The head of private equity lodging investment for CapitaLand Investment Ltd. talks about which markets the company invests in and why it prefers to go off-market with its deals.
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SINGAPORE — When speaking about CapitaLand Investment’s
successful acquisition and renovation of the lyf Shibuya Tokyo hotel in Japan
in 2023, Chun Meng Tan, head of private equity lodging investment, said one of
the key takeaways when dealing with asset management is having an asset management team on the ground.
“They’ll be able to help you to monitor the project on a
very regular basis… The other insight is to have a reliable project partner who
is able to communicate effectively,” he said. “For places like Japan, language
may be a barrier, and they have very different mindsets and cultures when it
comes to working. For the Japanese contractor, they can be very detailed.”
Tan used the example of getting a quote from a contractor
in Japan, which can take up to one month, whereas in Singapore, a contractor
can deliver it in two or three days.

It’s very important to be clear on what you want at the onset and communicate clearly, because otherwise, if there are changes, they will tell you they need another two weeks to one month before they can come back with the revised figures, and that is where your project will be delayed.
Chun Meng Tan
“It’s very important to be clear on what you want at the
onset and communicate clearly, because otherwise, if there are changes, they
will tell you they need another two weeks to one month before they can come
back with the revised figures, and that is where your project will be delayed,”
he said.
The renovations were very successful for the hotel for
Singapore-based investor. Tan said that when CLI purchased
the hotel in 2023 (before Japan opened its borders), the property had not been
renovated in 10 years. CLI closed the property for a year to renovate and
increased the capacity from 186 to 200 keys. The company added a gym, more
facilities and a social kitchen “so that the property would be more appealing
to international investors.”
Those renovations paid off for CapitaLand, as the pre-COVID
ADR more than doubled from 13,000-14,000 yen per night to the 30,000 yen a
night it’s getting now (the property reopened on December 19).
As part of the inaugural virtual HICAP Conversations
series, Hotel Investment Today correspondent Raini H.R. interviewed Tan. The Conversations mark the first in a series of Zoom interviews where we will discuss macro views to
market specifics to provide
snapshots for owners, operators, developers, and investors to understand
current trends. To watch this event, click here. For
details on Hotel Investment Today’s interview with Gaw Capital Partners’ Kenny
Gaw, click here.
Here are some highlights of that conversation.
Hotel Investment Today (HIT): In light of
economic uncertainties, how do you perceive the direction of private equity for
real estate in Asia Pacific
Chun Meng Tan: I’ll
focus more on the living sector (which includes multifamily, serviced
residence, co-living, student accommodation and senior living)… In recent
years, we have found that a lot of investors are looking to this space because
of the current geopolitical situations, high interest rates, and inflation.
They want to invest in value strategies in developed Asia in this sector… One
of the reasons is that the living sector is much more resilient, and they can
pivot between long and short stays, allowing them to adjust their rental rates
faster than inflationary pressure.
HIT: What are the risks and challenges in that
sector?
Tan: A lot of investors prefer to
invest in developed Asia. The reason is that those countries (Singapore, South
Korea, Japan and Australia)… have strong rules of law, market transparency,
liquidity and are generally politically stable with strong institutions… Those
are the reasons why people choose those countries for investment. … [In those
countries] their demand is very strong, especially across the different
classes. The occupancies are in the range of 80% to 90% if you’re talking about
rental housing. The occupancy can go as high as 95% in Japan. They also have a
very limited supply over the next few years. From a fundamental analysis,
that’s what makes those countries very appealing to investment.
HIT: What are the biggest opportunities in this
living sector? Do serviced residences and co-living fight with one another?
Which is opportunistic?
Tan: I wouldn’t say they fight
each other. They are similar products. They are able to cater to
both the long and the short stay. The key difference is that they are just
targeting different clientele. There’s a slight difference in terms of the product.
For serviced residences, because the clientele are able to have higher budgets, they probably want a bit more exclusivity. So, you have all those kitchenettes
and facilities within the room.

Most of our deals are off-market. That’s also because CapitaLand does have a long-standing presence across Asian markets. We have teams on the ground and an extensive network and connections with developers, partners and investors. We’re also very active, and we are able to move fast.
Chun Meng Tan
For the co-living, because you’re targeting a
younger-generation clientele, they do have a lower budget. So, we will have
smaller rooms to cater to them, which is perfectly fine for them. Then we put
the facilities in the common area, and that’s also what they want because they
can co-mingle and network with other people and make friends. That’s exactly
what they are looking for… We think that there’s a very strong demand for these
assets in the few markets we are looking at.
HIT: How do you identify opportunities in
service residences and co-living assets?
Tan: Most of our deals are
off-market. That’s also because CapitaLand does have a long-standing presence
across Asian markets. We have teams on the ground and an extensive network and
connections with developers, partners and investors. We’re also very active,
and we are able to move fast.
For example, a vendor was looking to go through the process
of appointing a broker and selling the asset. We were informed of this before
they actually went through that process, and we went to them and told them if
they go through the market process, it’s probably going to take four to six months to
close the deal. [If we go off-market], we can close the deal within four weeks.
That was a game changer for them because they could divest much faster than
going through a lengthy market process with no deal certainty, no certainty
that they would be able to sell the project.