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Property

Japan's Seibu to sell hotels and leisure facilities for over $900m

COVID slump leads group to offload Prince hotels, golf clubs and ski resorts

The Prince Park Tower Tokyo is expected to be one of the hotels put up for sale by Seibu Holdings. (File photo by Jiji)

TOKYO -- Seibu Holdings is set to sell off some of its iconic hotel and leisure facilities for over 100 billion yen ($908 million), as the pandemic prompts the Japanese railway and hotel conglomerate to offload those assets to focus on their operation, multiple sources told Nikkei.

It is seeking proposals from investment funds and will begin negotiations for around 40 of its facilities in the country with the aim of completing sales by April 2022.

Seibu is the latest railway company to try to raise cash by selling hotels and other real estate properties in the face of long-lasting negative impact from the COVID-19 pandemic, following in the footsteps of Kintetsu Group Holdings and the companies of Japan Railway.

Seibu will sell properties including hotels, golf courses and ski resorts. In terms of hotels, it is expected to sell fewer than 10 but The Prince Park Tower Tokyo, Sapporo Prince Hotel and Lake Biwa Otsu Prince Hotel are likely to be up for sale. The group is expected to keep its flagship Shinagawa Prince Hotel and Karuizawa Prince Hotel.

The book value of the facilities is expected to exceed 100 billion yen, of a total portfolio of hotel and leisure operations worth 570 billion yen. The company may reduce the number of facilities it plans to sell depending on negotiations.

Seibu counts on hotel and leisure businesses more than other domestic railway companies. The conglomerate posted a record net loss of 72.3 billion yen for the fiscal year ended in March, including an impairment loss of 20.2 billion yen from hotels and other facilities due to a decline in occupancy.

Its group company Prince Hotels currently owns and operates 39 of its 49 hotels in Japan. Seibu hopes that its midterm business plan of hiving off some assets will help it to become more resilient during the pandemic.

Seibu plans to continue operating the facilities after the sales. One of its strategies is to separate ownership and operation of Prince Hotels so that it can be more focused in the day-to-day management of the properties. For the other properties it is keeping, Seibu plans to renovate them to improve profitability.

Kintetsu Group Holdings recently said that it will sell eight hotels in Kyoto and other areas to a major U.S. investment fund. JR East, JR West and JR Kyushu are also considering selling office buildings and commercial facilities to funds, earmarking the proceeds for the redevelopment of areas around the station.

While rail companies are selling off assets to improve their finances and secure funds for post-pandemic investments, fund management companies with deep pockets, thanks to ultralow interest rates, have come to the rescue. These investors are already circling, hoping to position themselves for a recovery in inbound tourism in the medium to long term.

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