BILLIONAIRE Tan Sri Vincent Tan Chee Yioun and his flagship Berjaya group seem to have made a killing with two ventures in Japan — in Kyoto and Okinawa.
The first venture is an investment of US$380 million to convert a hospital into Four Seasons Hotel and Hotel Residences Kyoto on a five-acre tract located next to an 800-year-old water pond.
The newly opened five-star hotel, which has 123 rooms and 57 residences, is already attracting interest from potential buyers.
One offer stands out, it seems, but is still slightly below Tan’s level of acceptance. When asked about this at the Kyoto Four Seasons, Tan does not deny the fact that there are parties that have cast their eyes on the hotel. “Other than family, everything else is for sale, at the right price,” the business tycoon chuckles.
While details were not available at press time, Tan’s “right price” is understood to be substantially higher than the US$380 million it cost him to build the hotel.
Tan had acquired the property in 2008 — the year the US subprime mortgage crisis hit the global economy and Lehman Brothers collapsed. He tore down the old structure to build the picturesque Four Seasons Hotel and Hotel Residences Kyoto.
Talking to the media in Kyoto, Tan explains, “On a per square foot basis, it was like half the price of a lot of land around the Golden Triangle [in Kuala Lumpur], maybe even less than half.
“I asked a few questions about hotel rates here, and my God, the land was half the price and the hotel rates were three or four times those of Kuala Lumpur or higher … the numbers looked good.”
To put this in perspective, Tan is selling the residences at between US$5,000 and US$6,000 psf. The 57 residences are between 893 and 2,045 sq ft in size.
At US$5,000 psf, a unit would cost between US$4.46 million and US$10.22 million while at US$6,000 psf, it would cost between US$5.36 million and US$12.27 million.
Taking an average of US$8.36 million, the 57 units for sale would fetch Tan some US$476.52 million, which is already 25% higher than the investment cost of US$380 million.
Even if all residences were sold at the lower end of US$5,000 psf or US$4.46 million and all of them were at the lower end in terms of size — 893 sq ft — Tan would rake in US$254.22 million or about 67% of the US$380 million in investment cost.
And this is excluding the average US$1,000 per night charged for the hotel rooms.
Nonetheless, some observers opine that for Tan, the scenic landscape by the pond justifies the premium price.
“You can’t put a price tag on the development … how do you peg an accurate value to the 800-year-old pond, to the beautiful landscaping?” asks an investment banker.
In the media interview, Tan attributes the investment to luck.
“Yes, [US$380 million is] a lot of money. But the land didn’t cost so much. At the time, it was murah lah, in 2008, the global crash, so the timing was nice. But now if you were to buy it, oh my God … it’s so expensive … It’s not that we were clever, it’s just that we got lucky,” he says.
The Four Seasons Kyoto, which owns the Japanese assets, is equally owned by Berjaya Land Bhd (BLand) and Berjaya Corp Bhd (BCorp).
According to BLand’s annual report for FY2016, BCorp owned a 75% stake in it while Tan controlled 45.68% of BCorp.
It is noteworthy that BLand had acquired a 100-acre tract in Okinawa in 2009, and Tan is in discussions with Four Seasons and Resort to build a hotel, residences and villas on the land.
Sources familiar with the land say that it is located on a hilltop — ideal for a resort.
“Whatever it is, we are going to make a lot of money as we paid very little for the land and people have been offering to buy it 10 to 12 times its price, but we are not selling,” Tan says, adding that the resort is likely to be operational in about four years.
“It will probably be the best hotel there in Okinawa … Picture [resorts] Pulau Tioman, picture Pulau Redang … water [the sea] at Okinawa is like that in Pulau Tioman and Pulau Redang. It [Okinawa] has a big population, big infrastructure, an international airport.
“It’s a fantastic place and it receives 10 to 11 million visitors [a year], eight million of them Japanese, about two or three million of them foreigners, mostly from Taiwan, Hong Kong and China, maybe some from Singapore … it will be very nice.”
BLand’s annual report states that it owns 287 parcels of land in Onna Son, Okinawa, with a net carrying value of RM82.81 million, that have been acquired since July 2009.
Though Tan declines to state the current value of the land, based on the offers he has received, it can be estimated at RM828.1 million to RM993.72 million.
With close to 20 hotels under its belt, BLand is looking to unlock value in its hotel business, Tan acknowledges.
“Yes, we are thinking, there’re all kinds of proposals … yes, we would like to [unlock value]. But we would like to build hotels and residences together. Residences help to pay for the hotels, then our investment will be better. Just a hotel by itself is tough, it takes a long pay-back period … Nothing is finalised, we will see, we are flexible,” he says.
In its first financial quarter ended July 31, 2016, BLand suffered a net loss of RM27.24 million on revenue of RM1.55 billion. In the previous corresponding period, it had registered a net profit of RM9.91 million on revenue of RM1.5 billion.
In its notes accompanying its financial results, BLand says the loss was a result of unfavourable foreign exchange rates, higher operating expenses at some units, losses incurred by the property development and investment business, a higher share of losses from associate companies, and higher finance costs.
BLand ended trading at 63 sen last Friday.
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