Kasumigaseki Capital Co., Ltd. (3498) reported consolidated results for the fiscal year ended August 2026 on October 5, 2026: net sales of ¥163,756 million (+69.7% YoY), operating profit of ¥27,866 million (+47.2%), and profit attributable to owners of parent of ¥16,692 million (+62.9%). When it raised guidance on September 17, the company said the upgrade was “mainly due to development projects progressing smoothly in the hotel business, including expanded project profits and earlier sales.” During the year it opened five hotels, acquired 16 development sites, and bought three existing hotels and ryokan. This article reads where the profit was made using the earnings release (kessan tanshin) and the results presentation, and quantifies how developed properties move into funds and a listed REIT — using the contents of the sponsor-affiliated Kasumigaseki Hotel REIT Investment Corporation (401A), which holds 15 properties with 726 rooms, and the estimated settled ADR of the cities and wards where they are located.

Earnings Highlights — Land Sales to Development Funds Drove Growth Within ¥54.2 Billion of Gross Profit

Let us start with the skeleton of the numbers. Net sales of ¥163,756 million for the fiscal year ended August 2026 were up ¥67,255 million from ¥96,501 million in the prior year, and gross profit rose ¥17,747 million from ¥36,436 million to ¥54,183 million. The gross margin fell from 37.8% to 33.1%, but operating profit increased by ¥8,932 million to ¥27,866 million; the results presentation explains that “the substantial increase in gross profit absorbed higher SG&A expenses, including personnel costs.” On the source of growth, the presentation states that “the REIT listing and fund formation in FY8/2025 further expanded developer-investor demand, and land sales to development funds drove profit growth.” In the hotel business, the company sourced 22 projects during the year (16 land, 6 land and buildings) and booked revenue on 16 (14 land sales, 2 land-and-building sales).

The details of the September 17 upward revision are worth noting. Net sales were revised up +9.1% from ¥150,000 million to ¥163,700 million and operating profit +4.2% from ¥26,500 million to ¥27,600 million, while net profit rose only +0.6%, from ¥16,500 million to ¥16,600 million. Sales growing strongly while profit grows only slightly is consistent with the “earlier sales” pulled into the current period including not only high-margin land sales but also land-and-building sales. Actual results exceeded all of the revised figures, and the fourth quarter (June–August) alone generated net sales of ¥75,280 million and operating profit of ¥19,664 million — 70% of full-year operating profit concentrated in the final quarter.

On the other hand, the balance sheet and cash flows reflect the weight of growth investment. Total assets grew ¥100,444 million from ¥121,688 million to ¥222,132 million, and real estate for sale built up by ¥28,507 million from ¥36,381 million to ¥64,888 million. Cash flow from operating activities swung from an inflow of ¥6,893 million in the prior year to an outflow of ¥16,765 million. Net assets, meanwhile, rose from ¥38,193 million to ¥87,836 million, lifting the equity ratio from 29.7% to 39.1%. The results presentation positions inventories of ¥71.2 billion (real estate for sale plus development project expenditures) as “sufficient inventory to achieve the FY8/2027 plan” — the inventory build-up itself is designed to be the source of next year’s gains on sale.

Source: Compiled by HotelBank Editorial Team from Kasumigaseki Capital’s earnings releases for FY8/2026 and FY8/2025. Shares were split 2-for-1 effective September 1, 2025; the FY8/2025 dividend is the pre-split amount.

Source: Compiled by HotelBank Editorial Team from Kasumigaseki Capital earnings releases (FY8/2025 and FY8/2026). FY8/2027 is the company forecast.

From Development to Funds and the REIT — Hotels Are 75 Projects, ¥431.2 Billion of a ¥1.2 Trillion Business

To understand how the profit arises, you need to grasp the cycle the company describes as growing “through structure rather than ownership.” In the results presentation’s diagram, assets move from land acquisition (on balance sheet) to development funds, then to operating funds, and finally to the REIT, with the company earning gains on sale, project management fees, asset management fees and incentive fees at each stage. In other words, the company’s P&L consists not of hotel room revenue but of gains on sale and fees booked each time a development project is transferred to investors. Having a listed REIT means owning the final exit of this cycle within the group, which is what the phrase “establishing the cycle with the REIT” signals.

