While the sale was substantial in and of itself, the real import of the deal comes in the fact that it might kick off an international flurry of Japanese hotel buys. "There's been an enormous amount of capital raised for investment in Japan, but to date there hadn't been one hotel sale," Rob Stiles tells GlobeSt.com in an exclusive interview. Stiles is the San Francisco-based managing director of Sonnenblick-Goldman, and regional managing director of its Asian operations. Sonnenblick, headquartered in Manhattan, co-represented Royal Hotel with Arthur Andersen.

"There have been a number of smaller hotel transactions," Stiles explains, "but none were internationally marketed. This is the first where international as well as domestic investors had the right to bid." The problem to date has been that sellers have been slow to catch on to the interest that exists out there. "There are teams scouring the market for opportunities," he says. With this sale, "bankers and owners will realize that the capital is there."

The deal, which closed on Wednesday (Japan time), was the result of a six-month marketing program ("Fairly typical," says Stiles) in which "interest was strong. Eight of the 10 finalists were North American capital sources. Part of their interest was that there is such a dearth of available product there." Sonnenblick lodging and leisure group managing director Mark Gordon handled marketing in the US.

The improving state of financing in Japan also increased the allure. "Three years ago," Stiles reports, "non-recourse financing didn't exist in Japan. It's emerging now and doing so aggressively. In terms of leverage and interest rates, the climate is very supportive of the buyer."

Jun Shiraishi of Ishrin Hospitality explains that the new owner will reflag the hotel with an as yet undetermined "international brand" and will upgrade some facilities to meet the standards of an international lodging. Pricing on the upgrades has yet to be determined.

The Rihga, which opened in 1993, provides such amenities as 26,000 sf of banquet and meeting space, five restaurants and a health club. Shuya Kuwana was the Arthur Andersen point person on the deal.

Instant Insights /

Rihga Royal Narita Moves for $75 Mil; May Spur Japan Hotel Plays

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