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S'pore property firm on track to beefing up presence in Japan
Publication Date : 04-04-2014
Property firm Ascendas Hospitality Trust is a step closer to boosting its presence in Japan's fast recovering property market.
The trust raised S$50 million (US$39 million) on Tuesday via a private placement of about 73.5 million stapled securities at 68 cents apiece to partly fund its acquisition of the Osaka Namba Washington Hotel Plaza.
The hospitality trust announced plans last Wednesday to buy the 698-room hotel in Osaka's Namba district from Ainodake Godo Kaisha for $110.8 million. It is its second acquisition in Japan.
The trust's move underlines how keen Singapore firms are becoming on Japan and its recovering economy.
Ascott Residence Trust made its move when it bought Infiniti Garden, a rental housing property, in Fukuoka.
Lim Jit Poh, chairman of Ascott Residence Trust Management, said at the time: "Japan's economy has rebounded sharply following the government's fiscal and monetary policy stimulus package."
Indeed, tourism in Japan has picked up, with the number of foreign visitors crossing the 10 million mark last year for the first time.
Efforts have also been stepped up to boost the country's inbound tourism with the 2020 Olympics looming on the horizon.
"With relaxed visas for South-east Asians and low-cost carriers in Japan, that helps to bring quite a fair bit of Korean, Taiwanese and Thais," said Tan Juay Hiang, chief executive of Ascendas Hospitality Trust, in an interview with The Straits Times.
"Singapore, as a small country, our inbound visitors are close to about 14 million... I think Japan is a huge country, to move that up to 20 million over the next couple of years, I think it's quite easy," Tan added.
DBS Group Research equity analysts Derek Tan and Rachael Tan noted in a report that the outlook for tourism in Japan was bright, "supported by an attractive exchange rate and active promotions by the Japan National Tourism Organisation".
Japanese real estate, which has been in deflationary doldrums for years, has since picked up after Prime Minister Shinzo Abe vowed to kick-start the Japanese economy through high government spending and money printing.
His efforts are starting to bear fruit.
Hotel values have registered stable growth in the past year, while revenue per available room - an industry measure of occupancies and nightly rates - has risen by 10 per cent, said Ms Chee Hok Yean, head of hotels, valuations and capital markets at Chesterton Singapore.
"In the last year, prices moved up between 3 and 5 per cent. Prices have moved but they haven't shot up, it's still quite marginal. (Buyers) still can look into Japan," Ms Chee noted.
She estimated that yields on net property income are about 5 to 6 per cent. The estimated yield of 6.4 per cent expected from the Osaka Namba Washington Hotel Plaza seems very attractive in that light.
However, Japan remains very much a closed society.
Beyond the impact of the Olympics in 2020, its economy and tourism numbers will still largely depend on looser visa policies and political stability.
Japan, after all, has had seven prime ministers in six years before Abe took office in 2012.
With the latest acquisition, Japan makes up 22 per cent of Ascendas Hospitality's portfolio, with its remaining assets spread out over Australia, Singapore and China.
This "diversification strategy", according to Tan, is important "because different countries will have different cycle of the economy and the tourism sector".
This, perhaps, will go some way to ride out any rough spots in a single market.