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Property investment

Japan’s shortage of hotel rooms offers US$100m window of opportunity for Hong Kong asset manager

Look’s Asset Management plans to buy up dozens of Japanese residential buildings in core areas and refurbish them into short-stay apartments

PUBLISHED : Tuesday, 07 March, 2017, 11:16am
UPDATED : Tuesday, 07 March, 2017, 7:59pm

Despite an already-booming Japanese tourist market, the government has now unveiled an ambitious plan to double the number of foreign visitors by the 2020 Tokyo Olympics.

Many visitors to the country already find it is increasingly difficult to book an affordable room due to a serious shortage of beds.

And Hong Kong-based Look’s Asset Management has spotted that gap in the investment market and plans to buy up dozens of Japanese residential buildings in core areas and refurbish them into short-stay apartments, similar to what Airbnb does to boost returns for its investors.

“Japan has a large number of repeat travellers from greater China, Korea and other Asian countries; they are cost conscious, and want to stay in convenient locations.

“They would rather spend their money on shopping and dining than hotels,” said Timothy Shen Ka Yip, Look’s chairman.

Typical Japanese hotels are known for their high room rates, but tiny spaces. So Shen says there is huge demand for “affordable, convenient, and big” accommodation, adding that the rooms he will provide will be at least 200 square feet, double the size of a normal hotel room.

Property prices in Tokyo largely haven’t changed in 30 years, even though they have rebounded over the past two years. The market is still much cheaper compared with the last peak in 2007
Timothy Shen Ka Yip, chairman, Look’s Asset Management

Look’s Asset Management, set up in 2009, expects to raise US$100 million in its first round of funding, the Look’s Real Estate Opportunity Fund, which focuses solely on vacation rentals and short stays in Japan. It plans to use the money to buy its first three to four buildings in Tokyo and Osaka.

Target residential buildings are mostly those below 30 years old with prices ranging from a few thousand to HK$20,000 per square foot. On average, one building will have about 40 apartments, Shen said.

“Property prices in Tokyo largely haven’t changed in 30 years, even though they have rebounded over the past two years. The market is still much cheaper compared with the last peak in 2007,” Shen said.

The fund’s strategy is to upgrade the value of the building by changing the layout of the hotel buildings using, putting more rooms and providing efficient property management.

Hong Kong asset manager turns his attentions to buying short-stay apartments in Japan

Shen estimates a cash return of 15 per cent for investors.

Running a hotel can be costly, but the fact tourists don’t actually spend much time in their room, means many services, such as daily cleaning, are unnecessary. They would rather be provided with discounted prices than typical hotel services, he says.

Last year Japan’s Average Daily Rate grew for the fourth year running and recorded a new historical high at JPY15,396 (US$135), with occupancy remaining at an astonishing 82 per cent, according to Savills.

Japan doubled its tourism targets last year to 40 million annual visitors by 2020, after a record 20 million foreign tourists touched down in the country in 2015, another record at the time.

Shen says even that raised estimate is “conservative”, and puts the number is likely to be as high as 50-55 million, given the government is set to further ease rules on visas for Chinese visitors.

The increase of hotel rooms is already lagged behind, much more are needed in the run up to 2020 when Tokyo hosts the Olympics – “that’s the gap we want to fill”, he adds.

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