Boldly Leading Digital Innovation in Real Estate Investing

Last year, Japan’s real estate market continued its strong performance, with investment volumes exceeding JPY 4 trillion. The hotel sector, in particular, saw significant growth, driven by a record influx of tourists. Given these macro trends, what key factors make Japan such an attractive destination for foreign investors?

I believe three key factors have made Japan a prime destination for overseas investors. First is Japan’s low-interest rate environment, which has led investors to view real estate as undervalued. Second is the depreciation of the yen, further enhancing the perception that Japanese real estate offers attractive investment opportunities. Third is Japan’s geopolitical stability, which sets it apart from other Asian markets like Korea and China, making it a more secure and predictable investment destination.

In the first half of 2024, transaction volumes from overseas buyers contracted by approximately 60%. This decline was driven by two key concerns. First is the fear of potential interest rate hikes by the Bank of Japan (BOJ). In particular, concerns persist that the yen’s depreciation could force the BOJ to raise rates. This uncertainty has been further exacerbated by the election of Donald Trump in the U.S., as his proposed tariffs are expected to fuel inflation, intensifying these fears. Second is the concern over oversupply in certain asset classes, especially in the hotel sector and luxury residential market, which have seen significant new developments. Given these factors, how serious do you believe these concerns are today?

The Japanese government and the Bank of Japan (BOJ) are gradually raising short-term interest rates, with a 0.5% increase last week. At the same time, construction costs are rising, and inflation—reflected in the Consumer Price Index (CPI)—is becoming increasingly evident in Japanese society. However, this must be viewed in the context of the low-interest-rate, deflationary environment that has persisted for the past 30 years. In this sense, inflation can be seen as a positive sign of economic revitalization for Japan.

From a real estate investment perspective, property serves as a key inflation hedge, which should drive increased investment activity. Additionally, real estate remains attractive for tax optimization strategies, including inheritance tax planning and mitigation measures.

Regarding concerns about oversupply, the outlook depends on the geographic focus. At the national level, overall demand is declining due to Japan’s aging and shrinking population. However, in metropolitan areas like Tokyo, the population is actually growing, and there is still a shortage of RC structured multifamily condominiums, suggesting sustained demand in high-value urban markets.

Inflation initially surged due to geopolitical events, particularly the war in Ukraine, which drove up energy prices and the cost of grains and other essential goods. However, there is now a strong case to be made that Japan has transitioned into a demand-led inflation cycle. Last year, Japan recorded a 5% wage increase—the highest in over 30 years—and current trends suggest that a healthy inflation rate of around 2% to 3% is likely to persist. Looking ahead over the next five years, how do you expect inflation and wage growth to impact the real estate market?

There is a clear correlation between inflation and wage growth, creating a cycle where rising wages lead to higher rents. With wage increases, it becomes easier to adjust rental prices upward, making the market more attractive from an investment perspective. This is particularly beneficial for our firm, as we deal with RC structured multifamily condominiums,allowing us to pass on cost increases through higher rental rates—a key advantage for investors.

At the same time, inflation has made homeownership increasingly difficult for many Japanese buyers. As a result, more foreign investors are entering the market, viewing Japanese condominiums as strong investment opportunities, while domestic buyers are shifting their focus toward rental properties. In response to this trend, we are currently prioritizing family-style rental condominiums as one of our primary investment targets.

We've seen significant activity in the multifamily asset sector, with major institutional investors like BlackRock and Goldman Sachs entering the market last year. Historically, these firms had limited exposure to this asset class, making their recent moves particularly notable. However, concerns are growing over excessive development in this segment, especially given the rising costs of construction. Many developers are now shifting toward luxury housing, as the profitability of lower-cost projects is being squeezed. As a result, there is increasing consensus that selecting the right property in the right location is more critical than ever. Unlike in recent years, the market may not continue its uninterrupted growth trajectory. Do you agree with this assessment? And how do you see the luxury housing and new condominium market evolving over the next few years?

Despite the growing supply of luxury housing, I still see significant opportunities in this segment due to strong demand. While it may not be as pronounced as in the United States, wealth disparities in Japan are widening, leading to an increasing number of high-net-worth individuals seeking luxury properties.

