TPG AG JV Buying Grand Nikko Tokyo Daiba for $692M in APAC’s Biggest Hotel Buy of 2024 

Shortly after raising $2.5 billion to invest in Asian real estate, TPG Angelo Gordon is leading the region’s biggest hospitality investment so far this year with the JPY 106 billion ($691 million) purchase of a Tokyo hotel, according to market sources who spoke with Mingtiandi.

Together with local player Kenedix, the US investment manager is buying the Grand Nikko Tokyo Daiba from Hulic Co Ltd, which announced late last week that it will be signing an agreement to sell the 882-room hotel on 31 October. The Tokyo-listed developer said it expects the deal to close by 29 November without providing details on pricing or the purchaser.

Located on Odaiba, an artificial island in Tokyo Bay, rooms in the 29-storey hotel currently are available at around $191 per night, or 22 percent less than the neighbouring Hilton Tokyo Odaiba, potentially giving new owners the opportunity to boost returns.

TPG Angelo Gordon and its partner are making the commitment as Japanese hotels continue to rank among the top targets for investors active in Asia Pacific with trades of hospitality assets in the country expected to reach $4.7 billion this year according to JLL, which would represent a more than 25 percent increase from 2023.

Opportunities to Boost Returns

At the reported compensation, TPG Angelo Gordon and Kenedix are paying the equivalent of JPY 129 million per key for the 122,755 square metre (1.3 million square foot) property, which was renovated just before the pandemic, according to Dan Voellm, chief executive and founder of hotel consultancy AP Hospitality Advisors.

“Grand Nikko Tokyo Daiba hotel is a classic, full-service hotel,” Voellm told Mingtiandi. “At an impressive 882-rooms, the 1998 vintage hotel features one of the largest ballrooms in Japan. Together with nine F&B outlets, the Grand Nikko is a complex asset to operate in a market environment where talent is in very short supply.”

Voellm added that capitalising on the property’s meeting facilities would be key to driving performance for the new owners. In the quarter ended 30 September, Hulic reported net income of JPY 10.5 billion, which was down 28 percent from the same period a year ago. The company’s stock price is up nearly 3.5 percent since it announced plans to sell the hotel last week.

Located on a 20,870 square metre site connecting directly to the Odaiba station on the Yurikamome line and within a few minutes walk of the Tokyo Teleport station on the Rinkai line, the hotel is expected to benefit from rail operator JR East’s plans to extend the latter transit line to Haneda airport within the next few years.

With Disney having announced plans in July to expand its cruise business in Japan, the hotel located less than one kilometre (0.6 miles) from Tokyo’s cruise terminal, could see additional visitor traffic from that development, as well as from the planned opening of the 10,000-person Toyota Arena Tokyo late next year, according to industry analysts.

On an area basis, TPG Angelo Gordon and Kenedix are paying the equivalent of JPY 864 million per square metre for the hotel. A TPG Angelo Gordon representative declined to comment on what the company termed market speculation, while Kenedix and Hulic had yet to reply to inquiries from Mingtiandi by the time of publication.

Cashing in on Hotels

Investment in Japanese hotels totalled $3.8 billion in the first nine months of this year, already surpassing 2023’s full year total, according to a JLL report released earlier this month.

That jump was driven in large part by the $593.1 million trade of The Park Front Hotel @ Universal Studios in Osaka and Singapore sovereign fund GIC’s $435.5 million sale of the Hilton Fukuoka Sea Hawk to a buyer believed to eventually be SC Capital Partners-sponsored Japan Hotel REIT.

Earlier this month, a unit of hotel giant Hilton agreed to buy a Citadines serviced apartment block in Kyoto from SGX-listed CapitaLand Ascott Trust for JPY 6.2 billion, with AXA IM Alts, the alternative investment unit of French insurer AXA, closing on a JPY 6.8 billion purchase of Kyoto hotel in the second quarter.

The sale of the Grand Nikko Tokyo Daiba ranks as the largest hotel transaction in Japan, and all of Asia Pacific, so far this year, according to data from MSCI Real Assets. JLL Hotels and Hospitality is believed to have brokered the transaction.

Deploying Capital

The deal for the Grand Nikko Tokyo Daiba comes after TPG said in May this year that it had raised $2.5 billion for a pair of Asian property vehicles – its regional TPG AG Asia Realty V venture and TPG AG Japan Realty Value, its first domestic fund in Japan.

Asia Realty V focuses on sourcing off-market transactions in Japan, South Korea, mainland China, Hong Kong and Singapore, while Japan Realty Value seeks value-add opportunities in Asia’s second-largest economy, TPG said at the time.

Texas-based TPG acquired real estate-focused Angelo Gordon in a $2.7 billion deal first announced in May of last year. In March of this year the company teamed up with Hong Kong-based Far East Consortium and Atelier Capital Partners, a fund manager backed by Edward Wong Development, to acquire the Capri by Fraser, Changi CIty serviced apartments for S$170 million (then $127 million).

Tokyo-based Kenedix has frequently partnered with international fund managers acquiring Japanese real estate assets, including working with Canada’s Manulife Investment Management to acquire nine apartment buildings for JPY 23 billion in a deal announced in August.