Nanto Bank : （Ｓ）Stakeholder Voice①Pursuit of Investment Projects and Regional Contribution through Tourism Promotion and Community Development (923kb)

S	Developing with Our Region
Realizing Sustainable Growth of Our Regional Economy

Stakeholder Voice

Pursuit of Investment Projects and Regional Contribution through Tourism Promotion and Community Development

Motohide Hashimoto and Taisuke Okubo, two organizers of urban development projects in Nara prefecture, spoke with Ryuichiro Funaki of Nanto Bank about their projects and their expectations for them. They also shared their views of the Nanto Bank Group's role in regional revitalization.

MINTO Organization for Promoting Urban Development	The Nanto Bank, Ltd.	NOTE Nara Co., Ltd.
Motohide Hashimoto, Vice-Chairman(full-time)	Director and Managing Executive Officer Ryuichiro Funaki	President and CEO Taisuke Okubo

Organization for Promoting Urban Development (MINTO Organization hereinafter)

The MINTO Organization is a corporation designated by the Ministry of Land, Infrastructure, Transport and Tourism as a body authorized to promote private sector urban development under the Act on Special Measures Concerning the Promotion of Urban Development (Act No. 62 1987).

Since its establishment in 1987 as an agency engaged in financing urban development policy implementation, the MINTO Organization has provided financial support totaling approximately ¥1.9 trillion for over 1,400 private-sector urban development projects. It reviews its support for projects and operations flexibly in accordance with changes in social and economic conditions.

Since the recent demise of the land acquisition and transfer business, which previously played a key role in Japan, the MINTO Organization has engaged in mezzanine support, investment in urban renewal, joint urban restructuring, provision of urban development funding, and support services for the use of public spaces in urban areas.

Name	MINTO Organization for Promoting Urban Development
Address	3-3-3 Toyosu, Koto-ku, Tokyo
Establishment	October 1, 1987
Transition to a general incorporated foundation, April 1, 2013
President	Hirofumi Hanaoka
(Representative Director)
Assets	5.6 billion yen

NOTE Nara Co., Ltd. (NOTE Nara hereinafter)

NOTE Nara is a private company that engages in urban development projects involving historical edifices (old traditional private residences) throughout Nara prefecture.

The company restores unoccupied traditional houses to keep memories of the regional traditions and lifestyles alive.

There are over a million of these old private houses remaining in Japan today, each a repository of regional history and memories. On the other hand, however, they are disappearing at an annual rate of over 4% (40,000 houses/year) due to disuse, along with other regional traditions and resources.

NOTE Nara cooperates with local governments, villages, and businesses to commercialize the use of these traditional residences in its efforts to keep the residential customs and traditional activities of Nara prefecture alive for future generations.

Name	NOTE Nara Co., Ltd.
Address	4 Nishijyodo-cho, Nara City
Establishment	February 26, 2018
President	Taisuke Okubo
Assets	20 million yen

28 Nanto Report 2022, the integrated report of Nanto Bank

Business model	Strategies and
	resources allocation

Urban development in Nara prefecture with an eye to the future

Funaki: With the local economy contracting, our Group has extended its business into Osaka and other major cities and expanded its lending there. We are aware, however, that this business model will eventually reach its limits. We have consequently set a goal of increasing Nara Prefecture's GDP by 10%. We believe that one way to achieve this goal is to reactivate the prefecture's economy by communicating its attractions to potential visitors, attracting more tourists, and increasing the number of people who interact with Nara prefecture in other ways.

Okubo: We have seen no major change in the trend toward urbanization, which convinces me that a macro trend toward an increased flow of people, including people from Tokyo and Osaka, toward Nara is inevitable. In this environment, I believe that Nara, as a regional city, must take measures to promote urban development in accordance with the characteristics and demographics of the region. From a business perspective, I think it advisable to capitalize on Nara Prefecture's most distinctive feature, its tourism resources. One of the reasons my company specializes in remodeling old private residences in rural areas is that these traditional houses themselves remain repositories of various local resources, such as history, culture and foods, of the localities in which they are concentrated. We believe that, by focusing on these local resources unique to Nara prefecture, we can increase the number of people who come here to live, and also

create a population with ties to the prefecture and an exchange population of frequent visitors. This will maximize the lifetime value of the regions and businesses in which we are involved. By attracting more people to spend a portion of the 365 days each year in Nara, we can develop and maintain sustainable businesses in various regions of the prefecture. This will be a deciding factor in realizing our goal of attracting more people to come and settle in Nara Prefecture.