Although I’m not deeply familiar with the exact pace of supply and demand dynamics, I believe the luxury housing market still holds substantial potential for growth.

One of the fastest-growing sectors in Japan is tourism, with a record-breaking 35 million visitors last year. This surge has fueled a 72% year-on-year increase in hotel sector transactions, surpassing JPY 335 billion, as more companies recognize the sector’s potential. Your company has also entered this space. What drove your decision to expand into the hotel sector? What are your expectations for the future, and how do you plan to differentiate your hotel offerings in an increasingly competitive market?

Our hotel business is focused on inbound tourism, which continues to grow rapidly. As you mentioned, 35 million tourists visited Japan last year, and the government has set a target of 60 million by 2030, creating a significant demand for accommodations.

In our survey, many of these visitors travel in groups of three or more and stay for seven days or longer. However, there is a shortage of accommodations designed for group stays, particularly those offering essential amenities like laundry facilities, kitchens, and dining areas.

Recognizing this gap in the market, we are addressing the need by developing hotels specifically designed for group travelers, ensuring they have the space and service required for a comfortable, extended stay.

Rakuten STAY Naha Miebashi

Rakuten STAY Naha Miei Bridge-4

Japan’s labor shortage has become a serious challenge, particularly in the hospitality sector. To address this, we are implementing IT solutions and labor-saving technologies to minimize staffing needs while maintaining efficiency and service quality.

Our in-house IT team is developing a digital system to streamline key operations, such as guest reception, housekeeping requests, and linen changes. In addition, we are actively pursuing other digital transformation (DX) initiatives to enhance operational efficiency and improve the guest experience.

We recently interviewed Kasumigaseki Capital, which follows a similar strategy of focusing on hotels for long-term stays and large groups. Interestingly, they mentioned that through optimization efforts, they have been able to lower break-even occupancy rates to below 50% in their newer properties—well below the industry benchmark of around 70%. With your focus on IT-driven efficiencies and labor-saving measures, do you have target occupancy rates that you’re aiming for in your optimized hotel operations?

Our goal is similar, and we have already developed a mechanism that allows us to achieve a break-even occupancy rate of less than 50%.

Since your founding in 2011, you have established yourself as a leading investment platform that democratizes real estate investment opportunities. One of your notable milestones has been your expansion into Asia,     marking a significant step in your growth. Could you provide an overview of key milestones in your company’s history and the role you are playing in shaping the real estate investment sector?

Our company was originally established as a family office focused on bond and asset management. A major turning point came when we embraced digital transformation (DX) and crowdfunding technologies, allowing us to expand our business model.

In 2018, we launched the CREAL crowdfunding platform, with the goal of democratizing real estate investment for individual investors. However, due to limited market recognition and a lack of track record, raising sufficient capital proved challenging. To strengthen our position, we listed on the Tokyo Stock Exchange in 2022, enhancing our credibility and access to capital.

Another key milestone came in 2023, when SBI Holdings acquired a 20% stake in our company. This partnership has provided us with stronger market credibility and expanded access to potential new customers, marking a significant breakthrough in our growth strategy.          

Your crowdfunding efforts are particularly impressive, especially given that you’ve scaled to over 90,000 investors while delivering strong returns and receiving overwhelmingly positive customer feedback. While real estate crowdfunding holds great potential, few companies have managed to build successful, sustainable, and large-scale platforms in this space. What do you believe has set you apart and contributed to your success where others have struggled?

The biggest driver of our success is our management team. I began my career at Accenture Japan LTD before moving into real estate fund management, and our team brings a diverse set of skills, spanning IT, real estate, M&A, and asset management. This deep bench of talent and expertise has been instrumental in the success of our crowdfunding platform.

Additionally, there are three key elements to building a successful real estate crowdfunding business: system development and digital transformation (DX), digital B2C retail marketing, and product development with asset management expertise. Our strong in-house capabilities in all three areas have allowed us to differentiate ourselves and achieve sustainable growth.

