UBS Asset Management’s (AM) real estate and private markets segment has launched a $400 million initiative to invest in the Japanese hotel sector.
Mitsubishi Corp-UBS Realty (MC-UBS), UBS AM's joint venture in Japan partnering Mitsubishi Corporation, will source and manage asset for the strategy through its private fund management arm MCUBS Japan Advisors.
‘Our investment thesis is underpinned by the clear gap between strong growth in demand for overnight accommodation and the lagging response in supply of new hotel rooms,’ said Graham Mackie, head of real estate Asia Pacific at UBS AM.
‘We see a particular window of opportunity in limited service hotels, a sector that accounted for over 40% of all hotel stays in Japan last year.’
Tourist arrival numbers to Japan reached an historical high of 24 million in 2016 and is expected to hit 40 million by 2020, with Asian tourists being the main driver behind this growth as the emerging middle class continues to propel regional tourism, according to UBS AM.
The new strategy will focus on securing development opportunities in key metropolitan and regional areas such as Tokyo, Osaka, Nagoya, Fukuoka, and Hokkaido, among others.
It will target assets with potential for refurbishment, repositioning or conversion. This is in addition to investing in development projects, where there is a third party operator in place. The primary focus will be on the limited service hotel sector.
As of July 31, MC-UBS has $12 billion real estate assets under management.