Singapore's SC Capital set sights on hard-hit Japanese hotels with $550 mln fund

Japan Hotel REIT Investment

19/08/2021 06:19

By Junko Fujita
    TOKYO, Aug 19 (Reuters) - Singapore's SC Capital Partners
aims to raise around $550 million for a new fund targeting
hard-hit Japanese hotels, its chairman told Reuters, betting
tourism will come back strongly once the coronavirus pandemic
subsides.
    The asset manager is one of a number of foreign investors,
including Blackstone Group  BX.N , aiming to scoop up Japanese
hotels as owners put assets up for sale to generate cash.  
    "I believe very strongly that the trend of foreign visitors
coming to Japan will recover and gather strength and continue
for a very long time," Suchad Chiaranussati, chairman and
founder of SC Capital Partners, told Reuters in an interview.   
 
    "And among all the Asia Pacific markets, today I am most
optimistic on the recovery of tourism in Japan."
    Before the pandemic, Japan had been in the midst of a
tourism boom with the annual number of foreign visitors more
than doubling in five years to 32 million in 2019.  
    That number was only expected to increase with the 2020
Olympics, which helped fuel a hotel construction boom. But those
hopes unravelled after the pandemic sent occupancy rates
tumbling. After a year's delay, the Olympics finished this month
- without spectators or a tourism boost.
    SC Capital Partners, which owns almost 90 percent of the
company that manages real estate trust Japan Hotel Reit
Investment Corp  8985.T , aims to raise around 60 billion yen in
its first yen-denominated fund. 
    The asset manager aims to generate annual returns to
investors of around 14-16%, Chiaranussati said. 
    "In my opinion, the beginning of relaxation of international
travel will likely take place early next year," he said. 
    While SC Capital looks at sectors across Japan's property
markets, Chiaranussati said he sees more opportunities in hotels
given the impact of COVID-19 on valuations.

    PLENTY OF BUYERS
    But some property experts say it's not so easy to get hotels
at rock-bottom prices.
    "There are many potential buyers, so sellers do not have to
lower prices, which is why the number of recent deals are
limited," said Tetsuya Kaneko, managing director at Savills
Japan, a property services firm. 
    "Only those that had been already struggling before the
pandemic could be sold at a discount." 
    While hotel revenues have fallen sharply, in many cases
underlying property values haven't. For example, the appraisal
value of a Kyoto hotel owned by the Invincible Investment Corp
 8963.T  fell around 15% last year, a fraction of the 82% drop
the hotel suffered in its average revenue per available room - a
key indicator known as RevPAR - during the same period.
    Shares in Invincible as well as Japan Hotel Reit Investment
have recovered from their lows in March last year, indicating
that investors are already factoring in a recovery.
    Earlier this year, Blackstone Group bought eight hotels from
the Japanese railway operator Kintetsu Group Holdings  9041.T .
 urn:newsml:reuters.com:*:nL1N2LN08C 
    Seibu Holdings  9024.T , which also runs railways, has said
it plans to sell some hotel assets while continuing to manage
them. Hankyu Hanshin Holdings  9042.T , a railway and department
store operator, has said it plans to close seven of its
money-losing hotels, including ones in the heart of Tokyo and
Osaka.
    SC Capital will start investing in hotels as well as hotel
management platforms and travel-related companies as soon as the
fund is raised by the end of this year, Chiaranussati said.
    Potential investors in the fund will be Japanese and
overseas institutions, such as insurance groups, pension funds
and sovereign wealth money, he said. 

   ($1 = 109.5300 yen)

 (Reporting by Junko Fujita; Editing by David Dolan and Kim
Coghill)
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