GIC taps into Japan’s hotel theme with $900m JV

Singapore’s SWF has taken a 51% stake in the $901m Sheraton Grande Tokyo Bay Hotel as Japan’s hotel sector gains attention from investors attracted to positive bottom-up fundamentals.

GIC, Singapore’s sovereign wealth fund, has formed a joint venture with Invincible Investment Corporation, a public hotel and residential J-REIT, to invest ¥100 billion ($901 million; €747 million) in the Sheraton Grande Tokyo Bay Hotel.

GIC will take a 51 percent stake in the partnership for the 1,016-room hotel which is located adjacent to Tokyo Disney Resort and is its largest “official hotel,” out of six such hotels.

“As a long-term value investor, we are confident in the continued growth and demand in Japan”

– Lee Kok Sun

In recent years Tokyo Disney has attracted over 30 million park visitors annually, and its owner and operator Oriental Land Co. announced plans to add several new attractions at, including a large-scale investment project of ¥75 billion to open new attractions scheduled in the spring of 2020.

“Sheraton Grande Tokyo Bay Hotel, with its close proximity to Tokyo Disney Resort, has shown strong and resilient cash-flows,” commented Lee Kok Sun, chief investment officer, GIC Real Estate.

“As a long-term value investor, we are confident in the continued growth and demand in Japan,” he added.

GIC is not the only global investor taking an interest in Japan’s hotel market. Earlier this month UBS announced it was targeting a $400 million capital raise to make value-add and development-related investments in Japan’s hotel sector.

Investors have been attracted to the sector by positive bottom-up fundamentals, according to recent research from the Swiss bank. The stock of hotel rooms in Japan has remained steady over the years, and Tokyo’s proportion of total rooms has stayed at approximately 15 percent of the Japan total, according to UBS research.

The main reason for this lack of growth in hotel supply, UBS says, has been weak corporate confidence, as most businesses and hotel operators were not motivated to engage in excessive capital expenditure and business.

At the same time, lodging demand in Japan has seen exponential growth in recent years, with the number of inbound visitors reaching a high of 24 million in 2016.

Sustaining this demand in the near-term are two global sporting events, which are anticipated to act as a catalyst for further inbound tourism. Japan will be hosting the Rugby World Cup in 2019, and then a year later the Olympic Games will be held in Tokyo.

GIC, which has well over $100 billion in assets under management, has made investments in more than 40 countries across real estate, private equity, equities and fixed income since its inception in 1981.