Hilton Sells Japan Resort to Mori JV for $119M

Hilton Worldwide has sold the Hilton Odawara Resort and Spa in Japan to a joint venture between Mori Trust and Mori Trust Hotel REIT for $119 million, according to data supplied by Real Capital Analytics.

The REIT and the Tokyo-based developer have each taken a 50 percent ownership interest in the upscale hot spring resort on the Izu Peninsula 95 kilometres southwest of the capital that will continue to be operated under the Hilton Hotels and Resorts brand, as per an announcement last month by Mori Trust Hotel REIT.

The acquisition comes just in time for the 2020 Olympics in Japan, when the country is expecting an upswing in tourist arrivals and also coincides with an upswing in interest in the nation’s hospitality assets among regional and international investors.

Japan Hotel Transaction Volume Rising

Based on the sale price, the joint venture is paying $730,127 per room for the 163-room hotel complex which occupies a 174,566 square metre (1.9 million square foot) site overlooking Sagami Bay some 35 minutes south of Tokyo by bullet train.

Rooms at the facility are listed on Hilton’s booking site starting at JPY 25,000 per night, with property services firm Savills acting on behalf of NYSE-listed Hilton in the sale of the property

“The disposal of this asset on behalf of our client represents the culmination of a period of active investment and asset management, and coincides with strong long-term investment appetite for Japanese tourism infrastructure in the lead up to the 2019 Rugby World Cup, as well as the Tokyo 2020 Olympics,” said Savills’ global head of hotels, George Nicholas.

Just two years ago, the “onsen” hot spring resort in the Hakone mountains was voted Japan’s Leading Resort by the World Travel Awards and includes elaborate hydrotherapy hot spring bathhouses as well as an 800-square-metre fitness centre, tennis courts, a driving range and putting greens.

The acquisition comes as hotel transactions in Japan hit JPY 195 billion ($1.8 billion) during the first half of this year, a ten percent increase on the corresponding period in 2018 and the largest first-half volume recorded in ten years, according to Real Capital Analytics data.

Hilton Sells after Adding Value to 22-year-old Resort

Hilton has sold the property after investing $21.6 million in renovation works that included an overhaul of all the guest rooms, the three restaurants and common areas, as well as purchasing ten cottages and two buildings used for a timeshare operated by Hilton Grand Vacations, which are not part of the acquisition.

Following the acquisition, the time share properties, which are under separate ownership but are managed by Hilton Grand Vacations on the land adjacent to the resort will pay fees to the new owners for the use of hotel services and facilities at the Hilton Odawara Resort and Spa.

The US hotel firm had purchased the resort in 2015 from the city of Odawara for $7.5 million, after managing it under the Hilton brand on behalf of the municipality since 2004.

One year before Hilton’s relationship with the hotel began, the city had purchased what was then known as Spauza Odawara – a resort with a single, 12-storey property – for $7.7 million.

The Spauza Odawara resort had been developed in 1997 by non-governmental organisation EHDO for a lavish JPY 45.5 billion ($425 million) on former mandarin orchards, according to RCA data and an account in the Japan Times.

Overseas Visitors to Clock 40M

The sale of the resort comes as 16.6 million overseas visitors travelled to Japan during the first six months of this year, up 4.6 percent from the same period in 2018.

With the Japanese government projecting a total of 40 million visitors in 2020, boosted by the Rugby World Cup in September and next year’s Olympics, the country has seen a series of hotel acquisitions in 2019.

Just over a month ago, AXA IM – Real Assets agreed to acquire a 160-room hotel development in Hiroshima for JPY 4.6 billion from a joint venture between a Japanese unit of Sonny Kalsi’s GreenOak Investment Management and the local branch of Bangkok-based budget hotel chain Red Planet.

The acquisition was the third Japanese addition to AXA IM – Real Assets’ €2.5 billion ($2.8 billion) hotel portfolio.

A month prior to that deal, Hong Kong’s Wing Tai Holdings acquired a 134-room Tokyo hotel managed by Red Planet from GK Rio Grande for JPY 4.25 billion.

In January, Japan Hotel REIT acquired the 453-room Hilton Tokyo Odaiba from Hulic for JPY 64.2 billion, after acquiring the property from Elliott Management in November 2017 for JPY 60 billion, according to Savills.

In the same month, Sekisui House REIT acquired a 40 percent stake in the Ritz-Carlton Kyoto for JPY 17.8 billion.