Today, we interview Seth Sulkin, the CEO of Pacifica Capital K.K. in Tokyo. He has raised capital via non-recourse loans for renewables including solar, and is expanding in Japan & Asia.
1) When did you start Pacifica Capital and how many staff are there today? What is your main focus in Japan, and have you closed any deals of note in Asia?
We started in 2003, and now have 25 staff in Tokyo, mainly looking at Japan based deals. We touch on everything to do with Real Estate in Japan. That means development, asset & property management, advisory and renewable energy deals. We do look at China & Singapore, for real estate themed deals, but not really Hong Kong, and we have no plans to open any office within Asia.
2) Where do you see the opportunity for your firm to grow? is there any key advantage you have today in Japan?
Unlike many companies looking for opportunities, Pacifica Capital are only the second firm, behind Goldman Sachs, to close a non-recourse loan for a renewable project in Japan. Many other competitors still try, but few succeed with any closed deals, just a lot of effort and activity. In regard to solar opportunities, they are in reality real estate deals. The main difference is that they often have limits of 20 years. Compared to large REIT like sponsors, we are fast and nimble. As a firm, we know how to get permits and financing faster and more efficiently than many other competitors.
3) What attracted you to this opportunity to pursue renewable deals like solar in Japan?
The main attraction to the solar deals in Japan is the set cashflow for 20 years. The land cost is very small compared to the equipment used. The attraction is the accelerated depreciation on this equipment for most companies. As we operate a SPV or special purpose vehicle, that is less important to us. Although many feel that the land is key, it is more the equipment and depreciation that finds more attraction to many investors. Although established in 2012, we have been trying to maximize the feed-in tariffs benefits in Japan around solar projects.
The main attraction to the solar deals in Japan is the set cashflow for 20 years. The land cost is very small compared to the equipment used. The attraction is the accelerated depreciation on this equipment for most companies. As we operate a SPV or special purpose vehicle, that is less important to us. Although many feel that the land is key, it is more the equipment and depreciation that finds more attraction to many investors. Although established in 2012, we have been trying to maximize the feed-in tariffs benefits in Japan around solar projects.
4) Has this opportunity within renewable energy in Japan changed in any way due to government actions?
The original guidance and the policy around this has sadly changed. Major investors who have been looking into this opportunity have had to re-evaluate it profit potential. The UK, US and Germany have done a solid job with solar policy, but Spain has not as it changed terms halfway through. Japan may be following this bad example. A better more clear policy guide needs to be put in place.
5) Are there gaps in understanding that overseas investors do not fully understand that Pacifica Capital try and fill? Are there assumptions by overseas investors that cannot happen in Japan that needs education?
We do not look for stable buildings where we cannot add value in significant ways. We look make money by adding maximum value to properties in Japan. This even means taking on risk in land assembly that may require tenant evictions. Most foreign investors do not understand this risk well. If you buy one main property and then buy additional property, that ability is very rare. To price and value the larger footprint and to negotiate with tenants is what we do best at Pacifica Capital. These tenants evictions can often be resolved within 6-12 months. Too often foreign investors assume half the time this is impossible, but in reality less than 1% of tenants are difficult. 99% of the time all goes smooth and they miss out on these lucrative chances.
6) Are there project partners or investors that you are searching for at this time for solar, retail, commercial or hotel type opportunities?
We are always looking for investors who can help us do things that we could not do on our own. If there was a Japanese family or corporation willing to finally sell a rare piece of Japanese real estate, that would interest us greatly. This is a growing trend as more Japanese company presidents are finally doing more trusts & inheritance planning. If there was a Japanese or foreign investor who wanted to partner with us to do a major project in Japan, and use our expertise, that also would be very attractive.
6) Are there project partners or investors that you are searching for at this time for solar, retail, commercial or hotel type opportunities?
We are always looking for investors who can help us do things that we could not do on our own. If there was a Japanese family or corporation willing to finally sell a rare piece of Japanese real estate, that would interest us greatly. This is a growing trend as more Japanese company presidents are finally doing more trusts & inheritance planning. If there was a Japanese or foreign investor who wanted to partner with us to do a major project in Japan, and use our expertise, that also would be very attractive.
7) Where do you see your firm growing the most in the next 2-3 years? Will this continue in solar or change into another new direction?
We see hotels in Tokyo and Osaka to be a major opportunity. Not pure luxury hotels but more the 3-5 star boutique hotel that charges 15-30,000 yen a night. The growing amount of visitors to Japan needs more interesting hotels and places to stay, not boring business hotels that are very basic with no personality mainly functional. Tokyo does not have enough hotel capacity for the growing numbers of foreign tourist from China and Asia especially. More and more travellers to Tokyo or Osaka would like a "fun and interesting" place to stay, and not just settle for a clean yet basic hotel room while in Japan. Watch this space, we will be involved.
We see hotels in Tokyo and Osaka to be a major opportunity. Not pure luxury hotels but more the 3-5 star boutique hotel that charges 15-30,000 yen a night. The growing amount of visitors to Japan needs more interesting hotels and places to stay, not boring business hotels that are very basic with no personality mainly functional. Tokyo does not have enough hotel capacity for the growing numbers of foreign tourist from China and Asia especially. More and more travellers to Tokyo or Osaka would like a "fun and interesting" place to stay, and not just settle for a clean yet basic hotel room while in Japan. Watch this space, we will be involved.
For more information about new opportunities with Pacifica Capital K.K., please contact Seth Sulkin, via email at info@pacifica-cap.com
For more Buy-Side and Sell-Side roles in Asia-Pacific, contact our TMJ Partners Japan & Asia Finance team.
For more Buy-Side and Sell-Side roles in Asia-Pacific, contact our TMJ Partners Japan & Asia Finance team.
Tokyo Tokyo
Mark Pink Shinichi Nagasawa
Direct + 81 3 3505 3891 Direct +81 3 3505 3891
Email pinkmark@tmjpartners.com Email nagasawa@tmjpartners.com