Checking this in numbers, total business scale — AUM (assets under management) plus pipeline — grew ¥554.4 billion (+83.5%) in one year, from ¥663.6 billion (112 projects) at end-August 2025 to ¥1,218.0 billion (135 projects) at end-August 2026. By segment, infrastructure (logistics and data centers) grew from ¥341.1 billion to ¥505.5 billion, hotels from ¥246.5 billion (56 projects) to ¥431.2 billion (75 projects), up ¥184.7 billion (+74.9%), and overseas from ¥25.7 billion to ¥236.2 billion. In the hotel pipeline list (70 domestic projects worth ¥367.3 billion; 2 overseas worth ¥34.6 billion), 22 opened projects account for ¥72.9 billion and 1,291 rooms, 29 projects under development for ¥142.1 billion, and 19 planned projects for ¥152.3 billion — more than 60% of the business scale sits in projects that have not yet opened.

Source: Compiled by HotelBank Editorial Team from Kasumigaseki Capital “FY8/2026 Results Presentation,” project pipeline and AUM (business scale is total project amount on a cost basis, including some undisclosed projects).

401A’s role in this cycle is clear. According to the REIT’s earnings release for the period ended July 2026, it listed on August 13, 2025 and acquired 15 properties (acquisition price ¥49,210 million) the next day, August 14, and it states that “during the period, there were no acquisitions or dispositions of new properties and no additional issuance of investment units.” In other words, the REIT’s assets have stayed fixed for the year since listing, and additional supply from the sponsor’s development pipeline has not yet begun. At the same time, on October 8, 2026 it disclosed the filing of a shelf registration for investment corporation bonds, which can be read as a move to widen its funding options for the next acquisition. Of the 22 opened projects with 1,291 rooms, the 7 projects with 565 rooms that have not moved to 401A — excluding the 15 properties and 726 rooms it already holds — (FAV LUX Sapporo Susukino 84 rooms, BASE LAYER HOTEL NAGOYA NISHIKI 186 rooms, edit x seven Fuji Gotemba 49 rooms, edit x seven Setouchi Shodoshima 45 rooms, HOTEL FORK & KNIFE Miyajima 34 rooms, BASE LAYER HOTEL FUKUOKA 126 rooms, FAV LUX Miyazaki 41 rooms) form the next visible candidate group on a disclosed basis.

Regional Mix of 401A’s 15 Properties — Ishigaki’s 121 Rooms Are 38% of Acquisition Price; the Other 14 Average ¥50.43 Million per Room

So what does the portfolio of 15 properties transferred to the REIT look like? Checking ownership property by property (N=15 properties, Kasumigaseki Hotel REIT “Portfolio List” as of July 31, 2026), the total is 726 rooms and an acquisition price of ¥49,210 million, an average of ¥67.78 million per room. However, this average is heavily pulled up by seven x seven Ishigaki (121 rooms, ¥18,700 million, 38.0% of the portfolio). Excluding Ishigaki, the remaining 14 properties total 605 rooms and ¥30,510 million, or ¥50.43 million per room — roughly half the level. The portfolio incorporates many small group-stay hotels while anchoring itself on a resort that alone accounts for nearly 40% of the portfolio.

By region, Kyushu has the most with 5 properties, 280 rooms and ¥15,990 million (Kumamoto 1, Kagoshima 2, Nagasaki 1, Itoshima 1), followed by Okinawa with 1 property, 121 rooms and ¥18,700 million; Chubu with 3 properties, 127 rooms and ¥5,120 million (Takayama 2, Ise 1); Chugoku/Shikoku with 3 properties, 125 rooms and ¥4,780 million (Hiroshima 2, Takamatsu 1); Kanto with 2 properties, 43 rooms and ¥3,260 million (Arakawa and Sumida wards); and Hokkaido with 1 property, 30 rooms and ¥1,360 million. The two Tokyo properties account for only 6% of total rooms, and the portfolio’s center of gravity clearly lies in regional cities and tourist destinations. This distribution expresses, in the form of property placement, the investment policy the sponsor sets out in its earnings release — “contributing to realizing a tourism-oriented nation and regional revitalization” and “hotels for group stays where there is a supply-demand gap.”

