KKR, Gaw in Talks on Potential $660M Sale of Hyatt Regency Tokyo to Japan Hotel REIT

KKR and Gaw have been renovating the Hyatt Regency Tokyo’s guest rooms and public areas

Fund managers KKR and Gaw Capital Partners have held talks on a potential JPY 100 billion ($660 million) sale of the Hyatt Regency Tokyo to Japan Hotel REIT, market sources confirmed to Mingtiandi.

Manhattan-based KKR and Hong Kong’s Gaw joined forces to buy the 746-key luxury hotel in Tokyo’s central Shinjuku ward less than two years ago for a reported $409.3 million, in a deal backed by South Korea’s MDM Asset Management. The owners have been renovating the guest rooms and public areas in the 1980-vintage building, which has a total floor area of 71,512 square metres (769,749 square feet).

News of the prospective deal was first reported by Bloomberg on Monday. Representatives of KKR and Gaw declined to comment when contacted by Mingtiandi.

Japan Hotel REIT’s manager, which is controlled by Singapore-based SC Capital Partners, issued a statement on Tuesday in which it denied having engaged “in any discussions or considerations regarding the acquisition of the said property by JHR”.

Former Railway Asset
NYSE-listed KKR and privately held Gaw announced in March 2023 that funds managed by the two firms had agreed to acquire the Hyatt Regency Tokyo for an undisclosed amount from Odakyu Electric Railway, giving the US private equity giant its first hotel asset in Japan.

Director Kensuke Kudo of KKR’s Japan real estate team

Odakyu said at the time that it expected to record a gain of JPY 50 billion (then $380.4 million) on the disposal. KKR picked up its share of the asset on behalf of its $1.7 billion Asia Real Estate Partners, the buyout firm’s first dedicated fund for property investments in the region.

Japanese railway operators like Odakyu historically have been favoured partners for global real estate investors seeking value-add plays in Asia’s second-largest economy.

In 2021, US private equity major Blackstone bought eight hotels from the Kintetsu rail group, including the 988-room Miyako Kyoto Hachijo across from Kyoto station; the 456-room Universal City, adjacent to Universal Studios Japan in Osaka; and the Miyako Hakata, with 208 rooms, next to Hakata station in Fukuoka.

In 2022, Singapore sovereign giant GIC acquired 15 Prince hotels and 16 additional leisure properties from Seibu Railway owner Seibu Holdings, while Hong Kong private equity shop PAG reportedly snapped up a mock-Dutch theme park in Nagasaki from sellers including railway operator JR Kyushu and travel agency HIS for $655 million.

In addition to the Hyatt Regency Tokyo trade, 2023 saw BentallGreenOak’s reported $385 million acquisition of the Rihga Royal Hotel Osaka and the $900 million portfolio buy of 27 resort hotels from Daiwa House Industry by a consortium of SC Capital, Goldman Sachs Asset Management and the Abu Dhabi Investment Authority.

Sea Hawk Buy
An acquisition of the Hyatt Regency would mark Japan Hotel REIT’s second big-ticket deal in recent months after the trust in January agreed to buy the Hilton Fukuoka Sea Hawk from Mizuho Leasing for JPY 64.4 billion ($420 million).

The Mizuho affiliate, which on several occasions has acted as an intermediary to purchase properties on behalf of Tokyo-listed REITs, acquired the 1,053-key property from GIC in September. The $452 million transaction represented Asia Pacific’s biggest single-hotel deal during the fourth quarter, according to data provider MSCI.

The Sea Hawk reigned as Asia Pacific’s largest Hilton until the Hilton Singapore Orchard re-opened in 2022 with 1,080 rooms. The hotel’s sale price works out to JPY 61.2 million ($400,000) per key, with the transaction expected to close on 21 February.