Orix JREIT Buying Pair of Hotels in Osaka, Kyoto From Daiwa House Unit for $50M

Orix JREIT has agreed to buy two hotels in Japan’s Kansai region from a Daiwa House affiliate for JPY 7.9 billion ($50 million).

The Tokyo-listed trust is picking up 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, according to a filing. The seller, Cosmos Initia, is a real estate sales and brokerage unit of development giant Daiwa House.

The 2021-vintage Osaka hotel is trading at a net operating income yield of 5 percent, and the 2020-built Kyoto asset carries an NOI yield of 7.6 percent. The yields after depreciation are 4 percent and 4.1 percent respectively.

“OJR is reshuffling assets focused on improving portfolio quality with the aims of achieving stable growth of unitholder value,” the trust’s manager said. “OJR has decided to acquire the properties based on the judgment that the acquisition of the properties will contribute to the enhancement of unitholder value, as both the properties are expected to capture robust inbound demand.”

City Centre Locations

Mimaru Osaka Shinsaibashi East is within a six-minute walk of two metro stations in the Shinsaibashi commercial area of Kansai’s biggest city. Situated near the western edge of central Chuo ward, the hotel is roughly 4 kilometres (2.5 miles) from Osaka Castle and surrounding attractions.

Mimaru Suites Kyoto Shijo in Shijo Karasuma, a central area of the former capital, lies three minutes by foot from Shijo subway station and six minutes from Karasuma railway station.

All guest rooms at the two hotels are equipped with a kitchen, refrigerator and other appliances to serve long-stay international travellers, the manager said. The Osaka asset’s sale price translates to JPY 110.4 million ($700,000) per key, while the Kyoto property’s per-key price is JPY 70.3 million ($450,000).

Both hotels are leased to a single tenant at an undisclosed rent, per the filing. The transactions with Cosmos Initia are scheduled to be completed on 1 April 2025.

Expanding Portfolio

Orix JREIT kicked off 2024 with the acquisition of three Tokyo residential projects for a combined JPY 12.6 billion and the sale of an office building in the city for JPY 8.8 billion.

In August, the trust bought the Tenjin North Front Building in Fukuoka’s Chuo ward from Fukuoka REIT for JPY 6.4 billion, representing a 23 percent premium to the appraised value of the 2010-era office block.

Upon completion of the latest hotel buys, Orix JREIT’s portfolio will reach JPY 736 billion by acquisition price across office, retail, residential, logistics and hospitality assets.