AXA IM Alts Buys Kyoto Hotel for $44M as Japan Hospitality Deal Streak Continues

AXA IM Alts has acquired a Kyoto hotel for JPY 6.8 billion ($44 million), as global investors continue to favour Japanese hospitality assets amid a tourism boom that drove visitor arrivals to a record 8.56 million in the first quarter, according to Japan’s National Tourism Organisation.

The alternative investment arm of French insurer AXA Group, which acquired the property from an unnamed vendor on behalf of clients, intends to refurbish and rebrand the asset as the Holiday Inn Kyoto Gojo, with the 183-key hotel set to be completed in early 2025.

“The fallout from the COVID-19 pandemic provided a compelling entry point for new acquisitions in certain pockets of the hospitality sector,” Laurent Jacquemin, head of Asia Pacific at AXA IM Alts said in a release on Wednesday. “The sector’s favourable structural drivers, including an increase in domestic and international tourism, underpin this highly attractive investment.”

AXA IM Alts’ purchase adds to a growing wave of Japanese hotel deals, after acquisitions of hospitality assets in the country reached a record JPY 500 billion in 2023, surpassing the 2022 total by 240 percent and eclipsing the previous record set in 2019 by 4 percent, according to CBRE.

Value-Add Play

AXA IM Alts plans to enhance the 13-storey property’s specifications and amenities, which will include a cafe bar, high end restaurant, state-of-the-art gym, traditional Japanese bathhouse and conference facilities, with the acquisition price reflecting the value-add project’s total cost.

“We have a long track record of successfully executing value-add projects as we look to reposition this sizable, well-located hotel in a market characterised by a scarcity of foreign-brand hotels,” said Jacquemin.

Set to be managed by IHG Hotels & Resorts, the 8,099 square metre (87,177 square foot) property will also see its sustainability credentials boosted with energy efficiency improvements and a certification under Japan’s building-housing energy-efficiency labeling system (BELS).

“We are very pleased to announce our agreement with AXA IM Alts to open Holiday Inn Kyoto Gojo by early 2025, marking the return of the brand to its roots in Kyoto where it was first launched back in 1973,” said Abhijay Sandilya, managing director of Japan and Micronesia at IHG Hotels & Resorts in a release. “We look forward to building on this long-standing partnership with AXA IM Alts and hope to develop even more great hotels throughout Japan in the years to come.”

The hotel benefits from its location near Kyoto Station, the city’s main transport hub, and is situated close to cultural heritage sites.

AXA IM Alts managed €183 billion in global assets as of December, with real estate and infrastructure assets accounting for over €129 billion of that total, and the company pointed to the acquisition as enabling it to continue scaling its portfolio in Japan.

“Japan is a key global market for AXA IM Alts, and one where we will look to pursue our deployment in 2024, targeting those sectors benefiting from supportive technological, urbanisation and demographic trends,” said Jacquemin.

The acquisition adds to a string of Japanese investments by AXA IM Alts, with the fund manager having acquired last year two senior housing properties totaling 331 rooms in the northern island of Hokkaido and a portfolio of 33 apartment assets across Tokyo, Greater Osaka, and Nagoya.

In 2022, AXA IM Alts purchased a 800-bed portfolio of nursing homes in Tokyo, Osaka and Aichi, a 1,482-unit residential portfolio in Greater Tokyo and Osaka, four student housing properties near universities in Greater Tokyo, as well as a pair of Tokyo apartment buildings.

Deal Blitz

Demand for hospitality assets in Japan has been driven by a post-pandemic influx of tourists, with the government estimating that 33 million international visitors will arrive in the country this year, surpassing the previous record set in 2019.

That upswing is helping to boost returns for global investors in the sector, with foreign investors accounting for 46 percent of last year’s hotel investment volume – the highest proportion since 2017, according to CBRE.

Last month, New York-based fund manager Fortress Investment Group announced the acquisition of the Phoenix Seagaia Resort in southwest Japan’s Kyushu island, which includes the 743-key Sheraton Grande Ocean Resort and two smaller hospitality properties, from video game maker Sega Sammy Holdings.

That deal came a week after private equity giant KKR announced that it is launching 14 Japanese hotels under Marriott International’s Four Points Express by Sheraton brand, after acquiring the properties last year through its takeover of Japanese hospitality operator Unizo. KKR had also joined forces with Hong Kong’s Gaw Capital last year on the $409 million acquisition of the Hyatt Regency Tokyo in a deal backed by South Korea’s MDM Asset Management.

Also in May, Japan Hotel REIT, a Tokyo-listed trust sponsored by Singapore’s SC Capital, was  selected by Singaporean sovereign fund GIC as the preferred bidder for the Hilton Fukuoka Sea Hawk hotel. SC Capital had teamed up with Goldman Sachs Asset Management and the Abu Dhabi Investment Authority last year to buy a set of 27 Japanese hotels for $900 million, in the country’s largest hospitality acquisition of 2023.