The Abu Dhabi Investment Authority (ADIA) has teamed up with Singapore-based real estate investor SC Capital Partners and Goldman Sachs Asset Management to acquire a portfolio of 27 Japanese hotels from Daiwa House Industry for US$900 million.

With a total of 7,124 rooms, the hotels are in major tourist destinations across Japan and are set for rebranding and refurbishment under the new owners.

Mohamed Al Qubaisi, executive director of the real estate department at Adia, said: “Japan’s real estate sector continues to deliver superior returns, and the country’s hotel market is well-positioned for growth from the rebound of travel. This acquisition presented a unique opportunity to access a large, leisure-oriented hotel portfolio alongside SC Capital, a pan-Asia partner across multiple real estate asset classes, and Goldman Sachs Asset Management. The portfolio will benefit from increased domestic and international tourism, as well as JHRA’s strong asset management capabilities.”

ADIA is following GIC’s lead among sovereign wealth funds. Last year, the Singaporean fund spent JPY150 billion (US$1.3 billion) on acquiring a Japanese hotel portfolio of around 30 properties from Prince Hotels, a subsidiary of railway and hotel conglomerate Seibu Holdings.

Seen as something of a trend-setting among Asian sovereign wealth funds, GIC indicated last year that it was examining property deals in Japan due to the falling value of the yen and rising interest in hotels and resort properties, following the lifting of pandemic-related travel restrictions.

Head of global investment and portfolio strategy, Goh Chin Kiong, told Bloomberg, “GIC has always been interested in Japan real estate; we continue to be and we want to do more, which you can interpret as an increase in attractiveness for us. Financing costs in Japan have continued to stay low, especially relative to the rest of the world. The levered yield to us is attractive, especially versus Japanese yen bonds."

The post-Covid revival in tourism is encouraging a tide of sovereign fund investment in hotel and leisure, with a focus on Europe and a significant shift towards large-scale resorts. Global SWF data shows that from 2016, public pension funds and sovereign wealth funds have directly invested more than US$20 billion in the hotel and leisure industry.

SOI investment in the market slumped to a record low in 2020 as the tourism industry ground to a halt and travel declined to negligible levels. Yet, throughout the past seven years, Europe’s tourism sector has had an enduring appeal to SOIs, comprising 57% of total investment, followed by North America (20%), Developed Asia (15%), and Emerging Markets (8%).

Related funds ADIA GIC
Related tags Real Estate