Driving deals have been Japan’s stellar fundamentals, dynamic dealmaking by private equity capital, and a growth in liquidity in territories such as India, South Korea and Thailand.
Cross-border investment has been a hallmark of the hospitality investment surge, accounting for around a quarter of deals to date, according to JLL. This is partly credited to ongoing currency fluctuations in the region which have made deals cheaper for foreign capital, as well as the strong recovery of international tourism.
The rise in international funds buying up hotels reflects a wider regional phenomenon, with APAC leading on global cross-border capital flows in the first half of the year for all asset classes. Within the region, this has been assisted by strong trading volumes coming out of Singapore, Hong Kong, Japan and China. Chris Pilgrim, Colliers’ managing director of global capital markets, Asia Pacific, says: “Improving fundamentals are set to create new investment opportunities in the months ahead, with global rate cuts signalling positivity for real estate markets.”
International capital has been targeting standing assets in the region in a major way, with Japan and China in the top five cross-border markets globally and Australia in the top 10. It is all part of an improving world outlook, Pilgrim says. “Most major global economies have put the idea of recession behind them, with GDP rates improving year-on-year. Importantly, GDP growth forecasts for developed economies show a general improvement in 2025 and again in 2026, no doubt supported by subsequent rate cuts,” he notes. Pilgrim suggests that dealmaking will expand next year, with “a much greater spread to yields emerging, opening up more of the market to buyers and vendors as valuations adjust”.
Major deals
The biggest deal of the year saw global alternative asset management firm TPG Angelo Gordon acquire hotel property the Grand Nikko Tokyo Daiba in Japan from Hulic Co, in a deal which valued the property at ¥106 billion (€636 million).
TPG took over the 882-room property in partnership with Japanese real estate asset management company Kenedix. The hotel comprises six restaurants, a fitness centre and spa, retail units and event spaces across its 29 storeys.
The deal came after the firm raised nearly $8 billion in May to target Asian private equity and real estate. Fund closes included its eighth Asia focused private equity fund, TPG Asia VIII, as well as its debut TPG Angelo Gordon Asian real estate funds. These funds – Asia Realty V and the debuting Japan Realty Value fund – closed with more than $2.5 billion of capital in aggregate, with both exceeding their respective fundraising targets.
“These successful campaigns reflect the strength of our performance and the quality of our platform in Asia,” said TPG CEO Jon Winkelried of the fund closes, adding that the firm has now been present in the region for nearly 30 years.
Two other mega-deals in Japan also stood out. The Park Front Hotel at Universal Studios in Osaka sold for $593 million, while Mizuho Leasing paid $435.5 million for the Hilton Fukuoka Sea Hawk, divested by Singaporean sovereign wealth fund GIC. Alongside a slate of portfolio deals in the country, Japan accounted for over $4.5 billion in hotel trades alone. In the light of the Yen’s weakness and Japan’s low interest rates, alongside its stellar hospitality outlook, JLL forecasts that Japan could achieve some $5 billion of hotel deals in 2025.
The country’s fundamentals also prompted one of the biggest takeovers in the region in 2024, as Singapore’s CapitaLand Investment (CLI) inked a deal to acquire peer SC Capital Partners Group (SCCP) over a period of five years.
At the heart of the deal lies the TSE-listed Japan Hotel REIT (JHR), which holds around 80 Japanese hotels, and whose manager is owned by SCCP. For CLI, the deal marks the firm’s maiden entry into the Japan REIT market, the largest REIT industry in Asia Pacific.
“Japan is a focus market for CapitaLand Investment,” Hideto Yamada, managing director for Japan, CLI, told Hospitality Investor. “The acquisition of SC Capital Partners will triple our funds under management (FUM) in Japan from S$2.9 billion to about S$11 billion, raising its proportion from 3% to 10% of the S$113 billion funds under management of CLI and SCCP.”
Portfolio trades
Although portfolio trades weren’t as prevalent as in some other markets, they still tipped the scales on dealmaking volumes. In the spring, private equity giant KKR completed its takeover of Unizo Hotel Company, comprising a portfolio of 14 hotels. The firm subsequently inked a deal with Marriott International to convert the properties to Four Points Express by Sheraton, marking Marriott’s entry into Japan’s affordable midscale segment, and the debut of the brand in Asia Pacific.
Also in the first half of the year, LoadStar Capital launched a special purpose company to buy six luxury hotels in a range of Japanese tourist destinations from restaurant operator Hiramatsu and real estate developer NTT Urban Development Corporation. JHR, meanwhile, acquired two properties in Okinawa and two in Tokyo’s Shinjuku district for ¥56.2 billion ($350 million).
But Japan wasn’t the only target market of interest. Ananda Development sold its interests in five serviced apartment properties in Thailand to its partner, Mitsui Fudosan, most of which are operated by Ascott brands. Meanwhile, Australia’s Salter Brothers, which targeted pan-Asian expansion in 2024, inked a deal in New South Wales for the Bannisters portfolio, comprising luxury resort hotels. The resorts include Bannisters by the Sea (34 rooms) and Bannisters Pavilion (33 rooms), both based in Mollymook, as well as the 78-key Bannisters Port Stephens based in Port Stephens.
View on 2025
According to JLL, average daily rates (ADR) in APAC increased some 19 percent in 2024 compared to the previous highs of 2018-2019. The professional services firm also sees space for occupancy to rise, with strong business travel outpacing leisure travel in some places. Despite this, MICE, potentially the final piece in the jigsaw, may still need more time to recover.
The role of China in future volumes is still shrouded in doubt. Lingering economic issues and geopolitical rivalries create a complex outlook, although for 2024, deals in the country could reach $2.1 billion by year end, representing a single digit growth on the previous year. Shanghai and Beijing remain the hottest markets. India would like to step up as a regional growth star, after leading the region on new hotel openings in 2024. JLL predicts that this year’s Indian hotel transaction volumes could exceed $413 million, compared to 2023’s buoyant figure of $401 million. Tier-1 markets are expected to account for 78 percent of the expected total deals, with 22 percent of transactions in its expanding tier-2 and 3 cities.
By Isobel Lee
