GIC Confirms Sale of Fukuoka Hilton to Mizuho Leasing, Flip to Japan Hotel REIT Expected

GIC has closed on Asia Pacific’s largest hotel deal by room-count this year with a spokesperson confirming to Mingtiandi on Friday that the Singapore sovereign fund sold the Hilton Fukuoka Sea Hawk to Mizuho Leasing in a transaction which closed late last month.

The Mizuho affiliate has on several occasions in the past acted as an intermediary to purchase properties on behalf of Tokyo-listed real estate investment trusts, with industry analysts predicting that SC Capital Partners-managed Japan Hotel REIT will soon acquire the 1,053-key property from the leasing firm.

In a statement at the time that the acquisition was signed in late July Mizuho Leasing, which is backed by Mizuho Financial Group and Japanese trading firm Marubeni, said its ML Estate unit had acquired the Hilton Fukuoka Sea Hawk hotel in Japan’s fifth-largest city, citing the property’s links with the city’s main sports stadium, sea views and event facilities as integral to the investment thesis.

“It is adjacent to the Mizuho PayPay Dome, making it highly convenient for users of the dome, and is expected to attract demand from both tourists and business travelers,” the company said. “It also has one of the largest banquet halls in Kyushu and a chapel with a panoramic view of Hakata Bay from 123 meters above ground, making it one of the most representative hotels in Fukuoka City, and can meet a wide range of needs for MICE and weddings.”

Buying Bridge

While neither GIC nor Mizuho Leasing have released financial details for the transaction, market sources had indicated to Mingtiandi in May that Tokyo-listed Japan Hotel REIT was in exclusive discussions to purchase the Hilton Fukuoka Sea Hawk hotel from GIC for JPY 70 billion ($498 million).

Sources now point to a selling price closer to JPY 65 billion for what was once Asia Pacific’s largest Hilton, which would be equivalent to JPY 61.8 million per key.

In addition to Mizuho Leasing’s history of acting as an acquisition intermediary on behalf of REITs, market analysts also point to Mizuho Bank status as a major financing partner for Japan Hotel REIT as an indicator that the companies could be working together on the purchase.

In March of this year Mizuho Bank was part of a consortium which lent more than JPY 20 billion to Japan Hotel REIT for refinancing and other purposes. In October last year, the institution teamed with Sumitomo Mitsui Banking Corporation and Minato Bank to lend JPY 3.8 billion to the Tokyo-listed trust.

The 35-storey hotel is part of a 169,157 square metre entertainment complex in the city’s Momochi coast area that also houses the Hawks Town Mall and the Mizuho PayPay Dome stadium, which is home to the Fukuoka SoftBank Hawks baseball team. Mizuho had acquired the naming rights for the stadium in April.

With Japan Hotel REIT (JHR) having an established footprint in the biggest city on Kyushu island, and carrying a preference for value-add plays, Dan Voellm, CEO and founder of AP Hospitality Advisors sees the Hilton acquisition as a good fit for the trust.

“JHR owns multiple hotels in Fukuoka and has a good understanding of the market,” Voellm said. “Given its sheer size, the asset likely has diverse upsides actionable by a more hands-on asset management (Japan Hotel REIT’s management affiliate) JHA can deliver. There are certainly ways to drive higher operational efficiencies but also synergies with the neighboring Mizuho PayPay Dome Fukuokoa and Hawks Town to enhance the guest mix.”

Voellm added that Fukuoka’s location, popularity with Korean visitors and proactive government also support the deal. “It’s (Fukuoka’s) rich cultural offering distinct from Honshu and proactive city management, including airport expansion, make this a compelling play. While it is hard to tell if the pricing is right without cap rate at hand, it is way below replacement cost,” he said.

17-Year Investment

GIC had reportedly sought as much as JPY 90 billion ($617 million) for the property when it began marketing the asset a year ago.

GIC had acquired the asset (then known as JAL Resort Sea Hawk Hotel Fukuoka) in 2007 through its purchase of the Hawks Town complex, undertaking a $20 million renovation of the 1995-vintage hotel before it reopened as a Hilton in 2010.

The hostelry reigned as Asia Pacific’s largest Hilton until the Hilton Singapore Orchard re-opened in 2022 with 1,080 rooms. Hilton’s management agreement for the hotel near the famed Fukuoka Tower is said to be expiring soon.

The divestment marks GIC’s complete exit from the Hawks Town complex, having sold the mall element to Mitsubishi Estate in 2015, and disposed of the 52,500-seat stadium to Softbank in 2012 for JPY 87 billion, according to local media reports.

GIC offloaded the hotel in the same month that the sovereign giant added to its Japanese logistics portfolio with the purchase of a Yokohama shed from an undisclosed seller, continuing from a warehouse acquisition spree last year that included six assets purchased from Blackstone for over $800 million and three facilities in Nagoya, Osaka and Fukuoka that it picked up from Daiwa House Industry.

Japan Hotel Deals Pile Up

GIC’s divestment comes after Japan recorded $2.6 billion of hotel transactions in the first half of the year, representing a 64 percent year-on-year increase from the corresponding period last year, according to JLL, which advised on the sale of the Fukuoka property.

With tourism in Japan having exceeded pre-pandemic levels with a record 17.8 million foreign visitors in the first half of the year, according to the Japan National Tourism Organisation, investors have been piling into the country’s hospitality assets. JLL is forecasting that purchases of Japanese hotel properties will reach $4.1 billion this year on the back of attractive yields, limited new supply, and a strong revenue outlook.

“Despite the Bank of Japan raising interest rates by 15 basis points, Japanese hotel assets still provide extremely attractive cash-on-cash yields in comparison to other countries,” Charlie Macildowie, executive vice president at JLL’s hotels and hospitality group said in an August statement.

Macildowie added, “In addition, data tracked by JLL shows the new hotel supply pipeline to be extremely subdued, driven by high construction costs. With demand remaining strong and supply flat, the fundamentals for future revPAR (revenue per available room) growth look strong and investors are recognising this.”

In June, Japan Hotel REIT announced plans to acquire two Okinawa hotels and two budget hostelries in Tokyo for a total of JPY 56.2 billion ($350 million), while France’s AXA IM Alts acquired a Kyoto hotel that same month for JPY 6.8 billion ($44 million).

Those deals came a month after New York-based fund manager Fortress Investment Group announced the acquisition of the Phoenix Seagaia Resort in southwest Japan’s Kyushu island from video game maker Sega Sammy Holdings.

Also in May, 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.