KKR Japan REIT Selling Tokyo R&D Centre to Mitsubishi Unit for $68M

A KKR-sponsored REIT has agreed to sell an ageing Tokyo R&D facility to a development unit of Mitsubishi Corporation for JPY 10 billion ($68 million).

Industrial & Infrastructure Fund is unloading IIF Kamata R&D Center in the capital’s southernmost Ota ward at a price 37.4 percent above book value and 24.7 percent above appraisal value, according to a filing by IIF’s manager, which is controlled by Manhattan-based buyout giant KKR. The fully occupied 1988-era building, acquired by the trust in 2012 for JPY 7.2 billion, provides 21,897 square metres (235,697 square feet) of floor space.

IIF Kamata R&D Center faces significant capital expenditures and increased operating costs in the mid to long term, as well as a lease expiry in 2026 for the building’s main tenant, measurement systems maker Tokyo Keiki, according to the manager.

“At the same time, the surrounding area is a well-developed residential zone with high livability and excellent transportation access, making the property attractive to potential buyers considering alternative uses,” the manager said.

Repaying Shed Loans

Situated within walking distance of Kamata and Keikyu Kamata railway stations, IIF Kamata R&D Center is suited to R&D and back-office uses and features emergency power generation, uninterruptible power supply for continuous operations and a multi-layered security system with non-contact entry cards, according to a fact sheet.

The buyer, Mitsubishi Corporation Urban Development, is picking up the six-storey building at the equivalent of JPY 456,684 ($3,085) per square metre of floor space, with the transaction scheduled to close on 1 October.

Upon completion, IIF expects to return the entire JPY 2.3 billion gain on sale to unitholders in the form of a dividend of JPY 910 per unit for the period ending January 2026. The remaining proceeds will be used to repay the borrowings incurred to purchase IIF Narashino Logistics Center I, a newly built warehouse in Chiba prefecture, and for future acquisitions.

IIF’s portfolio consists of interests in 109 properties with a total acquisition value of JPY 508 billion and an occupancy rate of 99.7 percent.

Fuji Soft Office Buy

KKR acquired IIF’s manager in 2022 from Mitsubishi Corp and Swiss banking giant UBS in a $2 billion balance sheet transaction using no client funds. The manager also runs a commercial REIT, Japan Metropolitan Fund, which earlier this month acquired a set of office properties from KKR-owned Fuji Soft for JPY 68.7 billion.

The 14-asset portfolio comprised 12 office buildings and land leaseholds held by Fuji Soft and two office blocks held by the systems developer’s Cyber Com subsidiary, including the Fuji Soft Shiodome Building in Tokyo’s central Minato ward and the Fuji Soft head office in Yokohama.

The deal marked JMF’s first corporate real estate carve-out with KKR, which won a battle with Bain Capital to take Fuji Soft private earlier this year, and boosted the JMF portfolio to a total of 159 properties acquired for JPY 1.33 trillion.