The Japan Boutique Hospitality Fund got off to a successful and promising start in 2018 and the fourth quarter was a busy period in terms of acquisitions and preparing the deal pipeline for accelerated activity in 2019.

At the end of October (2018) we acquired a boutique hotel in Kyoto called Hotel Owan on behalf of our institutional Client, Shinhan Financial Group. The property has been renamed as Hotel Owan Hanami (https://resistay.jp/en/room/owan-amaterrace/) and is a popular choice for Asian and Western Families visiting Kyoto due to the offering of large rooms, a superb design concept combining Japanese and contemporary design motifs, and ease of access to major tourism destinations in Kyoto.

Hotel Owan

One of our investment assumptions for the Hotel Owan acquisition was that the ADR’s (Average Daily Room Rate) were undervalued and that we could raise the rates. We have already started to increase the ADR’s in our first two months of ownership and this is increasing the Net Operating Income of the asset.

Hotel Owan

Hotel Owan

Previously in August (2018) we acquired the first ryokan for the Japan Boutique Hospitality Fund, Shousenkaku Kagetsu (https://www.shousenkaku-kagetsu.com/en/). We are particularly keen on the ryokan sector of the Japanese hospitality market as we feel it is undervalued, fragmented and there is tremendous opportunity to apply a value-add investment approach to well selected ryokans.

Shousenkaku Kagetsu

In the case of Kagetsu, the historical occupancy levels were 53% on average. By enhancing the marketing strategy and taking a more proactive marketing approach, in just three months of ownership, we have already moved the needle on the occupancies from 53% to 68% in pre-ski season months. Now that we are in the ski season in Japan, we anticipate to be running at near 100% capacity through April 2019. We will be making physical enhancements to the property in May by renovating 10 of the 28 rooms in Kagetsu ryokan, further enhancing the value of the property.

Shousenkaku Kagetsu

Shousenkaku Kagetsu

Our investment team’s ability to identify undervalued hospitality assets where we can actively improve the property and operations is already bearing fruit in these first two acquisitions.

In addition to acquiring these two properties and beginning the value-creation process, the Japan CRE investment team has been busy building the pipeline of investable assets for 2019, with on-site due diligence visits throughout Japan, where we have identified attractive boutique hospitality assets at attractive prices.

As we kick off the New Year of 2019, we now have a pipeline of 52 potential assets that are under various stages of due diligence.

Pipeline asset locations: Tokyo, Kyoto, Osaka, Izu, Niigata, Kitakyushu & Kobe

The first quarter of 2019 is going to be a busy time as we start to ramp up the acquisition process for the Japan Boutique Hospitality Fund and our institutional mandates. At a minimum we anticipate acquiring and closing on 3-4 assets by March 2019.

While we can not disclose all of these assets at this point in time, one of the acquisitions we are most excited about is Project Falcon which is our acquisition of 24 machiyas in Kyoto which will be transformed into an Urban Luxury Machiya Resort. We have been working on this project for 8 months and we are scheduled to close and become the majority equity owner of the project at the end of January 2019.

Mockup of Project Falcon

We will also be acquiring a larger boutique hotel in Tokyo for an institutional partner, and a number of ryokans for the Japan Boutique Hospitality Fund.

Ryokan Pipeline Asset

We will be announcing our first capital call and first soft closing on 10 January 2019 in order to facilitate the closing and acquisition of Project Falcon at the end of January.

We appreciate all those investors who have already made a commitment to the Fund and to those who will be joining us at the 10 January capital call.

We want to take this opportunity to wish all our Clients and Partners a wonderful 2019 filled with abundant success and good health.

Sincerely,

 

Christopher A. Aiello

Managing Director – Japan Real Estate

 

 

 

Odyssey Asset Management Limited

Odyssey Asset Management Ltd, a sister company to the Odyssey Capital Group, is a Hong Kong SFC 1, 4 & 9 licensed company. The Japanese CRE team is headed up by Christopher A. Aiello, and also includes Alex Walker, Daniel Vovil and Sam Luck.

Odyssey Capital Group Ltd is Asia’s leading independent Alternative Asset Manager that provides differentiated and bespoke investment solutions across multiple asset classes, including asset management, real estate, private equity and hedge funds. The Firm’s primary focus is to seek out undervalued investment opportunities to co-invest in with its clients.

The Odyssey team comprises over 30 experienced executives, asset managers, lawyers, private bankers, trust & tax planning specialists and experienced investors with over 400 years of combined financial and operational experience across the Asia Pacific, Europe and North America.

For more information about the Odyssey Japan Boutique Hospitality Fund, phone or email Daniel Vovil via the contact details listed below.

Daniel Vovil, Co-Founder and President, Odyssey Capital Group
daniel.vovil@odysseycapital-group.com | (852) 9725-5477

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