Singapore-Listed Thakral Sells Osaka Hotel Stake, Eyes More Japan Divestments

Thakral Corp has sold its 50 percent stake in a 120-key business hotel in Osaka for an undisclosed sum as the Singapore-listed investment firm continues to scale back its exposure to Japanese real estate.

The firm, whose businesses span real estate, consumer product distribution and  tech investments, said in an announcement on Monday that it achieved S$1.7 million ($1.3 million) in post-tax gains from the disposal of its half stake in the Kita-Umeda district property formerly known as R Hotels Inn to an undisclosed buyer.

“The sale of the hotel property came at the right time given the strong tailwinds for the property market in Osaka,” said Thakral group chief executive officer and executive director Inderbethal Singh Thakral. “We are looking to redeploy the capital into higher-yielding investments and our group’s working capital needs.”

With Osaka’s real estate market on the rise, Thakral said it is also planning to sell off its two office buildings in the city, with the company set to significantly trim its S$46.7-million Japanese real estate portfolio as it prepares to put those assets on the market by late September.

Exiting After 6 Years

The firm is selling the property one kilometre (0.6 miles) north of the Osaka train station nearly six years after acquiring it following a JPY 500 million ($3.4 million now) renovation by the previous owner. The company did not disclose the price of its 2017 acquisition at the time.

Offloading the Umeda district property leaves Thakral with a 50-percent stake in the 105-key Best Western Osaka Tsukamoto as its sole remaining hotel asset. In its 2022 annual report, the company said it also plans to divest that Osaka city centre asset.

Thakral continues to reduce its exposure to Japanese real estate even as the market shows signs of steady recovery.

In its first-half earnings report published earlier this month, Thakral pointed out that average daily room rates in Japan’s hospitality market had already surpassed pre-pandemic levels as demand rebounds. “As new supply, which peaked in 2020, is limited over the next few years, room rates are expected to remain at elevated levels for some time,” the company said.

Occupancy growth, however, has been sluggish as the country continues to face staff shortages

The firm said it is also set to exit its investments in the Itachibori Square and Utsubo East office buildings in Osaka, with Thakral holding 55 percent stakes in each asset. A successful divestment of the two properties will leave the company with four remaining office assets in Osaka.

Thakral said the proceeds from the sale of its hotel interest will be used to support fresh acquisition opportunities that will improve the earnings profile of its real estate portfolio and strengthen overall working capital.

In June, the firm announced that it had purchased a 10 percent stake in e-commerce platform CurrentBody.com, which specialises in beauty devices and other electrically powered health products.

Global Investors Lead Hotel Deals

Despite Japan’s recovering market, the country has not been a major growth driver for the company with revenues from its Osaka property portfolio declining to S$1.1 million in the first six months of this year, from S$1.5 million a year ago. The portfolio contributed just 1 percent of the company’s S$104 million total first-half revenues.

“The group’s portfolio of commercial real estate properties in Japan recorded a steady flow of rental income as markets remained steady with stable average rents over the past half-year,” the firm said in its latest earnings report.

Outside Japan, the firm’s property business also includes The Riverwalk office building in Singapore’s Boat Quay district and a portfolio of luxury senior housing communities in Australia, which it developed and operates under the GemLife brand through a joint venture with the Puljich family from Queensland.

The Osaka hospitality exit comes at a time investment giants are rushing to snap up hotels in Japan in the midst of a rapid tourism rebound.

Japan’s hotel sector was the top performing segment for cross-border investments with around $2 billion worth of deals recorded through early August,  according to a report from MSCI Real Assets released this month. The wave of overseas investment in Japanese hotels included deals by private equity titans Blackstone and KKR, Singapore sovereign fund GIC and New York-based fund manager BentallGreenOak.

In July, Hong Kong-based AB Capital Investment picked up the 220-room APA Hotel Kamataeki-Higashi in the Kamata area, west of Haneda Airport, for an undisclosed sum, marking its fourth hotel acquisition in the country.