April 9, 2024
SINGAPORE – From ski resorts and beachside retreats to city hotels and vacant rural homes, Singapore investors have a yen for hospitality purchases in Japan to cash in on its tourism boom.
The country has red-hot potential and remains excellent value for money, while offering low barriers to entry for foreigners, they told The Straits Times.
This is despite the Bank of Japan’s first monetary policy rate hike in 17 years on March 19, followed by data a week later showing land prices recording their largest surge in over 30 years in 2023.
“Japan probably will get more expensive, and it should – because it’s still way too cheap,” Patience Capital Group (PCG) founder Ken Chan, 56, told ST. The fund owns 350ha of land, mainly in Myoko in Niigata, including the country’s second-longest ski run at 8.5km.
“The question is, will foreigners not come because it’s more expensive? I think the answer is no. Even if prices go up 20 (per cent) to 30 per cent, it is still very cheap,” added Mr Chan, who used to head Singapore sovereign wealth fund GIC in Japan.
Such bullish sentiment drove Singapore to become Japan’s top real estate investor in 2023.
Multimillion-dollar deals were sealed, with newcomers such as IMC Pan Asia Alliance Group and Anglo Fortune Capital Group snapping up their first Japan purchases, while long-time investors like GIC and SC Capital Partners expanded their Japan portfolio.
IMC is an industrial and shipping conglomerate that also has businesses in real estate – it co-developed Singapore’s Suntec City complex – and more recently ventured into hospitality. In 2017, it opened its first “well-being resort”, Sangha Retreat by Octave, in Suzhou, China.
In May 2023, it bought a 30,000 sq m plot of land in Kawana in Shizuoka’s Izu Peninsula offering sweeping bayside views.
Its chief strategy officer James Ong, 44, told ST that IMC aims to build a hospitality brand in Japan, with the Kawana retreat due to open around 2028, offering about 50 rooms and villas.
IMC is now looking at properties in Hokkaido and Tokyo. Mr Ong said: “Japan has a robust domestic travel market, and is top of the list of holiday destinations for international tourists. There is also growing attention among Japanese on well-being, paired with a willingness to spend more.”
While IMC wants to build its own brand, property investment advisory Anglo Fortune Capital Group is in it with an eye to maximising profit. Until recently, Anglo Fortune invested exclusively in London, where it traded over £1 billion (S$1.7 billion) worth of real estate before the investment climate began to sour.
Chief executive officer Kin Lee, 49, described Anglo Fortune as a “silent investor” working with well-known hotel brands. “The reason you’ve never heard of us is that our clients prefer it that way – everything we do is very silent, very under the radar.”
Mr Lee, who bought the investment firm’s first Japan property in February 2023, is already moving on to the fifth deal in April 2024. Among the properties is a 100-room three-star hotel in the heart of Shibuya, which is now being prepared for sale at “very handsome” returns.
Mr Lee observed that cities like Tokyo, Osaka and Kyoto are becoming too expensive to secure high profit margins, and expects to shift his focus to regions like Fukuoka and Kumamoto. He also intends to focus on Hakuba, a mountainous ski resort in Nagano and site of the 1998 Winter Olympics.
Early bird catches the worm
With interest rates still at zero per cent to 0.1 per cent, Mr Lee expects the flood of global investment capital to continue.
“We are performance-based asset managers, and we need to make money for our clients,” he said.
“So yes, I’m in a hurry. The early bird catches the worm – we’re hunting, we’re deploying, but now that we have a track record, we can move faster.”
They join other long-time investors like SC Capital Partners, a private equity real estate firm founded in Singapore in 2004 that bought its first Japan property in May 2010 – the since-sold Comfort Hotel Nihonbashi in Tokyo.
In a rare media interview, the firm’s founder Suchad Chiaranussati told ST that Japan accounts for a third of its overall investments through its private real estate funds across the Asia-Pacific.
Its Japan portfolio now includes hospitality, student accommodation, offices, logistics, residential, corporate housing, retail and, since November 2023, a data centre in Osaka.
In 2023, it was part of a consortium that snapped up 27 resort hotels across Japan from Daiwa House Industry in a deal worth about US$900 million (S$1.2 billion). Of these, 23 are being rebranded and refurbished and will open in April 2024 under the brands Mercure and Grand Mercure.
