KKR Teams Up With Marriott to Launch Japan Hotels After Unizo Buy

KKR has put a US brand on a set of 14 hotels that it acquired last year through its takeover of Japanese hospitality operator Unizo, with the properties to be managed under Marriott International’s Four Points Express by Sheraton.

The two companies are jointly entering Japan’s midscale hotel space under the terms of the deal, which also marks the Asia Pacific debut of Four Points Express by Sheraton, KKR said Tuesday in a release. Reuters reported last September that Unizo had selected KKR as its restructuring sponsor ahead of a takeover of the Tokyo-based company’s Japan office building and hotel business. The agency cited an account in the Nikkei newspaper.

The portfolio of 14 hotels, all of which will be converted to Four Points Express by Sheraton locations, spans 10 cities including Yokohama, Osaka, Kyoto and Kobe. The properties are expected to add more than 3,600 new rooms to KKR’s and Marriott’s respective hotel portfolios upon opening in the second half of 2024.

“International and domestic tourism in Japan has rebounded strongly since the pandemic and continues to pick up pace,” said Kensuke Kudo, managing director for real estate at KKR. “As demand for midscale hotels grows rapidly, we see a tremendous opportunity to offer high-quality and comfortable accommodation at great value.”

Red-Hot Sector

The Marriott tie-up is KKR’s latest splash in Japan’s red-hot hotel sector after the Manhattan-based firm last year joined forces with Hong Kong’s Gaw Capital on the $409.3 million acquisition of the Hyatt Regency Tokyo in a deal backed by South Korea’s MDM Asset Management.

Other big-ticket Japan hotel deals by global investors in 2023 included BentallGreenOak’s reported JPY 50 billion ($385 million) acquisition of the Rihga Royal Hotel Osaka, as well as the $900 million portfolio buy of 27 resort hotels from Daiwa House Industry by a consortium of SC Capital Partners, Goldman Sachs Asset Management and the Abu Dhabi Investment Authority.

For the investment in Four Points Express by Sheraton, which KKR is making from its Asia Pacific real estate strategy, the aim is to reposition the hotels formerly owned by debt-saddled Unizo in order to serve value-conscious consumers in convenient locations. The “efficient cost model” is intended to provide an effective pricing strategy for franchisees and drive meaningful growth for Marriott.

“There’s a growing consumer demand for reliable-yet-affordable accommodation in the region,” said Rajeev Menon, president of Marriott International for APAC ex China. “Our goal is to be everywhere our guests want us to be, with the right property in the right location, at the right price point. This collaboration with KKR will expand our ability to do exactly that — starting in Japan, with opportunity to grow our midscale presence in the region.”

Deal Blitz Goes On

Financial details weren’t disclosed for the transaction, which continues a series of bold moves by NYSE-listed KKR as it deepens its real estate commitment in Asia’s second-largest economy.

In February, a Japanese REIT managed by KKR announced its proposed purchase of JPY 108.3 billion ($700 million) in logistics assets totalling over 389,603 square metres (4.1 million square feet) from Logisteed, in a carve-out of assets from the KKR-owned firm. The REIT, known as Industrial & Infrastructure Fund Investment Corporation, also agreed to invest JPY 16.6 billion to buy a 49.9 percent stake in a Logisteed trust holding four warehouses.

That same month, another KKR-managed J-REIT revealed its 12th apartment purchase in less than a year with the acquisition of four Tokyo assets from a subsidiary of Daiwa House for JPY 9.5 billion ($64 million). Metropolitan Fund Investment Corporation’s dozen acquisitions dating to March 2023 amount to a JPY 31 billion commitment in Japan’s rental residential sector.