KUALA LUMPUR: Berjaya Corp Bhd (BCorp) will build Okinawa’s most outstanding hotel at a total investment of about US$400mil (RM1.65bil), inclusive of land cost.
Okinawa Four Seasons would “set a new standard” on the islands south of Japan, executive chairman Tan Sri Vincent Tan said.
Tan said the gross development value (GDV) of Four Seasons Resort and Private Residences Okinawa is expected to be US$1bil.
“Baring unforeseen circumstances, we may make US$600mil on this Okinawa project,” he said at a briefing after signing an agreement with Four Seasons Hotels and Resorts Asia Pacific to manage the Okinawa hotel and residences.
This is his second Four Seasons project in Japan, the first being Four Seasons Hotel and Hotel Residences in Kyoto, which opened in 2016, and which he is in the midst of negotiating with several parties for a sale.
Previous reports said Tan would like to sell the Kyoto hotel for about US$700mil (RM2.93bil) to US$800mil, which translates to a divestment gain of US$400mil.
“(Four Seasons Hotel and Hotel Residences) Kyoto is very good and very successful for us. It is among the top-three hotels in Japan and I believe Okinawa will also be an outstanding success,” Tan said.
He has so far sold half of the 57 residences in Kyoto. Using the same template to reduce construction cost, the plan is to sell all the 120 residences and 40 villas in Okinawa. It will have 120 hotel rooms.
“I am very happy we made the decision to invest in Japan and we are looking for other opportunities too. Japan has been good for us,” he said.
If he succeeds in selling the Okinawa venture as well, Tan would be making a neat US$1bil from both projects.
While the math looks good, it seems a bit odd that Tan is, at the same time, thinking of listing the hotel business on the Singapore stock exchange while selling his trophy hotel assets.
In December 2018, Tan told the media that BERJAYA LAND BHD (BLand) was undervalued. As the hotel business was parked under BLand, he was thinking of carving out the hotel assets and list them in Singapore. BCorp has about 70% in BLand.
“It is good for us to bring back proceeds from Kyoto. It will help to manage our debt-equity ratio. People pay a premium for trophy assets, so it does not matter as long as the profit is good.
“There are some Malaysian hotels we will keep. We are entrepreneurs running a business. So we have to be flexible. We are not running a fund,” Tan said.
Going back to his plans for Okinawa, although Kyoto – being an ancient and former capital of Japan – is rich in culture and history, the Okinawa adventure seems a lot more exotic and exciting because of its size and seafront view.
Tan combined various land parcels to get his 100 acres in Onna Village, bought at about the same time as the five acres on which the Four Seasons Hotel and Hotel Residences in Kyoto currently sits on.
Tan declined to say how much he had paid for the 100 acres but according to a 2016 report by The Star, the carrying cost of the land in Okinawa for BLand was RM82.8mil.
Tan did not borrow for the land purchase and said banks would fund the construction. The company said it preferred to work with an anchor bank rather than several banks and it would involve Japanese banks too.
The project is expected to take four years to complete but Tan aims to finish it in three years. He has been to Okinawa 12 to 15 times.
Like its low-rise Kyoto hotel, Tan said the Okinawa hotel will also be a four-storey structure fronting crystal-clear waters.
Tan said the hotel and residences would take up 30 acres and he could build a retail mall and two to four-star hotels on the remaining 70 acres.
“Okinawa is a very good market. We can do a shopping mall and two to four-star hotels. We can build higher (than the Four Seasons), so these other hotels will still get a view,” he said.
Tan has not finalised the room rates but with Kyoto fetching between US$1,200 and US$1,500, he reckoned US$1,000 would be very doable for Four Seasons Okinawa.
“There are many three and four-star hotels there, at between US$700 and US$800 a night,” he said.
Meanwhile, in a November 2018 report, Malaysian Rating Corp Bhd (MARC) affirmed its ratings on BLand’s outstanding RM500mil medium-term notes (MTN) programme guaranteed by Danajamin Nasional Bhd at AAA(fg) and RM150mil MTN programme guaranteed by OCBC Bank (M) Bhd at AAA(bg). The outlook on the ratings is stable.
MARC pointed out that BLand’s standalone credit profile remained weighed down by the weak domestic property market, its sizeable debt obligations and modest earnings from non-gaming subsidiaries.
BLand has mainly relied on proceeds from asset disposals and refinancing to address its financial obligations.
“BLand’s domestic property projects are largely limited to ongoing developments in Bukit Jalil, Kuala Lumpur, and Georgetown, Pulau Pinang, which have a combined GDV of RM1.1bil.
“Unbilled sales from these projects stood at RM153mil as at June 30, 2018, providing some near-term earnings visibility,” said MARC.
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