In all, SC Capital Partners Group owns 79 hotels in Japan, and has sold another 13.
Back in 2010 when the company first entered the Japanese market, there were just 8.6 million visitors to Japan. But Mr Chiaranussati was confident that Japan would come to adopt tourism as a key economic strategy, and visitor numbers have since surged nearly four times to a pre-pandemic high of 31.9 million in 2019.
“Our gut feeling alone is not enough to sustain this in the long term. All our decisions are based on very strong fundamental analyses,” he said.
Meanwhile, GIC, which has been investing in Japan since the 1990s, also has a diversified portfolio.
GIC bought nine logistics facilities in Japan in 2023, while its most recent reported big-ticket hospitality purchase was in 2022 when it snapped up 31 properties from Seibu Holdings. They included The Prince Park Tower Tokyo, located beside the Tokyo Tower, and Naeba Ski Resort in Niigata, which hosts the popular Fuji Rock Festival in the summer.
GIC is now reportedly considering the sale of the 1,053-room Hilton Fukuoka Sea Hawk Hotel, which it bought in 2007, for over 85 billion yen (S$756 million).
Mr Chan left GIC to found PCG. To raise new capital, PCG has reopened a tourism investment fund that it closed in October 2023 after procuring 35 billion yen, amid fervent interest from investors. The fund will close again in September, and the goal is to grow its equity to 60 billion yen by then, Mr Chan said.
PCG also owns a 42ha plot of land in Shimoda, Shizuoka, and recently sold the K5 boutique hotel in Tokyo, but it is the plans for ski destination Myoko that have grabbed headlines.
More than 10 hotel brands have bid on building resorts in Myoko, with PCG to soon decide on the winners, Mr Chan said. The first resort is due to open by winter in 2028, and Mr Chan sees opportunities, given its accessibility to Tokyo.
“Myoko is not just a ski resort – it’s a mountain resort for all seasons,” said Mr Chan. High school runners train in Myoko’s mountains, while Singapore’s EtonHouse is due to hold a summer camp there in 2024. There is also potential for music and wellness festivals.
While prices in the country are set to increase, Mr Chan believes that the time is ripe for Japan to finally recover from its economic stagnation. The influx of investments is healthy, he said, and will be good for the country.
Redeveloping empty homes
Singaporeans are also involved in redeveloping akiya (abandoned houses) and kominka (old Japanese-style houses) for holiday rental.
Attention has grown on these millions of empty homes across Japan.
Mr Steven Liew, the Singaporean director of public policy for the Asia-Pacific at Airbnb, used to live in Fukuoka where he invested in start-ups as a venture capitalist.
Airbnb has since 2022 donated US$1.25 million to the Japan Kominka Association to support the maintenance and use of old homes in the country. Through this, 25 vacant homes are being refurbished, with 11 properties already listed on the platform.
Mr Liew told ST that Airbnb hopes to “provide a solution for preserving long-established traditions, local culture, language, art, and history that play an integral role in Japanese society”, while addressing overtourism problems by encouraging inbound tourists to visit lesser-known but equally attractive destinations.
Fellow Singaporean Lester Goh, a 31-year-old architect by training, co-founded Akiya2.0 with an Australian partner in 2023.
The firm works with local governments across Japan to preserve and restore vacant homes, in the hope of reviving local communities. These akiya may be converted either into homes for holiday rental, or into cafes or businesses that local regions require.
Mr Goh envisions “clusters” of about 15 to 20 renovated akiya in each area. Akiya2.0 already has property in Wajima on the Noto Peninsula and Shimanami Kaido, a 60km road connecting islands in the Seto Inland Sea that has been described as a cyclist’s dream.
The first project was to be in Wajima, but Akiya2.0 has postponed this so as not to divert resources from the city’s recovery efforts after the 7.6-magnitude earthquake that struck on New Year’s Day, Mr Goh said. It has turned its attention instead to Shimanami Kaido, and is buying property along the route with an eye to a launch by end-2024.
“We are seeking places that are convenient for tourists and yet remain untouched,” said the Japan resident since 2019. “We are also actively speaking to local residents, listening to and taking in their opinions.”