KKR Japan REIT Buying Two Greater Tokyo Residential Buildings for $41M

KKR’s Japan Metropolitan Fund Investment Corporation will acquire two rental residential assets in Greater Tokyo for a combined JPY 5.39 billion ($41 million) as the US private equity giant continues its spate of real estate deals in Asia’s second-largest economy.

The Tokyo-listed REIT will buy trust beneficiary rights to the 108-unit RJR Prescia Shin-Yokohama for JPY 3.19 billion and the 58-unit Tak Plaza II in Tokyo’s Kita special ward for JPY 2.2 billion, according to a stock filing.

The acquisition of the centrally located properties will further JMF’s goals of securing stable earnings on a medium- to long-term basis and ensuring steady growth of operating assets, said the trust’s manager, KJR Management, which KKR acquired for $2 billion last April when it was known as Mitsubishi Corp-UBS Realty.

“While the conditions in the real estate trading market remain harsh, the acquisition of these excellent residences with an NOI yield in excess of 4 percent will contribute to the progress of asset replacement and an improvement in the portfolio quality,” the manager said.

Adding Apartments

The Yokohama property, located an eight-minute walk from Shin-Yokohama subway station, is a 10-storey rental apartment building with units measuring between 30 and 38 square metres (323 and 409 square feet). The first floor and the first basement floor of the 2009-vintage building are designated for shops and are leased for long terms by two tenants for a showroom/office and a music school, JMF said.

RJR Prescia Shin-Yokohama has a total leasable area of 3,989 square metres, meaning the trust will pay roughly JPY 799,700 ($6,008) per square metre of TLA to the undisclosed seller.

Tak Plaza II, a five-storey rental apartment building near Tokyo’s Akabane railway station, was completed in 2006, and large-scale repair work was carried out in 2020. The REIT’s consideration pencils out to JPY 802,920 ($6,033) per square metre for the property’s 2,740 square metres of TLA. The seller is local property firm KT Capital Corporation.

KKR bought Mitsubishi Corp-UBS Realty, a joint venture of the Japanese conglomerate and the Swiss banking giant, in an all-cash, balance sheet transaction using no client funds. The renamed KJR Management manages a pair of Tokyo-listed real estate investment trusts with a combined $12 billion in assets under management.

JMF’s portfolio comprises 127 assets across the retail, office, residential, hotel and mixed-use segments with a total acquisition price of JPY 1.2 trillion ($9 billion).

Tokyo Rosy for Real Estate

The JMF pickups come after Manhattan-based KKR teamed with Hong Kong’s Gaw Capital Partners to buy the Hyatt Regency Tokyo from Odakyu Electric Railway in a deal announced last month, giving the US private equity giant its first hotel asset in Japan.

Funds managed by the two investment firms agreed to acquire the luxury hotel in Tokyo’s central Shinjuku special ward for an undisclosed amount. Odakyu said it expected to record a gain of JPY 50 billion ($380.4 million) on the disposal, but the rail operator was mum on the sale price.

Last December, KKR announced that one of its closed-end funds, KKR Real Estate Select Trust, had acquired 39 multi-family properties located in 15 popular residential submarkets across Tokyo.