Hashimoto: Our mission at the MINTO Organization is to provide financing to support local and regional urban development as well as to support our local communities and the development of local tourism bases. Tourists are extremely important for regional revitalization, not only in Nara prefecture but also in other prefectures, but our current situation is extremely difficult. I believe that curiosity is a deep-rooted human attribute, and that this curiosity is what makes people travel and seek out new foods. I believe this represents a potential source of profit growth from establishing a business and from Nanto Bank's efforts to raise Nara prefecture's GDP by 10%. This was my experience when I was working for the Regional Taxation Bureau with responsibility for sake makers.

I found that my interest was aroused further when I not only tasted the sake but also observed the sake-brewing process and learned about the brewery operations. I think it would be best to go beyond descriptions of the sake brewed in Nara prefecture to provide information about its background and tell the story behind its brewing. If we do this, I believe tourists will be encouraged to return to Nara. Nara prefecture has a 1,300-year history dating back to the Nara Period when Nara was Japan's ancient capital, and this history gives it an advantage over other regions in its ability to promote Japan's story.

Funaki: You're certainly right that Nara prefecture enjoys the advantage of more tourism resources than other regions of Japan. Unfortunately, even though Nara's representative shrines and temples have high name recognition, we have so far failed to communicate the grand history and story of Nara in a unified manner. I'm convinced that we need to disseminate this information and provide more opportunities for tourists to experience our traditional culture.

Reasons behind the revitalization of Gosho-machi and the focus of the project and related investment

Okubo: There are two key factors supporting revitalization of the town of Gosho-machi. First, the local resources necessary to constructing a narrative and concept are plentiful; and, second, the town offers ideal soil for nurturing a diverse range of initiatives with a view to the next five or ten years. As a regional development company, we offer the value required to establish a sustainable business. We learned of the existence of a disused public bathhouse in the Gosho-machi district of Gosho City through an introduction by Nanto Bank. After about two years of investigation and consideration, we completed a plan based on

a comprehensive concept of Gosho Sento Hotel development. This is a "stay, eat, enjoy hot water bathing" concept that creates a story identifying the renovated hotel as a place to stay, eat, and relax in a traditional public bath. To foster diversity, we have asked a local sake brewery and soap maker to invest in the plan and cooperate in its development. These requests reflect our realization that we need the ground and the soil to grow together with various local businesses. We plan to make use of the properties of four

Nanto Report 2022, the integrated report of Nanto Bank 29

S	Developing with Our Region
Realizing Sustainable Growth of Our Regional Economy

Diagram of the Fund

Private-sector urban development projects

Subsidies	MINTO	Investments	Investments, etc.
Organization
Government		Asset
		Renovation
		Fund	Private-sector urban
			development projects
	Regional
	financial	Investments	Investments, etc.
	institutions

Source: MINTO Organization

Overview of the Asset Renovation Fund

Name	Asset Renovation Investment Limited Partnership
Date of	December 16, 2021
establishment	Date of initiation by Nanto Bank: February 4, 2022
Investment	Private urban development projects utilizing old assets and
targets	developing teleworking bases, open green spaces, etc.
Nature of	Forms of investment (preferred shares, anonymous association
investments), corporate bonds (straight bonds, subordinated
investments
bonds), etc.
Investment	Approx. 4 years (until end December 2025)
period	Remaining period: approx. 14 years (until end December 2035)
Limited liability	The Organization for Promoting Urban Development, regional
partners	financial institutions including The Nanto Bank, Ltd., others
Management	Ohanapana Corporation (100% owned subsidiary of NEC
company	Capital Solutions Limited)

old traditional houses in Gosho-machi to establish a structure that creates a sense of circulation through a decentralized approach in which accommodation, dining and public bath facilities are scattered through the town.

Funaki: Gosho has been a major transportation hub since the Edo period, and the streetscapes of that era remain to this day. The local people's affection for each other and their social interactions nurtured through the town's long history remain alive as well. We want to pass this atmosphere and other aspects of the old town on to the next generation as their cultural heritage. We are also determined to make this project a pioneering success story by revitalizing the town and enhancing its appeal for tourists.

Hashimoto: When it comes to urban planning, we need leaders like Mr. Okubo. We should mobilize the strengths of everyone in the community, including people in the local government, under their leadership to make it work. It is important for us as investors to be aware that we are not only investing in the project, but that we are also pursuing it together. We launched a fund for the renovation of old assets under the Gosho Plan, which is a new program of the MINTO Organization conducted jointly with Nanto Bank, which has been involved in the project from the start, participating actively in various aspects, including holding local explanatory meetings. We expect realization of the project to take some time, and most likely to remain uncertain at times. Small and medium-sized enterprises require appropriate guidance to remain in business, and I believe local financial institutions should take good care of them to ensure their success.

