Taking the Lead in the Project from Obtaining Leaseholder Information to Constructing the Hotel in Kyoto Osamu Kotou, Chief, Real Estate Lease Business Div. Ⅱ
Takuya Arai, Kyoto Branch

Fuyo General Lease (hereinafter referred to as “Fuyo Lease”), which acquired the leasehold information of Kyoto Karasuma Oike from a close alliance partner, proposed to the landlord the construction of a high-spec hotel to handle the increase in foreign tourists as the most effective way to utilize the land. We selected Royal Park Hotels and Resorts Co., Ltd. (hereinafter referred to as RPHS) of the Mitsubishi Estate Group, as the operator, and selected a major general contractor for design and construction, and promoted the hotel development project ourselves, including building a stable profit scheme, and the hotel has now opened.

The landlord wanted a system that would allow him to earn land income for a long time in a stable manner

――How did this project start?

Arai At Fuyo Lease, we care about building relationships of trust with our customers. As a result, in 2015, the Kyoto branch cooperated with the Real Estate Information Office to obtain land lease information of landlords in the target area from a close alliance partner, which was the origin of this project. The target location is very close to Karasuma Oike Station, which is served by two Kyoto Metro lines, the Karasuma Line and the Tozai Line, making it a convenient location for both sightseeing and business. Moreover, the south side is a corner area facing Oike-dori street, and it is in a good location close to the goal point for the yamaboko float parade in the Gion Festival.

Kotou Various efforts to make Japan a popular tourism destination have led to an increase in the number of tourists visiting Japan each year, and the word “inbound” is now used in the media. Kyoto is rich in tourist resources and is very popular among tourists from Japan and overseas, but at that time, there were still few high-spec hotels to cope with the increase in foreign tourists, and it was also a time when the demand for hotels was increasing.

――What kind of requests did the landlord make?

Arai The landlord had three requests for building a hotel: “a high-grade product with a strong brand image,” “a stable scheme with trusted partners,” and “a mechanism for obtaining stable land use income over a long period of time.”
Based on these requests from the landlord, Fuyo Lease began to prepare a concrete plan, with the development of a high-grade hotel that would be suitable for the good location as the center of the proposal. After careful consideration, we selected RPHS of Mitsubishi Estate Group as the hotel operator, and a major general contractor with a track record of multiple RPHS hotel developments as the design and construction company.
Fuyo Lease borrowed land from the landlord to build the hotel. Fuyo Lease leases the hotel building to RPHS. We created a scheme whereby Fuyo Lease pays the landlord for the land. As a result of repeated and careful presentations of this scheme to the landlord and efforts to build trust, Fuyo Lease’s proposal was adopted from among the proposals of several companies.

Flexibly responding to numerous changes and taking the lead to promote the project for over seven years

――What kind of difficulties did you have when developing the hotel?

Kotou The project was initially set up to coincide with the increase in inbound tourists due to the Tokyo Olympics in the summer of 2020. However, along the way, the business environment changed significantly with the outbreak of the COVID-19 pandemic, and countless changes were required in the hotel plan and specifications.
In particular, in order to further differentiate from the many hotels that opened one after another in Kyoto, we reduced the number of rooms from the original plan of more than 180 to 125, and increased the area per room. Every time we reviewed these plans, we had to verify the economic conditions and try to meet the desired economic conditions of each person involved.
As a result, this project has taken more than seven years since the start, but it has finally reached its completion date. As the environment changed, I think we were able to overcome the problems based on an unwavering relationship of trust with the landlord, RPHS, the design and construction company, and the other companies involved. We were able to respond to the requests as much as possible, and the landlord gave us a high rating when we completed the work.

――Please provide an overview of what the hotel will be like.

Arai The hotel brand is set as the flagship line “Iconic” in RPHS’s “THE series.” The official name is “The Royal Park Hotel Iconic Kyoto.” It is scheduled to open on April 1, 2022.
There are no rooms on the second floor facing Oike-dori, and the terrace and lounge are open to guests. This is a precious location where you can see the yamaboko floats from the same height during the Gion festival. There is also a meditation room where you can easily experience mindfulness, and a large bathing area where you can relax after a long day of traveling.
Michelin chef Shinji Harada will open the Italian restaurant Sincronia di Shinji Harada, and one of the world’s most sought-after pastry chefs, Sadaharu Aoki, will open the patisserie Sadaharu AOKI paris as their first restaurants in Kansai on the 1st floor of the hotel.
In addition to rest and refreshment, we aim to be a hotel that customers come back to again and again and that enhances satisfaction by providing an extraordinary experience.

――What was the significance of this project for Fuyo Lease?

Kotou Fuyo Lease obtained the leasehold information from a close alliance partner, selected the operator and the design and construction company, became the owner, assumed part of the development and business risks, and will maintain the hotel buildings it constructed for a long period of time. In this way, this project is the first time that Fuyo Lease will promote a development project in the lead position. This project is an effort to embody the corporate slogan of “Go Where No One Has Gone Before” and I heard from my senior colleagues that there has been no end to the struggles.
However, the conclusion of this No. 1 project after all the hard work has resulted in the sharing of experience and know-how within the company, followed by the conclusion of multiple “lead projects” by Fuyo Lease. Over the course of seven years, the contact persons in the real estate department and the Kyoto branch have changed three times. The two of us who are in charge of completion feel that it is our mission to make sure that the hard work of many seniors is not forgotten, to transfer this precious experience and know-how to the younger staff, and to make the project an asset of Fuyo Lease.

――How do you view the future development?

Arai The completion and opening of the hotel is not the goal of Fuyo Lease. Our building leasing business begins here in earnest. As a building owner, we will continue to strive to maintain the value of the hotel building over the long term and make it a hotel that our customers will love forever.
Although the business environment is changing drastically and the needs of customers are diversifying, we hope to expand the area where we can serve our customers as Fuyo Lease by listening earnestly, and focus on contributing even more than ever to customers and the community.

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