SC Capital-Sponsored Japan Hotel REIT Buying Four Properties in Okinawa, Tokyo for $350M

Japan Hotel REIT plans to acquire two full-service Okinawa properties and two budget hostelries in Tokyo’s Shinjuku ward for a total of JPY 56.2 billion ($350 million), the TSE-listed trust’s manager announced Monday.

The transactions for Okinawa Harborview Hotel (JPY 21.5 billion) and Southern Beach Hotel & Resort Okinawa (JPY 16.2 billion) are scheduled to close on 31 July, JHR said in a stock exchange filing. The deals for Mimaru Tokyo Shinjuku West (JPY 9.7 billion) and Hotel Amanek Shinjuku-Kabukicho (JPY 8.8 billion) are to be completed on 12 July.

Each of the four assets is a large, high-quality property in an area where stable accommodation demand and growth can be expected, according to JHR.

“Following the acquisition, we are planning to pursue improvements in portfolio quality and medium to long-term growth through the active asset management strategy utilising JHR’s experience and knowledge,” said the trust’s manager, Japan Hotel REIT Advisors, which is majority-owned by Singapore-based SC Capital Partners.

Renovation Scheduled

The sellers were undisclosed in the filing. The 352-room Okinawa Harborview Hotel near the downtown area of the island’s largest city, Naha, will be leased to JHR strategic partner Hotel Management Japan.

After completing the acquisition for JPY 61 million ($380,000) per key, JHR plans to carry out a renovation of the 1975-vintage Harborview’s guest rooms, restaurants and pools in 2025. The lease contract has fixed rents for the initial two years from July 2024 to July 2026, followed by a rent structure that combines fixed and variable rents from August 2026.

The 448-room Southern Beach Hotel & Resort Okinawa, located in the southernmost city of Itoman, lies 20 minutes by car from Naha Airport and has a lease contract combining fixed and variable rents. The contract expires in December 2025, at which time JHR may revise the existing terms at the 2009-era property.

The latest buys will add to the four properties JHR owns in Okinawa prefecture: Hotel Nikko Alivila, The Beach Tower Okinawa, Oriental Hotel Okinawa Resort & Spa and Mercure Okinawa Naha. The trust plans to grow the Okinawa portfolio further to capitalise on tourist demand.

Meanwhile, the newly built Mimaru Tokyo Shinjuku West and Hotel Amanek Shinjuku-Kabukicho offer a total of 245 rooms aimed at foreign tourists seeking limited-service accommodation in the buzzy area around the capital’s Shinjuku railway station.

The four assets will boost JHR’s portfolio value to JPY 453.1 billion based on buy price. To help fund the acquisitions, JHR will issue new investment units and conduct a secondary offering to raise an estimated JPY 34.1 billion, according to a separate statement released Monday. The trust also lined up JPY 30 billion in loans from various banks.

Tourism Bonanza

The new additions to the JHR stable follow the REIT’s acquisition of the 170-room Hotel JAL City Kannai Yokohama for JPY 4 billion in a deal concluded last December. The trust is also in due diligence to purchase the Hilton Fukuoka Sea Hawk from Singapore’s GIC for as much as JPY 70 billion, sources told Mingtiandi in May.

Last July, JHR sponsor SC Capital joined with Goldman Sachs and the Abu Dhabi Investment Authority to acquire a portfolio of 27 resort hotels across Japan for $900 million in the country’s largest hotel deal of 2023 and top property acquisition by non-local entities during the year.

Tourism in Japan is set for a record year in 2024 after the Land of the Rising Sun welcomed 3.04 million foreign visitors in May, marking a third straight month of more than 3 million, according to the Japan National Tourism Organisation.

The surge has given rise to concerns about overtourism, with the mayor of Himeji saying last week that he would like to start charging foreign tourists six times more than locals to visit the western city’s famed 400-year-old castle. Some local governments are imposing entry taxes to curb foot traffic.