Source: Compiled by HotelBank Editorial Team from Kasumigaseki Hotel REIT “Portfolio List” and MetroEngines Research & Consulting (property coordinates). Circle size indicates number of rooms.

Source: Compiled by HotelBank Editorial Team from Kasumigaseki Hotel REIT “Portfolio List” (as of July 31, 2026) and its earnings release for the period ended July 2026. All properties were acquired on August 14, 2025. Rent type is based on the forecast assumptions in the same earnings release.

Setting acquisition price per room against room count reveals each brand’s price band. The 10 fav properties range from ¥26.67 million (Kagoshima Chuo) to ¥81.58 million (Tokyo Ryogoku) per room, and excluding the two Tokyo properties they fall within ¥26.67–48.33 million. The 3 FAV LUX properties range from ¥43.40 million to ¥63.46 million, and the 2 seven x seven properties are ¥111.28 million (Itoshima) and ¥154.55 million (Ishigaki) — the higher the brand, the larger the investment per room. The REIT’s earnings release classifies four of these — Itoshima, Nagasaki, Ishigaki and Kagoshima Tenmonkan — as fixed-rent properties, with fixed rent applying “until a certain point at which hotel sales and earnings are considered to have stabilized.” These four account for 283 rooms and ¥30,610 million, or 62.2% of the acquisition price, meaning more than 60% of the portfolio’s value was incorporated with rent fixed at an early stage after opening.

Source: Compiled by HotelBank Editorial Team from Kasumigaseki Hotel REIT “Portfolio List” (N=15 properties; x-axis = rooms, y-axis = acquisition price per room, circle size = acquisition price).

Operating Results of the 11 Variable-Rent Properties — 84.3% Occupancy and RevPAR ¥25,560 in August 2026

What directly drives the REIT’s revenue is the operating performance of the 11 properties on variable rent (the 10 fav properties and FAV LUX Hida Takayama). For August 2026, the REIT reported combined figures for the 11 properties of 84.3% occupancy, ADR of ¥30,309, RevPAR of ¥25,560 and sales of ¥362 million. On a full-year basis, the sponsor’s results presentation shows results for the 11 properties from August 2025 to July 2026 of ADR ¥26,306 (−2.4% YoY), occupancy 75.6% (+11.1pt) and RevPAR ¥19,889 (+14.4%), and projects RevPAR of ¥20,683 (+4.0%) for August 2026 to July 2027. Adjusting rates slightly while lifting occupancy by double-digit points and recovering through RevPAR was the pattern of the first year after acquisition.

Comparing August 2026 property by property against the same month a year earlier (August 2025, the first month after acquisition), RevPAR rose year on year at 8 of the 11 properties. The largest gains were at fav Hakodate (ADR ¥41,980, +21.9%; RevPAR ¥37,691, +26.5%), fav Hida Takayama (occupancy 93.5%, +14.6pt; RevPAR +15.2%), fav Hiroshima Stadium (RevPAR +15.2%) and fav Ise (RevPAR +14.4%). fav Kumamoto kept occupancy at 90.0% while setting ADR at ¥19,445 (−17.8%), and fav Kagoshima Chuo, at 62.9% occupancy, still has room to grow RevPAR. The results presentation also shows that at seven x seven Itoshima, after the April 2026 addition of a pool, sauna area, terrace and lounge, April–July results versus the same period a year earlier were ADR +9.2%, occupancy +16.1pt, RevPAR +39.6% and GOP +89.5% — so the fixed-rent properties are also building a track record toward switching to variable rent.

Source: Compiled by HotelBank Editorial Team from Kasumigaseki Hotel REIT “Hotel Operating Results” (August 2026; the 11 properties with variable rent). The prior-year month is August 2025 (the first month after acquisition, days 1–31). ADR = room revenue ÷ rooms sold (the REIT’s definition).

Source: Compiled by HotelBank Editorial Team from Kasumigaseki Hotel REIT “Hotel Operating Results” (August 2025 and August 2026). Property-level RevPAR of the 11 properties with variable rent.

