2020 Tokyo Olympics drives deals in Japan, boosted by REITs

The run-up to the 2020 Olympics in Tokyo has seen a spike in hotel transactions, driven by the country’s REITs.

The latest acquisition has seen Japan Hotel REIT Investment Corporation invest ¥47,175 million into adding three hotels to its portfolio.

The Olympics is a key driver for the country’s growth. According to the Japan National Tourism Organisation, international arrivals reached an all-time high in the year to March 31, surpassing the 20-million milestone at 21,360,000. The Japanese government aims to welcome 40 million overseas visitors annually by 2020.

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REIT At The Ready

The REIT is following a building trend in the country. According to JLL, the first half of this year saw Japan record the largest transaction volume in the Asia-Pacific region, with $2.1 billion, significantly ahead of Australia with $278 million. Of the top 10 single asset transactions, Japan accounted for five.

“In H1 2016, REITs emerged as a top buyer group given their acquisitive nature in the region’s most active market, Japan,” JLL said. “Looking forward, there remains a general lack of city-center assets for sale and opportunities are expected to generate strong interest.

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“Whilst the investment environment is expected to be dominated by Japan for the remainder of 2016, deal flow should remain robust, supported by stronger buyer activity in Thailand, Vietnam, Korea and Myanmar. Despite recent volatility in global markets, there is still some disconnect between buyer and seller expectations.

“Lower outbound travel from the UK due to the weaker British pound and potential economic downturn may slightly impact occupied room nights across some Asian gateway cities. The immediate impact will be primarily related to leisure travel, business travel is more tied to source markets’ economic health rather than currency, so any real Brexit impact will take some time to materialize.”

JHR said that it aimed to provide investors with attractive investment opportunities in hotels “that can realize both stability and upside potential” and looked to the acquisition of “large-scale, high-quality assets.” 

JHR is the largest REIT in Japan, specializing in hotel property investment and currently owns a total of 38 hotels across the country. The recently renovated Hilton Nagoya, Hotel Vista Grande Osaka and Hotel Ascent in Fukuoka are being acquired. The Osaka property will be rebranded under InterContinental Hotels Group’s Holiday Inn flag by the end of this year.

The Holiday Inn Osaka Namba is the REIT’s first partnership with IHG. “We are pleased to bring the Holiday Inn brand to Osaka - Japan’s third largest city,” Hans Heijligers, head of Japan, IHG, said when the deal was announced. “Osaka saw a 91-percent growth in international tourist numbers in 2015 and we are confident the brand awareness achieved by Holiday Inn’s global network of over 1,150 hotels will attract strong occupancies from international guests looking to stay with a familiar hotel brand.” 

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