Singapore-listed Ascendas Hospitality Trust has struck a deal to buy three newly-built hotels in Osaka for a total price of about 11.24 billion yen ($101.6 million), amid a surge of overseas tourist arrivals in Japan’s third-largest city.
The acquisition will boost the trust’s portfolio to 13 hotels across Asia Pacific with a total value of over S$1.7 billion. Ascendas Hospitality Trust, which is managed by subsidiaries of Singaporean developer Ascendas-Singbridge Group, already owns a pair of hotels in Osaka and Tokyo.
Announced Monday, the deal for the trio of Japanese properties totalling 518 rooms comes after Ascendas Hospitality Trust made its maiden Korean acquisition in April. The trust is buying this latest batch of hotels from Tokyo-listed real estate firm Es-con Japan Ltd.
On the same day the deal was disclosed, Osaka was rocked by a strong earthquake that killed at least five people and injured hundreds. Later that day, Ascendas Hospitality Trust announced that no physical damage was detected to its existing property or the new hotels that it is buying in the city.
Deal More than Doubles Japan Portfolio
“Osaka is a city we are familiar with and A-HTRUST’s acquisition of Sunroute Osaka Namba in 2014 has been highly successful, with the latest valuation more than double the purchase price,” commented Tan Juay Hiang, CEO of the managers of the trust in a statement. “Given the strong fundamentals of its hospitality market, this is a city in which we are keen to deepen our presence.”
The freehold properties, located in the Honmachi district nearby the downtown business and entertainment hub, are all three-star hotels under Japan’s Hotel WBF brand, and will be managed by a unit of domestic tourism and hospitality firm White Bear Family Co, Ltd.
Hotel WBF Kitasemba West, located at Chuo-ku, Awajicho 3-22, has 168 rooms and was completed in March. Completed in April were the 168-room Hotel WBF Kitasemba East, at Chuo-ku, Awajicho 2-36-1; and Hotel WBF Honmachi, at Chuo-ku, Kitakyuhojimachi 4-6-2. The area is home to destinations such as Osaka Castle and the Dotonbori entertainment precinct, and is served by five subway lines.
The purchase price represents a 2.9 percent discount to the latest valuation of the hotels and equates to around 20 million yen ($182,000) per key, which the trust’s manager says is relatively low compared to some recent hotel deals in Osaka. The statement indicates that the transaction will be fully funded by debt, and is expected to strengthen the trust’s cash flow through master leases for the hotels, providing a more stable income stream.
Distribution per stapled security is expected to rise 4.3 percent for the fiscal year 2017-18, when recent transactions in Seoul and Beijing are also taken into account.
Trust Aims to Tap Osaka Tourism Surge
Osaka, a port city of 2.7 million people in central Japan, has become a key travel destination in the country, with Osaka Prefecture welcoming more than 11.1 million foreign tourists in 2017, which represents an 18 percent increase over the previous year. Overseas tourist arrivals to the city jumped 363 percent over the five years through 2016, compared to a 188 percent increase nationwide.
“Osaka is a key financial centre as well as a popular leisure destination, and inbound travel to the city has been on a strong growth trend. Domestic travel has also been healthy over recent years. We are confident that Osaka, as a gateway city, will continue to attract visitors across various segments,” Tan noted.
Japan Move Continues Deal Momentum
Ascendas Hospitality Trust, a stapled group comprising the Ascendas Hospitality Real Estate Investment Trust and Ascendas Hospitality Business Trust, was listed in 2012 and currently manages a portfolio of some 4,000 rooms across Singapore, South Korea, and Australia in addition to Japan.
This past January, the vehicle sold its only Chinese assets — a pair of Beijing hotels — to a joint venture between US private equity firm TPG and NASDAQ-listed China Lodging Group (also known as Huazhu Hotels) for a total of RMB 1.18 billion ($186 million).
In April, the trust made its first foray into South Korea by picking up a 98.7 percent in Seoul’s KY-Heritage Hotel Dongdaemun, while its sponsor Ascendas (Korea) Pte Ltd took the remaining stake. The deal for the 215-room hotel totalled $68.3 million.
Property giant Ascendas-Singbridge is jointly owned by Singapore government-linked firms Temasek Holdings and JTC Corporation.