Estimated Settled ADR in the Host Cities — Down YoY in 10 of 13 Cities/Wards, Yet 8 Properties Grew RevPAR

Next, we check the market level in the cities and wards where the 15 properties are located, using MetroEngines Research & Consulting’s estimated settled ADR (municipal median). In August 2026, estimated settled ADR was highest in Takayama at ¥18,096 (138 properties covered), Ise at ¥17,133 (43 properties) and Ishigaki at ¥16,118 (60 properties), and lowest in Kumamoto Chuo Ward at ¥8,799 (60 properties) and Kagoshima at ¥6,788 (73 properties). Year on year, 10 cities/wards were negative — all except Ise (+8.1%), Ishigaki (+9.4%) and Hiroshima Minami Ward (+0.8%) — with Takamatsu −15.5%, Kagoshima −15.6%, Nagasaki −15.4%, Sumida −14.7% and Arakawa −14.2%, showing that medians in regional cities and eastern Tokyo softened in summer 2026. The Japan Tourism Agency’s “Overnight Travel Statistics Survey,” cited in the REIT’s earnings release, also shows total guest nights for January–June 2026 down 4.7% year on year — a year in which tailwinds for the overall market were weak.

What we want to stress here is that the two should not be compared in absolute terms. The municipal estimated settled ADR is a tax-excluded-equivalent estimate derived by applying an adjustment factor to the lowest-plan level for two guests per room, whereas the REIT-disclosed ADR is an operating result of room revenue divided by rooms sold, with no disclosure of whether tax is included. Because the bases differ, a ratio such as “how many times the market median the property’s ADR is” has no meaning. Only direction can be read — and there are several cases where property RevPAR moved independently of the market’s direction: in Hakodate, where the municipal median fell by double digits (−11.9%), fav Hakodate’s RevPAR rose +26.5%; in Takamatsu (−15.5%), fav Takamatsu rose +0.7%; and in Sumida (−14.7%), fav Tokyo Ryogoku rose +4.5%. This is circumstantial evidence that room configurations designed for group stays are capturing demand different from the two-guests-per-room market median.

Source: MetroEngines Research & Consulting (estimated settled ADR = municipal median; properties covered = N used in each month’s calculation). *The registered address of seven x seven Itoshima is Fukuoka City; this table refers to neighboring Itoshima City as the market of the Itoshima Peninsula the property faces. Itoshima City covers only 4 properties and should be treated as a reference value.

Source: MetroEngines Research & Consulting (August 2026, median estimated settled ADR by municipality. Figures above the bars are YoY changes; Itoshima is a reference value based on 4 properties).

FY8/2027 Forecast and the 16 Development Sites — Disclosed Rooms: 1,806 Across 27 Projects Under Development, 724 Rooms in 11 Projects by Spring 2027

The company forecasts net sales of ¥220,000 million (+34.3%), operating profit of ¥41,000 million (+47.1%), ordinary profit of ¥36,000 million and net profit of ¥24,000 million for the fiscal year ending August 2027, with the annual dividend to rise by ¥35 from ¥165 to ¥200. On the domestic hotel market, the earnings release assumes that “domestic travel demand remains firm, and inbound demand will grow further due to the weak yen,” and inventories of ¥71.2 billion plus progress in selling pipeline projects underpin this forecast. The results presentation also sets targets under its second medium-term management plan of ¥1.5 trillion in AUM for the fiscal year ending August 2029, and ROE with a floor of 25% and a target of 30%.

So how much room supply could the 16 development sites acquired this year represent? Because the company does not disclose room counts by site, we do not create estimated room counts here and instead tally only the range for which room counts appear in the pipeline list of the results presentation. Of the 29 projects under development, room counts are given for 27 projects totaling 1,806 rooms; the remaining 2 (Miyazaki Aoshima Hotel PJ and Ginza EAST Hotel PJ) and the 19 planned projects have undisclosed room counts. Of these, the 11 projects with 724 rooms scheduled to open between November 2026 and spring 2027 represent the disclosed range that could open during the fiscal year ending August 2027. Rebranded BASE LAYER HOTEL properties — BLH NAGASAKI (140 rooms, February 2027), BLH KOBE SANNOMIYA (82 rooms, November 2026) and BLH _ UNION NAGOYA SAKAE (86 rooms, January 2027) — make up more than half of the rooms, followed by development-type projects FAV LUX Asahikawa (64 rooms), seven x seven Yufuin (39 rooms) and edit x seven Ise (49 rooms).

