Hony makes first foray into Japan

This is the Beijing-based private equity firm’s debut investment overseas and also the first time it has ventured into real estate. The transaction will be executed through Hony Capital Fund 2008, LLP.

Tokai Kanko, which has close ties to Hong Kong-listed real estate investment and development firm Far East Consortium International (FECI), will use the funds to pursue real estate acquisitions in Japan. The investment is part of an alliance through which Hony, FECI and Tokai Kanko will also create a separate fund worth JPY6.75 billion.

The Chinese firm and David Chiu, a senior executive at FECI, will between them inject JPY5.4 billion into a special purpose vehicle, each taking a 40% stake. Tokai Kanko has committed to provide the remaining JPY1.35 billion in return for a 20% holding. The vehicle will be managed by Galaxy Godo Kaisha.

Tokai Kanko and Galaxy Godo Kaisha are both interested in hotels and related assets. The link with Hony can be traced back to a longstanding business relationship between Hoong Cheong Thard, a senior manager at FECI, and John Zhao, Hony’s founder and CEO.

“Both [Hoong and Zhao] are interested in investing in Japanese hotel businesses because of growing demand from Chinese tourists,” says Sataro Shishido, COO of Tokai Kanko.

With this in mind, Tokai Kanko’s primary geographic target is not just Tokyo, but also Osaka, Kyoto, Kyusyu, Okinawa, and Hokkaido – all of which are popular among Chinese visitors. Shishido notes that business hotels with between 200 and 300 rooms are the most attractive properties.
“We need accommodation with the capacity to host tour groups from China, Malaysia, Indonesia and Taiwan, where the company has already built up a client base with local travel agents via FECI,” he explains.
The company’s first acquisition reflects this investment philosophy. Tokai Kanko has agreed to purchase a 60% stake in Agora Hospitalities, which manages the 175-room Moriguchi Royal Pines Hotel in Osaka, not far from Kyoto.

According to analysts, a number of real estate assets in the hospitality industry have been put up for sale – often at steep discounts – in response to falling consumer demand. “We have been offered a number of assets, and we think that we will need to launch another fund quite soon,” Shishido adds.

Tokai Kaiko was owned by Seison Group, an affiliate of Seibu Group, until 1997, when it was purchased by Asia Land, a company controlled by Chiu. Chiu’s father is the majority owner of FEIC and other real estate companies. Tokai Kaiko currently runs two resort hotels in Japan, and one each in Australia and Malaysia. It also operates cemeteries. 

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• Topics
• Real estate
• Real estate
• North Asia
• Greater China
• Hony Capital