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Seibu Holdings Tokyo Garden Terrace Kioicho sale marks turning point says president

Writer's picture: Adam GermanAdam German

According to a Nikkei Shimbun interview on January 27th, President Ryuichiro Nishiyama explained that the sale of the complex on the former Akasaka Prince Hotel site to Blackstone aims to improve capital efficiency and ensure continued growth despite economic fluctuations.  


Seibu Holdings President and COO
Nishiyama Ryuichiro

Seibu Holdings president Ryuichiro Nishiyama, courtesy of the company website. 


Seibu Holdings (HD) announced in late 2024 the sale of Tokyo Garden Terrace Kioicho to Blackstone for approximately ¥400 billion.  


This decision marks a significant shift from the company's traditional business model based on real estate ownership to a capital recycling model. 

 

According to the Motley Fool, “Capital recycling or asset recycling is a business investment and funding strategy. Companies will sell non-core, lower-returning assets and reinvest or recycle that capital into higher-returning opportunities” 

The sale of the Tokyo Garden Terrace Kioicho to Blackstone, aimed for completion by the end of February, is a key part of Seibu HD's long-term strategy, which positions the real estate business as the core of the group's growth strategy.  


Tokyo Garden Terrace Kioicho

Tokyo Garden Terrace Kioicho courtesy of Seibu Holdings website. 


Nishiyama emphasized that the liquidity generated from this sale will be reinvested into various growth areas, including hotels, leisure, rail transportation, and development projects in central Tokyo and along railway lines. 


Seibu HD plans to invest approximately ¥1.85 trillion from fiscal 2024 to 2035. This includes development projects in Takanawa, Shinagawa, and Shiba Park, as well as resort developments in Karuizawa, Hakone, and Furano.  


The company is also considering mergers and acquisitions with hotel operating companies and enhancing the value of major hotels like the Shinagawa Prince Hotel. 


The COVID-19 pandemic prompted Seibu HD to start selling hotel real estate around 2021. Nishiyama noted that the pandemic impacted almost the entire group, leading to a decision to transform the business structure to withstand sudden economic changes.  


The company has shifted its hotel business to focus on operations, continuing to operate the hotel in Tokyo Garden Terrace Kioicho while reducing the risks associated with real estate ownership. 


Historically, the real estate business in Japan was based on long-term ownership, but Nishiyama pointed out that the market and corporate accounting have become global.  


He stressed the importance of realizing latent gains and distributing profits to shareholders, warning that management complacency is no longer acceptable. 


Seibu HD is also mindful of the risk of being acquired, especially with the Ministry of Economy, Trade and Industry's new guidelines for corporate acquisitions. Nishiyama highlighted the importance of enhancing corporate value and maintaining a proactive approach to management. 


The company plans to increase the number of hotel operations to 250 locations domestically and internationally, focusing on external management contracts. Nishiyama emphasized the importance of investing in human resources to support this growth and providing the best employee treatment in each industry. 


Seibu HD aims to achieve a return on equity (ROE) of 8% and target 10%, with a return on assets (ROA) of 2.7% or higher. These financial KPIs, in Nishiyama’s opinion, are seen as proof of the company's durability. 


Nishiyama also stressed the importance of engaging in sincere dialogue with investors, including activist shareholders like 3D Investment Partners, and adopting proposals that benefit the company. 


Source: 

Nikkei Shimbun (Japanese only; paywalled) 

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