Source: Compiled by HotelBank Editorial Team from the project pipeline list in Kasumigaseki Capital “FY8/2026 Results Presentation.” The presentation notes that “schedules and room counts are subject to change depending on development progress.”

These 724 rooms are almost the same scale as the 726 rooms 401A currently holds. However, the presentation notes that “schedules and room counts are subject to change depending on development progress,” and projects scheduled to open in the fiscal year ending August 2027 are distinguished in bold type in the document, so there is no guarantee that the 11 projects we picked based on the scheduled-opening text exactly match the bold entries. Nor can the document tell us which rows of the list correspond to the 16 development sites. Read as supply, what is confirmed is only that “27 projects under development with 1,806 rooms have been disclosed”; projects scheduled to open in 2028 or later (Nanki-Shirahama 74 rooms, Shimane Izumo 97 rooms, Osaka Honmachi 117 rooms, Naha Hijagawa 105 rooms, Nagoya Nishiki 3-chome 110 rooms, and others) stand further back as later supply.

What Investors Should Check — The Scope of Disclosure on Buyers and Sale Prices, and the REIT’s Rent Structure

Finally, let us organize the scope of disclosure that investors reading these results should check. First, because the company discloses itself as “a single segment, the real estate consulting business,” it does not disclose profit by segment; which business — hotels, infrastructure, overseas or healthcare — generated the profit can only be inferred from the qualitative explanations and project counts in the results presentation. Since the hotel business was cited as the reason for the upward revision, the 14 hotel land sales and 2 land-and-building sales are presumably at the center of the profit, but gains on sale by project are not disclosed. Second, buyers and sale prices are undisclosed in many individual disclosures, citing confidentiality obligations; one can trace fund investor composition (the results presentation describes the Miami project as “financed by a domestic megabank and funded by domestic investors”), but material to verify the reasonableness of prices from outside is limited.

Third, the points to check on the REIT side. For the period ended July 2026, 401A recorded operating revenue of ¥1,655 million, net income of ¥839 million, and distributions per unit of ¥3,145 (¥2,921 plus a ¥224 distribution in excess of earnings), with an end-of-period LTV of 44.1% and a long-term issuer rating of A− from Japan Credit Rating Agency. In the forecast for the period ending January 2027, rental revenue consists of ¥1,275 million in fixed rent (including minimum guaranteed rent) versus ¥462 million in variable rent, so more than 70% of revenue comes from the fixed and minimum-guarantee portion. When the four fixed-rent properties (62.2% of acquisition price) switch to variable rent, and when and at what prices the sponsor’s 7 opened projects with 565 rooms and its projects under development move into the REIT, will simultaneously determine the sponsor’s gains on sale and the REIT’s external growth. Related issues are covered in our comparison of the sponsors of seven hotel REITs, exit design for build-to-sell hotel development, and the durability of hotel REIT fixed rents.

Source: Compiled by HotelBank Editorial Team from each company’s disclosure materials.

Summary

For the fiscal year ended August 2026, Kasumigaseki Capital booked operating profit of ¥27,866 million from gains on sale of development projects centered on land sales in its hotel business, and it expects ¥41,000 million for the fiscal year ending August 2027. The source of profit is not room revenue but the gains on sale and fees earned at each stage of a cycle that moves assets from land acquisition to development funds, operating funds and the REIT, funded by ¥71.2 billion in inventories and a hotel pipeline of 75 projects worth ¥431.2 billion. 401A, one of the exits, holds 15 properties with 726 rooms at an acquisition price of ¥49,210 million, with the single Ishigaki property accounting for 38% of the acquisition price and the four fixed-rent properties 62.2%. The 11 variable-rent properties posted 84.3% occupancy and RevPAR of ¥25,560 in August 2026, and 8 of them grew RevPAR even as estimated settled ADR in their host cities fell year on year. Room counts for the 16 development sites are not disclosed; what can be confirmed within the disclosed range is 27 projects under development with 1,806 rooms, of which 11 projects with 724 rooms are scheduled to open by spring 2027. For investors, the next points to check come down to the scope of disclosure on buyers and prices, the timing of the switch for the four fixed-rent properties, and when and at what prices the sponsor’s 7 opened projects with 565 rooms move into the REIT.