When comparing ourselves to competitors in the same business such as real estate investment companies, they have strong capabilities in product development and sourcing, but they lack in-house expertise in IT systems and marketing. On the other hand, other IT-driven companies excel in systems and marketing, but they struggle with sourcing and developing real estate products. Our ability to integrate expertise across all three critical areas has given us a distinct competitive advantage in the market.

The CREAL product and service portfolio is primarily designed for retail investors, but you also offer CREAL PB, which caters to individual investors with a fully integrated service that includes financing, loans, tax advisory, and property management. Investors must have a minimum of JPY 10 million to participate in CREAL PB. Additionally, you have CREAL Pro, which targets institutional investors and high-net-worth individuals. Given that these products serve different investor segments, what synergies are you able to create between them, and how do they complement each other within your broader strategy?

One unique aspect of CREAL for investment strategy is our focus on assets in the JPY 2 billion range. This asset class is too large for individual buyers to purchase directly, yet too small to attract the attention of institutional investors. Thus, this asset class is relatively cheaper. We can swiftly invest in those assets by using our crowdfunding platform CREAL to make a profit. By identifying less popular or undervalued properties with attractive pricing, we create investment opportunities that might otherwise be overlooked.

As for creating synergies with CREAL PRO, a key part of our strategy is aggregating smaller investments accumulated by CREAL into a bridge fund of approximately JPY 10 billion to JPY 20 billion, which allows us to develop a larger fund specifically targeting CREAL Pro customers. This is the synergy we create between our retail and institutional investment platforms among CREAL and CREAL PRO.

Similarly, there is a natural progression between CREAL and CREAL PB. The latter serves as the next step for retail investors as they accumulate wealth. With CREAL, investors can enter the market with as little as JPY 10,000, allowing us to attract and nurture individuals interested in real estate investment. Over time, as their investment capacity grows, we guide them toward CREAL PB, where they can access larger investment opportunities, financing solutions, and wealth management services.

CREAL showcases exceptional growth, with assets under management growing from JPY 1 billion in 2019 to JPY 66 billion last year. Looking back over the past five years, what do you see as the key drivers behind your success in attracting foreign investors? Additionally, are there any new investor regions you are looking to expand into?     　    

Our strategy is to unify multiple products and asset classes under a single investment platform. While real estate remains our primary focus, we will expand our multi-asset approach into alternative investments, including private credit, renewable energy, ships, airplanes, wine, and whiskey.

By democratizing access to these traditionally institutional-only investment opportunities, we are enabling retail investors to participate in markets that were previously out of reach, creating new avenues for diversified and high-value investments.

We are expanding our asset offerings to provide tailored investment products for different customer segments. CREAL serves entry-level real estate investors, CREAL PB is designed for those making direct real estate investments, and our private fund caters to institutional and high-net-worth clients under CREAL Pro.

For clients with higher financial literacy, particularly those seeking tax reduction strategies or taxation countermeasures, we will offer digital bonds and smaller individual real estate opportunities.

Our strategy is to deliver the optimal investment product to each client through the most appropriate distribution channel—all within a unified platform. Unlike traditional equities or bonds that can be purchased on the open market, we develop our own financial products. This also extends to property development, such as the hotels we discussed, which we integrate into our crowdfunding platform for investor participation.

Our vision is to become the "Uniqlo of finance"—a company that not only creates its own financial products but also sells them directly to investors, a model that remains rare in the finance industry.

Shifting to your overseas operations, you established an office in Singapore in 2018, with a key strategy of targeting high-net-worth individuals in the Asia-Pacific region by offering them investment opportunities in Japan. Could you share insights into your track record with foreign investors so far? Additionally, how important will expanding and strengthening this international business be for CREAL’s future growth?

We officially established our Singapore branch in 2023, though we have had a presence in the country since 2018. During that time, we partnered with PropNex, Singapore’s largest real estate agency, and held monthly Japanese real estate seminars until COVID-19. Through these seminars, we recognized a strong demand for Japanese real estate, and over the five years from 2018 to 2023, we accumulated nearly 100 individual Singaporean investors. This growing interest led us to formally open our Singapore office in 2023 and obtain our own real estate license in the country.

