Guest room at Kirishima Kokusai Hotel , Kirishima , Kagoshima , Japan
Our control of MHM gives us the resources to execute large , operationally complex deals . For example , in our acquisitions of 30 hotels from Japan Post in April 2022 , we acquired a portfolio of assets which has never made a combined profit in its decades of operation since the start of the business . We saw the opportunity to expand the sales channels beyond the 400,000 Japan Post life insurance members and a limited OTA presence to a much larger market . We will also refresh the properties through targeted renovations such as the conversion of underutilized space into rooms , modernization of the F & B offering , and revamping of the guest rooms to better adapt to consumer tastes . We have a team of 25 dedicated renovation managers at MHM which will plan and oversee many simultaneous renovations .
Our investment criteria have not changed over the past couple of years , but we are finding more deals that meet our criteria .
H : Does Fortress bring in investment partners for hotel deals and can you explain the criteria ? SY : Occasionally . We do so on a case-by-case basis depending on the circumstances of each deal .
H : How competitive are hotel deal opportunities today versus two or three years ago , and how is that impacting Fortress ’ acquisition strategy ? SY : We have seen newer players enter the market . There have been large portfolio transactions where the seller retained management of the hotels , as well as some trades of well-located , newer limited-service hotels in major markets . For the former categories , buyers have been large PE firms . For the latter , Asian owner-operators have been aggressive operators .
We are also seeing increased interest in the resort space . Key gateway cities such as Tokyo and Kyoto remain attractive mid-to long-term investment opportunities , and Okinawa , especially the smaller islands of Ishigaki and Miyako , have a lot of potential to become major destinations for East Asians .
Fortress focuses on both buying at good pricing and identifying areas for value enhancement , so we have been able to acquire assets at all points in the real estate cycle .
H : Are you selling any hotel assets and does Fortress remain a net buyer of hotel assets ? SY : Fortress is currently investing Fortress Japan Opportunity Fund
IV in Japan . We will be selectively selling assets in some of the older vintage funds while continuing to look for new opportunities . It ’ s ¥ 150 billion in committed capital .
H : What markets and segments have your attention for acquisition ? SY : Markets with multiple demand generators are particularly attractive for us . For example , Kyoto is home to many large corporations such as Nintendo , Kyocera , Omron and Murata , which drive business demand . It is also Japan ’ s historical capital with rich cultural attractions to drive a very wide range of domestic and international leisure demand of all budgets , both group and FIT .
Resorts and full-service are comparatively more attractive for us at the moment since new supply is more limited than for limitedservice .
H : What markets outside Japan interest Fortress for hotel investment ? SY : Fortress has been an active buyer in North America and Europe . These investments are through the Fortress Real Estate Opportunity Funds which share the same CIO as the Fortress Japan Opportunity Funds .
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