Tokyo, Hokkaido Hotels Lead $118M Portfolo Buy for SBI’s Nippon REIT

Nippon REIT has agreed to buy two hotels, two office buildings and an R&D facility for a total of JPY 17.4 billion ($118 million) as the TSE-listed trust aims to improve the quality of its portfolio.

Headlining the batch of target assets is Hotel Resol Stay Akihabara, with the REIT set to pick up the 132-room property in Tokyo’s central Chiyoda ward from Sankei Building for JPY 6.25 billion, according to a Friday stock filing. Japanese developer Sankei is also selling the 190-room Smile Hotel Premium Hakodate Goryokaku in southern Hokkaido to the trust for JPY 2.7 billion.

The deals mark Nippon REIT’s first-ever hotel property acquisitions, as the trust sponsored by finance giant SBI Group looks to cash in on growing demand from inbound tourists and rising room rates, especially in urban areas.

“With this trend also expected to spill over into Japan’s rural regions, variable rent hotels in particular are assets with high price sensitivity whose profitability is expected to improve even during inflationary periods,” the trust’s manager said. “Nippon REIT decided to acquire hotel assets in view of this market environment.”

Gateway to Akihabara

Nippon REIT is paying more than JPY 47.3 million ($320,000) per key for Hotel Resol Stay Akihabara, located just across the Kanda River from the Akihabara Electric Town shopping hub.

The 2020-built limited-service hotel features 130 double rooms, each measuring 15 square metres (161 square feet), as well as 47 twin rooms (18 square metres), eight triple rooms (22 square metres) and one universal room (29 square metres). The complex includes a parking garage with 14 spaces and an affiliated parking facility with 96 spaces.

The REIT is also acquiring Forecast Yokkaichi, an office block in Mie prefecture, from Fuyo General Lease for JPY 3.5 billion; NW Square, an office property in Hokkaido’s Sapporo, from a non-related party for JPY 1.7 billion; and Innoba Ota, a manufacturing and R&D facility in Tokyo’s southernmost Ota ward, from an SBI affiliate for JPY 3.2 billion.

The NW Square transaction is scheduled for completion on 29 August, while the hotel deals are expected to close on 26 September and the Forecast Yokkaichi and Innoba Ota purchases are to be settled on 14 January of next year.

Portfolio Overhaul

The proposed portfolio additions come after Nippon REIT last month agreed to sell two central Tokyo office buildings and a Nagoya retail property to a non-related domestic company for a total of JPY 16.8 billion ($114.4 million).

The trust is parting ways with the trio of assets at a 16 percent premium to their combined book value of JPY 14.5 billion. The divestments of the office buildings, Become Sakae and Forecast Sakurabashi, will take place in September and January, respectively, while the sale of Central Daikanyama in Nagoya closed earlier this month.

Upon completion of the forward commitments and the newly announced acquisitions, Nippon REIT’s portfolio will comprise 103 properties with a total acquisition value of JPY 257.2 billion.