Funaki: This project is positioned as part of our investment banking business. Urban development of this kind requires the collective efforts of the local residents, and we are consequently seeking to create an investment banking model unique among regional financial institutions, in which we do more than simply provide funds by working alongside the residents.

The Sakamoto Ryumon Bunko Collection in Yoshino-machi by Nara Mirai Design

Funaki: Next, I would like to ask your opinions of our planned renovation of Sakamoto Ryumon Bunko into an accommodation facility, a new challenge for us in creating a regional revitalization model and one that we expect will ultimately contribute to an increase in Nara prefecture's GDP.

Hashimoto: I understand that the Sakamoto Ryumon Bunko is an old private residence associated with Nanto Bank. We hope that establishing new ways for visitors to relax and enjoy themselves will produce a flow of visitors touring Nara Prefecture as a whole. I would like to see Sakamoto Ryumon Bunko develop as a core facility of this project offering unique accommodation functions.

Funaki: Sakamoto Ryumon Bunko was the residence of the founder of Yoshino Zaimoku Bank, one of the predecessors of Nanto Bank, and in a sense, it is a cultural asset that has been preserved by the local people. Its location in Yoshino, a World Heritage Site that forms part of the Yoshino-Kumano National Park, adds further to its allure. In this connection, one major issue we face

30 Nanto Report 2022, the integrated report of Nanto Bank

Business model	Strategies and
	resources allocation

is finding ways to make the most of the area's cultural heritage and natural resources. Traveling from the Kii mountain range to our neighboring prefectures, moreover, visitors will encounter other World Heritage Sites and some of the finest tourist resources in Japan, including Koyasan and Kumano, all within a convenient touring radius. If we can renovate an accommodation facility here, it will offer easy access to the region from transport facilities such as Kansai Airport and Nanki-Shirahama Airport. I believe it offers immense potential to contribute to an increase in tourism and the number of visitors to the Yoshino district as a whole by creating new touring routes, not only within the borders of Nara prefecture but extending to other parts of the Kii Peninsula as well.

Okubo: As manager of Nara Mirai Design, I am currently participating in the project to turn Sakamoto Ryumon Bunko into an accommodation facility. This is an extremely ambitious project that involves the Bank in urban development from a business standpoint. We would like to build a lodging facility here as a motivation for people to visit Yoshino, and as a venue for hosting local community residents. The initiatives of NOTE Nara and Nanto Bank extend from Nara City to Tawaramoto, Gosho, and Yoshino. We are hoping to establish systems for touring around Nara prefecture that will create a flow of people from the northern to the central and southern regions of the prefecture, and to lengthen the time tourists remain in the prefecture.

The role the Nara Bank Group should play in resolving regional issues

Funaki: Before we finish, I'd like to ask you about your expectations for our Group in resolving regional issues, and about the role you think it should play.

Okubo: My hope is that the Nanto Bank Group will continue to act as a catalyst for urban development initiatives. I believe Nanto Bank's participation in this project will make our urban development efforts three or four times more effective. When we approach a community with a project as outsiders, we require a guide who can clarify the characteristics and customs of the community for us. Nanto Bank has built close relationships with various businesses, government agencies, and individuals throughout the prefecture over the years, and I believe it has an extremely important role to play in the revitalization of regional communities, including urban development.

Hashimoto: I agree that Nanto Bank can play a crucially important role in the revitalization of Nara prefecture. The Bank has recruited many talented local personnel, making it what might be called a treasure house of human resources. In today's world, it would be a waste to work only within the narrow framework of the conventional banking business. Nanto Bank is already involved in various businesses outside the banking field, for example, including an e-commerce business supporting local products. I believe the various initiatives you are promoting to increase Nara prefecture's GDP by 10% and to expand your support for small and medium-sized enterprises will make the prefecture more vibrant. And I have high hopes that you will achieve significant success in your plans to increase the number of tourists visiting Nara prefecture, and to create a successful example of revitalization for other parts of Japan.

Funaki: Regional financial institutions are under pressure today to change their business models. We are working together to solve regional issues, sweating and taking risks together, with support from residents, outside experts, and public institutions. We realize that the approach we are initiating represents a significant transition from a lending model to an investment banking model. We can be proud that every employee of our Group shares a strong desire to contribute to the regional community. I feel confident that leveraging the strength this gives us to give back to the regional community with the help of people and organizations outside the Group will set us well on our way to achieving our target of a 10% increase in the prefecture's GDP.

Thank you very much for sharing your time with us today.

Nanto Report 2022, the integrated report of Nanto Bank 31