Orix JREIT to Buy Osaka Hotel for $230M, Sell Pair of Tokyo Properties for $120M

Osaka hotels continue to attract tourism-led investment, with Orix JREIT on Tuesday announcing plans to buy a 428-key property near the city’s Universal Studios Japan theme park for JPY 35 billion ($230 million).

The TSE-listed REIT is picking up Hotel Universal Port Vita from sponsor Orix Corporation to improve portfolio quality through asset replacement, the trust’s manager said in a release. With that goal in mind, OJR will sell a pair of ageing Tokyo properties — an office building and a retail facility, both in the Aoyama neighbourhood of the capital’s Minato ward — to the sponsor for a total of JPY 18 billion ($120 million).

The 14-storey Hotel Universal Port Vita, completed in 2018, sits next to the 2005-vintage Hotel Universal Port, a 600-key lodging purchased by OJR nearly seven years ago. The latest addition to the portfolio is set to benefit from tourism growth driven by this year’s Osaka-Kansai Expo and the construction of casino-focused integrated resorts due to open in 2030.

“OJR has decided to acquire Hotel Universal Port Vita based on the judgement that the acquisition will contribute to the enhancement of unitholder value, as the property is expected to capture robust inbound demand in collaboration with Hotel Universal Port,” the manager said.

Growing in Kansai

Hotel Universal Port Vita is a two-minute walk from Universal City station on the JR Yumesaki railway line, a local service connecting the Osaka Loop Line to Universal Studios Japan.

OJR is acquiring the hotel for the equivalent of JPY 81.8 million ($550,000) per key, at a net operating income yield of 5.1 percent and a yield after depreciation of 3.6 percent, in a transaction scheduled to close on 31 March.

The REIT has been upping its hospitality holdings in Honshu island’s Kansai region with the acquisitions of the 48-key Mimaru Osaka Shinsaibashi East for JPY 5.3 billion and the 37-key Mimaru Suites Kyoto Shijo for JPY 2.6 billion. Those deals with seller Cosmos Initia, a unit of property giant Daiwa House, were announced in December and are scheduled to close on 1 April.

Global investors have also jumped on the Osaka tourism trend, with US giant Blackstone announcing in December that it would acquire the Nest Hotel budget hostelry in the city for an undisclosed price — part of an effort to build a $1.3 billion hospitality portfolio spanning major destinations in Japan.

Revised Earnings

OJR’s disposed Tokyo assets, the 1970s-era Aoyama Suncrest Building and the 2008-vintage Kita Aoyama Building, are slated for redevelopment, the manager said. Upon completion of the REIT’s announced transactions, the portfolio will comprise office, retail, residential, logistics and hotel assets with a total acquisition value of JPY 760 billion ($5.1 billion).

As a result of the newly announced deals, OJR is raising its operating income forecast for the six months to the end of August by 9.5 percent to JPY 13.5 billion, with the net income view climbing 8.7 percent to JPY 11.9 billion, according to a filing.

The update reflects an expected gain of JPY 1.5 billion from asset disposals to be realised during the six-month period, according to the manager.