From 2023 to 2024, despite having only two employees, we facilitated JPY 20 billion in accumulated transactions. Our operations in Singapore create strong synergies with CREAL Pro, as we provide similar investment services to foreign investors. However, CREAL ASIA plays a crucial role as the main point of contact, helping investors navigate the language barrier and access opportunities in Japan.

In 2024, we transacted eleven buildings, evenly split between residential and hotel properties. The residential assets are located in Tokyo, while the hotels are in Tokyo, Osaka, and Kyoto.

Given the strong track record and rapid success that CREAL ASIA has achieved in a short period—even with the challenges of COVID-19—what are your expectations for its future growth? Looking ahead over the next five years, what KPIs or targets have you set for CREAL ASIA, and what milestones would you like to achieve?

Although CREAL Asia has only been operating for about a year, our goal is to become the leading Japanese real estate investment platform for ultra-high-net-worth individuals in Southeast Asia looking to invest in Japanese real estate.

Last year, total real estate transactions in Japan reached approximately JPY 4 trillion, with overseas investors accounting for around JPY 1 trillion. Our target is to capture more than 10% of that market share, positioning ourselves as a dominant player in the space.

We see strong demand from investors across the region, and one of our key strengths is our ability to build local teams that can bridge language and cultural barriers. Our goal is to expand beyond Chinese-speaking markets, forming teams fluent in Thai, Indonesian, Tagalog, and other languages, enabling us to connect high-net-worth investors from diverse backgrounds with opportunities in Japan.

With your base in Singapore, much of your focus has been on Singaporean investors. Looking ahead, are you planning to expand into new markets, and if so, which regions are you considering for future growth?

We are looking at Taiwan as a potential expansion market. While Singapore serves as our English-speaking hub, establishing a Chinese-driven operation is an attractive opportunity. Given the geopolitical tensions with China, there is growing interest among high-net-worth individuals in diversifying their investments outside of mainland China. Taiwan could serve as a strategic base to connect with these investors and further expand our reach in the region.

It’s impressive to see CREAL’s rapid success, and 2024 has started off exceptionally well. Your second-quarter results showed a significant surge in sales, surpassing JPY 20 billion—more than 100% growth year-over-year. Additionally, operating income grew by 70%, reflecting strong financial performance. However, despite these exceptional results, your share price and market valuation have declined by approximately 50% over the past year. How do you explain this disconnect between your financial performance and the company’s valuation?

Previously, our P/E ratio was 50, but it has now dropped to 20. While all divisions and segments are experiencing growth, the most significant expansion is happening in CREAL Pro and our overseas business. On the retail investor side, the CREAL platform is still in the process of gaining broader market acceptance, as it is a new concept. However, its long-term growth potential remains strong.

Looking back at our strategic positioning, we placed significant emphasis on CREAL Pro, which led the market to perceive us as a private fund company. Since companies in this category typically trade at an average P/E ratio of around 15, this likely contributed to our valuation decline to 20. In hindsight, if we had positioned CREAL more prominently, the situation may have been different.

That said, we expect a new turning point soon. With the CREAL platform, we are in the process of acquiring a new license, which will be a game changer. This will allow clients to access loans, enabling them to leverage their investments and enhance returns. Once we integrate this financing capability, it will provide a major boost to our growth and overall market positioning.

If we were to return for an interview in 2031, marking CREAL’s 20th anniversary, what key goals and milestones would you hope to have achieved by then? How do you envision CREAL’s growth and evolution, and what kind of company would you like it to be at that time?

By 2031, my goal is to fully realize our strategy of a multi-asset, multi-product single platform, ensuring it is implemented in every possible way. I also want to broaden our product lineup by expanding into alternative investments and incorporating new financial instruments such as security token offerings (STOs), alongside crowdfunding and other innovative investment solutions.

Currently, CREAL have 90,000 registered investors, and our goal is to grow that number to one million. While we have relied primarily on organic growth, without any mass advertising, such as TV commercials, we plan to actively market ourselves so that every individual investor is aware of our platform and the opportunities we offer.

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