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The Honolulu Advertiser
Posted on: Friday, November 29, 2002

U.S. equity fund looking at Japan resorts

By Brett Cole
Bloomberg News Service

TOKYO — Ripplewood Holdings LLC, owner of Japan's 750-acre Phoenix Seagaia resort, said it's looking into buying some of the nation's resorts, ski areas and big-city hotels.

The U.S. equity fund, the first foreign investor to buy a Japanese bank, is considering resorts on Okinawa, ski areas in Japan's mountains, and hotels in Fukuoka, Osaka and Tokyo, according to Michael Glennie, president of the Ripplewood Lodging unit.

"More and more investment opportunities have been presented to us in the last six months," Glennie said in an interview.

Ripplewood, Soros Real Estate Partners and other foreign companies are targeting Japan's leisure industry as the country's third recession in a decade pushes prices down and millions of baby boomers prepare to stop working. Ripplewood alone has about $840 million to invest in Japan.

Japanese hotels are a good investment, according to Starwood Hotels & Resorts Worldwide Inc., because some 10 million of the nation's 120 million people will retire in the next 10 years. Japanese older than 60 have saved about 65 trillion yen ($533 billion), it estimates.

"When we ask people what they want to do, more than 60 percent say they want to do domestic travel," said Akio Hirao, managing director for Japan, Korea and Guam for Starwood Hotels. "If we take care of their needs, there is a big market for us in terms of retirees."

Starwood — which manages 10 hotels in Japan, including one at Phoenix Seagaia, a 90-minute flight from Tokyo — said average rates for prime hotels in Tokyo are about 28,000 ($228) yen a night. Outside the capital, they average about 20,000 yen ($163) a night.

To be sure, Japan's economy is battling a decade-long slump. An average 53 Japanese companies a day failed this year, amid the nation's third recession in a decade. More than 73 golf course operators have failed since January, compared with 53 in 2001, said credit researcher Teikoku Data Bank.

As economic growth in the third quarter slid to 0.7 percent from 1 percent in the second quarter, sales on domestic routes at All Nippon Airways Co., Japan's biggest local carrier, fell to 352.9 billion yen in the six months to Sept. 30 from 369.4 billion yen the previous year.

Ripplewood's Glennie said the company is looking at hotels with at least 150 rooms and with potential for renovation and additions. The company doesn't have a specific budget for resort and hotel acquisitions and is examining potential purchases — at the right price.

"Despite an incredible period of recession, you still can't get a reasonable price (for some properties)," Glennie said.

The New York-based group paid $229 million for Phoenix Seagaia, which went bankrupt last year, and it has invested $1.2 billion in Shinsei Bank Ltd. and 30 percent of a separate $1.2 billion fund by taking control of music and video producer Nippon Columbia Co., and Niles Parts Co., a former affiliate of Nissan Motor Co.

Phoenix Seagaia, on the Pacific coast of Kyushu, has a convention center; 99 holes of golf; 10 tennis courts; the world's largest indoor water park, including a fake volcano; and 750 hotel rooms.