A hotel in Himeji has sold at a 3.2 billion Yen (US$22 million) loss based on book value last month as the struggles with nearby competition and the pandemic saw the seller seek to offload it before its value worsened further.

Hotel Nikko Himeji opened in 1990 in front of JR Himeji Station. ORIX JREIT acquired 53% of the joint ownership of the hotel in 2016 for 4.8 billon Yen. From 2018 onwards, increased hotel development in the surrounding district negatively impacted its competitiveness. Since 2018, seven new hotels with 1,580 rooms opened in the vicinity, while hotel numbers in Himeji City have declined since then.

The pandemic further worsened revenues. Changing lifestyles has also resulted in a drop in revenues from the wedding and banquet facilities with no recovery expected in this sector. Additional investment in improvements and refurbishments are not likely to result in improved revenues. The most recent NOI of the asset was 1.3%.

The REIT sold the trust beneficiary rights to an unnamed, domestic buyer in August 2023 for 1.832 billion Yen (US$12.5 million). The REIT portfolio manager had approached around 100 companies and only a few had expressed interest but at a price much lower than this.

Source: ORIX JREIT News Release, August 25, 2023.