Seen on ehotelier.com, April 16, 2007
Morgan Stanley, the biggest property investor among Wall Street firms, agreed to buy 13 hotels in Japan from All Nippon Airways Co., said three people who were brfed on the transaction.
ANA, Japan's largest domestic airline, will hold a board meeting in Tokyo today to discuss the hotel sale, said spokesman Yuichi Murakoshi, who declined to comment further. New York-based Morgan Stanley will pay 280 billion yen ($2.3 billion) in what is Japan's biggest real estate acquisition, Nikkei English News reported earlier, without citing anyone.
Japan offers investors the lowest borrowing costs among major economies and potential returns from the first gain in land prices in 16 years. All Nippon wants to focus on aviation and needs to raise funds to help pay for new planes.
"It's a good investment as property prices are rising,'' said Michio Kitamura, a senior consultant at Nomura Research Institute Ltd. "Japanese banks, which got burned in the bubble era, aren't aggressive and overseas investment banks are seizing the opportunities.''
Morgan Stanley's Tokyo-based spokesman Natsuo Nishio declined to comment. The people briefed on the transaction asked not to be identified before a public announcement.
Land Prices
The purchase would add to Morgan Stanley's more than 80 hotel properties worldwide, including the Westin in Tokyo's Ebisu district.
Land prices in Japan rose for the first time in 16 years in 2006 as international and domestic investors competed to acquire properties in the three biggest cities.
Gains in Tokyo, Osaka and Nagoya compensated for drops elsewhere in the country. Average commercial land prices in the three cities rose 8.9 percent in 2006 while residential land prices grew 2.8 percent, the Ministry of Land, Infrastructure and Transport said in a report released on March 22.
Japanese real estate investment trusts are reflecting the rise of land prices, with the Tokyo Stock Exchange REIT Index climbing 39 percent in the 12 months to April 13.
All Nippon ordered four planes worth as much as $1 billion from Boeing Co. last month. The company will buy four 777-300ERs to expend its international routes.
Management Focus
"The sale will help focus the management focus completely on the airline business,'' said Satoru Aoyama, an analyst at Fitch Ratings, who rates the company's debt BB+, one notch below investment grade. "They have significant capital expenditure plans and the money will help them.''
The 13 hotels had a combined book value of 110 billion yen as of March 31, based on a securities report that Tokyo-based ANA filed to Japan's Ministry of Finance on June 29.
All Nippon shares rose 1.3 percent to 477 yen as of 12:32 p.m. in Tokyo.
Morgan Stanley is raising $8 billion for its sixth high- return real estate fund, about 40 percent of which is earmarked for Japan, where commercial occupancy rates and rents are climbing.
Sonny Kalsi, Morgan Stanley's global co-head of real estate investing, told the Washington State Investment Board last November that Japan represented "the leading real estate opportunity in the world right now.''
The firm last year bought a collection of Intercontinental hotels in Europe and yesterday said it completed its acquisition of CNL Hotels & Resorts Inc. for $6.6 billion, gaining eight luxury resorts in Arizona, California, Florida and Hawaii.
Several international and Japanese investment banks and buyout firms were competing for the airline's hotels, which include ANA Hotel Tokyo in the city's Roppongi business and entertainment district. Other properties include a hotel close to Narita International Airport and ANA Hotel Hiroshima, a 15- minute walk from the Atomic Bomb Dome.
ANA was advised on the sale by Jones Lang LaSalle Inc. and Nomura Holdings Inc.