SC Capital’s Japan Hotel REIT Selling Fukuoka Property to Risa Partners for $29M

Japan Hotel REIT plans to sell a limited-service property in Fukuoka to fund manager Risa Partners for JPY 4.6 billion ($29 million), according to an announcement late last week.

The 247-key Washington Hotel Plaza Hakata Nakasu is changing hands for a consideration equal to the asset’s appraised value and a 120 percent premium to book value, the Tokyo-listed trust’s manager said Friday in a stock exchange filing. JHR expects to realise a capital gain of more than JPY 2.3 billion on the transaction, which is scheduled to close on 30 January.

While the 12-storey hotel has stable income-generating capacity, the potential for rent increases is limited because the property is under a lease contract with fixed rent only, said the manager, which is majority-owned by Singapore-based SC Capital Partners.

“Additionally, selling the property at its appraised value enables the realisation of gains on the sale,” the manager said. “Considering these factors, as well as the position of the asset to be sold within JHR’s portfolio, a comprehensive decision has been made to proceed with the sale.”

Party Central

Situated on a small island in the Naka River flowing through Japan’s sixth-largest city, Washington Hotel Plaza Hakata Nakasu is six minutes by foot from Nakasu-Kawabata station of the Fukuoka subway. The area comprises one of the best-known nightlife districts in Kyushu, the third largest of Japan’s main islands.

JHR acquired the 1995-vintage hotel in 2012 for JPY 2.1 billion, and the agreed sale price works out to JPY 18.6 million ($120,000) per key. A single lessee pays a monthly rent of JPY 20 million for the property, with the capitalisation rate exceeding 4 percent, according to the filing.

“Since the asset to be sold has been held for over 10 years, part of the gains will be retained as a reserve for tax purpose reduction entry,” the manager said. “By retaining these gains internally, JHR aims to enhance liquidity and consider utilising the funds for future purposes, such as acquiring new properties or funding capital expenditures, including guest room renovations.”

The hotel’s new owner, Risa Partners, is a unit of Japanese leasing company NEC Capital Solutions. Risa’s investments have included backing for funds managed by Vertex Holdings, the venture capital arm of Singapore state holding firm Temasek. Risa had not responded to Mingtiandi’s request for comment at the time of publication.

Sea Hawk Yet to Land

JHR’s Fukuoka disposal follows a September Mingtiandi report that the trust was planning to acquire a Hilton hotel in the city from Mizuho Leasing after the latter firm purchased the 1,053-key property from Singapore sovereign giant GIC. The REIT had yet to take possession of the Hilton Fukuoka Sea Hawk as of Monday.

In July, JHR completed its acquisition of two full-service Okinawa hotels and two budget hostelries in Tokyo’s Shinjuku ward for a total of JPY 56.2 billion ($350 million). Upon closing of the latest Fukuoka sale, the REIT’s portfolio will consist of 50 properties with 13,069 rooms acquired for a total of JPY 451 billion.

Sponsor SC Capital Partners is in the process of being acquired by CapitaLand Investment, with the deal set to provide the Temasek-controlled giant with its first toehold in Japan’s listed property trust market.