Mori Trust entered the hotel space in 1976 through its domestic Laforet Hotels & Resorts, alongside its newly launched Laforet Club, a corporate membership club that provides priority access to client companies. Its first upscale tie-up with an international brand was in 2005, the 291-room Conrad Tokyo—owned by Mori Trust and operated by Hilton—was among the international high-end luxury hotel brands that could compete with Japan’s iconic brands such as Hotel Okura and Imperial Hotel.
Five years later came the 292-room Westin Sendai in northern Japan, which Mori Trust owns and operates as a franchisee—its preferred approach, Date says, where it shoulders the investment and operating risk but has all the upside potential and management freedom. (Westin is a Marriot marquee.) “We thought, ‘How can we make it viable to invest in new hotel development?”’ she says. “By targeting operational efficiency, we were able to show that, and that we could manage an overseas franchise with the Westin.”
From there Mori Trust joined forces with Marriott International. Today about half of the hotels it wholly or partially owns are operated through Marriott brands, including three from its The Luxury Collection, a Sheraton on Okinawa and two Edition properties in Tokyo. And while Mori Trust owns five hotels nationwide under the Laforet brand, another eight were rebranded as Marriott and Courtyard by Marriot hotels. Mori Trust has also expanded its partnership with Hilton to two more hotels under the U.S. hotel group’s flagship brand, and inked an agreement to open a hotel with IHG Hotels and Resorts in Nagasaki.
The current outlook for the Japanese hotel property market is positive and overseas investors have “very high interest,” James Yukio Abe, investment sales chief at consultancy JLL Hotels & Hospitality in Tokyo, says by email. In 2024, JLL forecasts overseas investment into Asia-Pacific hotels will rebound to $11.6 billion, led by $4 billion spent in Japan.
An essential component of Date’s vision is to attract more premium guests outside of Japanese cities, she says, and its partnerships are a way to do that. Last year Mori Trust completed the 43-room Shisui hotel, the former prefecture governor’s residence in the ancient capital of Nara, which falls under its in-house brand Sui and is operated by Marriott’s The Luxury Collection. Other dual-branded properties are the 39-room Suiran in Kyoto and the 58-room Iraph Sui on Okinawa.
Separately, the outlook for Tokyo, where Mori Trust owns mainly Grade A office space by floor area, is improving, despite vacancy rates moving up a bit, Date says. In the third quarter of 2024, the Grade A vacancy rate was 5%, up from 4.6% the previous quarter, international property consultancy CBRE notes. As leases are set in years, there’s a lag between a decision to reduce space or move out. “A 2% or 3% vacancy rate is extraordinarily low. Five percent isn’t bad. Rents are bound to have fallen, but they’re at the cusp of rising again because Japanese firms are becoming more active in [office] searches,” Date says. “And if foreign firms start too, there’ll be a dearth of space and prices will quickly jump.”
One lingering Covid concern is that firms may downsize their office space as more staff work from home, but Date isn’t worried. “Recently, there’s been a return to offices. Those that reduced their offices probably realize that they don’t have enough space,” she says. “The pandemic impact has hit bottom, and we’re now heading toward a recovery.” By late next year, Mori Trust plans to open its latest Tokyo development, Tokyo World Gate Akasaka, a 13,100-square-meter site including a yet-to-be-named hotel, residences, shops and restaurants, anchored by a 43-story office tower. (The firm hasn’t disclosed investment costs.)
Based on improving office and hotel earnings and cash flow as new properties open, and a “conservative financial management policy” balancing cash and investment, Japan Credit Rating Agency upgraded Mori Trust Holdings’ credit a notch to AA from AA-, with a stable outlook, in August. Meanwhile Date has worked to keep the group’s debt in check: At 0.78, Mori Trust’ debt-to-equity ratio is about half the gearing of its peers such as Tokyu Fudosan and Mori Building. Going forward, an issue for Mori Trust will be maintaining good financial standing while making large-scale investments, Japan Credit Ratings Agency’s Rikawa, says by email.
An independent Mori Trust came into existence after the 1993 death of Date’s grandfather Taikichiro, an economics professor who pivoted to property development at age 55, and whose Mori Building helped transform Tokyo’s residential streets into a modern urban hub. Following a disagreement over corporate strategy, Akira and his brother, Minoru Mori, parted ways starting in 1999—with Minoru taking over the family’s Mori Building and Akira turning Mori Trust, a subsidiary of Mori Building, into a new firm. Today Akira and his family share a net worth of $4.4 billion, while
Yoshiko Mori, Minoru’s widow who inherited part of his estate including a share of Mori Building, has a $2.4 billion fortune. Minoru’s son-in-law, Shingo Tsuji, now runs the latter.
Date joined Mori Trust at the age of 27 in 1998, first working in back office operations, after a stint at the now-defunct Long-Term Credit Bank Research Institute, right out of Keio University, where she earned a graduate degree in urban planning. After her two older brothers left the company, she was appointed president in 2016—a rare corporate move in a country where the eldest son usually takes the top job at family-run firms.
At 53, Date, who likely has decades to go before retirement (Akira is 88 now), says that there is no plan to have a family member succeed her nor are there other family members, outside of her father, at the firm today. “My father used to tell us that ‘it’s not a given that your generation will run the company,’” she says. “He always said that ‘the most qualified person at the time will be chosen.’”
TOURISM TARGET
The push by Miwako Date, Mori Trust Holdings’ president and CEO, to increase luxury hotel offerings in Japan dovetails with government efforts to bring high-end tourists to Japan. The country aims to double visitor arrivals to 60 million by the end of the decade from a projected 35 million this year, lured by a weak yen and Japan’s culture, cuisine and historic sites.
Date, who sits on several tourism advisory panels across government and business organizations, acknowledged the problems facing the hospitality sector, especially given the labor shortage and need to improve working conditions and wages.
Other issues exist like transportation bottlenecks, she adds, including domestic flights that have yet to return to pre-pandemic levels and a lack of capacity to move people from airports and train stations to their final destinations.
More importantly, she says the current goal of 60 million visitors is too conservative and the government looks to fall short of the targeted ¥15 trillion ($98 billion) in inbound spending by 2030. That’s partly because fees for activities and cultural attractions, such as museums and temples, are a fraction of those elsewhere, she notes.
“The government needs to step back and reassess its target, what kind of visitors its strategy wants to attract and how the country is going to host them,” Date says. Steps include relaxing rules to allow more ride-sharing and increasing earmarked hotel and visitor taxes to help pay for tourist infrastructure, like public transportation. “It needs a new master plan.”
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