Invincible REIT Buying Six Japan Hotels From Sponsor Fortress for $400M

Invincible Investment Corporation, a Tokyo-listed hospitality and residential REIT, has agreed to acquire six hotels in Japan from affiliates of the trust’s sponsor, US asset manager Fortress Investment Group, for a total of JPY 57.2 billion ($400 million).

The largest of the six properties, Fusaki Beach Resort Hotel & Villas, is located on Okinawa’s Ishigaki Island, while the rest are in Nagano, Okayama, Aomori, Chiba and Akita on the main island of Honshu. Invincible plans to fund the acquisition by borrowing JPY 29.9 billion and raising up to JPY 33.4 billion from unit issuance.

With the deal’s expected closing on 1 August, Invincible’s assets under management will grow to JPY 548.6 billion, including 92 hotels valued at JPY 507.8 billion, the trust’s manager said in a release.

“INV will consider making additional selective investments in properties that are considered highly competitive in terms of locations and facilities, with the aim to improve the performance of the entire portfolio in terms of revenue growth and stability,” the manager said.

Portfolio Boost

At JPY 40.3 billion, the Fusaki Beach resort is set to become the biggest property by acquisition price in Invincible’s portfolio. The 398-room hotel, completed in 1982 and renovated in 2014, boasts 1 kilometre (0.6 miles) of beachfront, three connecting infinity pools and the largest indoor pool on the island.

Invincible is also picking up Tateshina Grand Hotel Takinoyu, a hot-spring resort roughly three hours by car or train from Tokyo and Nagoya; Tazawako Lake Resort & Onsen near Mount Akita Komagatake and Lake Tazawa; and three limited-service hotels: Hotel MyStays Okayama, Hotel MyStays Aomori Station and Hotel MyStays Soga.

The trust’s manager anticipates a net operating income yield averaging around 6 percent from the six properties, which are forecast to boost net income by 5.9 percent and distribution per unit by 6 percent compared with previous guidance.

Invincible’s earlier acquisitions include the 2017 purchase of a 49 percent interest in the Sheraton Grande Tokyo Bay Hotel, the largest hotel in the Tokyo Disney Resort area, with Singapore sovereign wealth fund GIC taking a 51 percent stake in a deal valued at JPY 100 billion ($909 million).

Sector’s H1 Surge

Investment activity in Japan’s hotel sector jumped 56 percent year-on-year to $1.54 billion during the first half of 2023, according to JLL.

Big-ticket transactions in the first six months of the year were led by KKR and Gaw Capital Partners’ acquisition of the Hyatt Regency Tokyo from Odakyu Electric Railway for a reported JPY 57.1 billion ($410 million), as well as BentallGreenOak’s purchase of the Rihga Royal Hotel Osaka for around JPY 50 billion ($360 million).

Last year, GIC paid a reported $1.3 billion for Tokyo-based railway operator Seibu Holdings’ portfolio of hotels, resorts and golf courses managed under the Prince hospitality brand.