KKR Japan REIT Acquiring Tokyo Apartments in 12th Multi-Family Buy in One Year

KKR’s TSE-listed REIT is making its 12th apartment purchase in less than one year as its manager announced on Wednesday the acquisition of four Tokyo rental residential assets for JPY 9.5 billion ($64 million) from a subsidiary of Daiwa House.

“The four residential properties that JMF decided to acquire are all located in the 23 wards of Tokyo and are prime rental residential properties in areas with excellent transportation and living convenience. JMF considers the acquisition of these residential properties to contribute to the progress of asset replacement and improvement of the quality of its portfolio,” said the trust’s manager in an investor disclosure on Wednesday.

Japan’s Metropolitan Fund Investment Corporation’s largest purchase in its latest set of acquisitions is the nearly-completed Cosmos Gracia Kuramae Terrace in Tokyo’s Taito ward for JPY 3 billion. The REIT is buying the residential portfolio from Cosmos Initia, a real estate sales and brokerage unit of Daiwa House.

The proposed purchase is JMF’s first of the year, and should it be consummated, the REIT’s 12 most recent acquisitions, dating to March 2023, will have been rental residential assets, amounting to a JPY 31 billion commitment in the sector.

Topping Up in Taito

Located 10 minutes’ drive from the Tokyo Skytree observation deck, the Cosmos Gracia Kuramae Terrace has 60 residential units and is scheduled for completion on Friday.

JMF is acquiring the asset at a 9.1 percent discount from its appraised value of JPY 3.4 billion at the start of the year. The 13-storey building has a total leasable area of 2,162 square metres, meaning that the trust will pay around JPY 1.4 million per square metre for the property.

The trust’s manager expects housing demand in Taito to remain steady due to growing population in the ward northeast of central Tokyo’s Chiyoda-ku. Defying Japan’s national population decline, the Taito is projected to be home to 230,532 people by 2045, up by 11.3 percent from 2020.

One of the three remaining apartment properties is also situated in Taito, with the remaining two located in Tokyo’s Setagaya and Itabashi wards. The four assets collectively add 159 units to the trust’s portfolio.

Post-acquisition, JMF’s portfolio will comprise 137 assets across retail, office, residential, hotel and mixed-use segments with a total acquisition price of JPY 1.2 trillion.

A Run on Rentals

This latest deal takes place less than two months after JMF in December announced the JPY 2.3 billion acquisition of an apartment asset in Nagoya, as the REIT continues to ramp up its rental residential holdings. That December announcement revealed that the trust is also purchasing a 28.6 percent interest in a porfolio of 12 rental residences across the country for JPY 1.5 billion.

In October, JMF completed it JPY 4 billion acquisition of the JMF-Residence Machidai apartment on the western fringe of Tokyo from local developer Es-Con Japan, just three months after it announced the acquisition of a trio of Osaka multi-family assets for JPY 5.4 billion.

Across Asia Pacific, multi-family has been the only sector to record an uptick in transaction volumes in 2023, with investors trading $11.9 billion in rental housing properties throughout last year, up 5 percent from 2022, according to data from MSCI Real Assets.

US-based investment management firm KKR acquired JMF’s manager from Mitsubishi and UBS Asset Management for $2 billion in April of 2022, and renamed the manager KJR Management upon completion of the deal.