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Lone Star to exit Japanese hotel operator

The US investment fund will reportedly sell the 55 hotels it owns in Japan through Solare Hotels and Resorts.

Lone Star Group intends to sell its Japanese hotel operator, Solare Hotels and Resorts, in a deal that could raise 150 to 200 billion yen ($1.4-$1.8 billion), according to reports.

Sources close to the deal told multiple news outlets that the business, which operates 55 hotels throughout Japan, will be sold either through a public REIT listing or through a trade sale.

Lone Star acquired the hotels in 2003 from the Chisan Co. Group, which filed for bankruptcy protection in 2002. Since then the hotels have been managed by Solare, which is wholly owned by Lone Star. Solare recorded sales of 37 billion for the fiscal year ending in December 2006, up 43 percent from the previous year.

Lone Star has made preparations to list a Japanese hotel REIT, having recently set up Star Hotel REIT Management Company. However, given that the Japanese REIT market may be affected by the US subprime crisis, the firm may instead seek to sell the company to another fund. According to the sources, Blackstone is believed to be one of the parties interested in the company. Both Blackstone and Lone Star declined to comment on the matter.

Blackstone recently opened an office in Tokyo to focus on Japanese real estate.