KKR Japan REIT Selling Yokohama Shopping Centre for $63M, Buying Kawasaki Mall for $33M

KKR’s Tokyo-listed commercial REIT has agreed to sell an ageing shopping centre in Yokohama for JPY 9 billion ($63 million) and plans to fill the gap with the JPY 4.8 billion buy of a newly completed Kawasaki mall.

Japan Metropolitan Fund will gain JPY 4.56 billion on the disposal of Ito-Yokado Tsunashima in Yokohama’s Kohoku ward, with the sale price representing a 75 percent premium to the asset’s appraised value, the REIT’s manager said Wednesday in a stock filing. The deal will be closed in two parts, on 28 February and 3 March 2025, with proceeds distributed to JMF unitholders over two separate fiscal periods.

Separately, the $9.1 billion trust will acquire the four-storey Cross Mukogaoka mall, which finished construction last November and opened in April, at a 27 percent discount to appraised value. The asset in Kawasaki, just past the southwest corner of Tokyo, is expected to generate a net operating income yield after depreciation of 4.4 percent, compared with the 3.5 percent average of JMF’s 141-asset portfolio.

“It also has room for future NOI growth as it is a newly built, urban retail property in a prime location, so it is expected to contribute to enhancing DPU,” the manager said.

Anchor Tenant Walks

The counterparties in both transactions are undisclosed domestic companies with no capital, personal or business relationships with JMF or the manager, according to the filing.

The four-storey Ito-Yokado Tsunashima was acquired by JMF for JPY 5 billion in 2004. With the departure of the anchor tenant, general store Ito-Yokado, the trust opted for disposal instead of trying to find a replacement at the 1982-vintage shopping centre.

The asset has 16,550 square metres (178,143 square feet) of floor space and enjoys a visible location in Yokohama’s most-populous Kohoku ward, being a four-minute walk from Tsunashima station on the Tokyu Toyoko Line and a six-minute walk from Shin-Tsunashima station on the Tokyu Shin-Yokohama Line.

Cross Mukogaoka sits in Tama ward, a Kawasaki bedroom community with a growing population of 215,000, and comprises 14 tenants including a supermarket, drugstore and electronics retailer. The mall’s 6,771 square metres of leasable space is fully occupied.

The purchase of Cross Mukogaoka is a forward commitment and is due to be completed on 1 April 2025.

Growing Footprint

Manhattan-based investment giant KKR bought KMF’s manager — formerly known as Mitsubishi Corp-UBS Realty, a joint venture of the Japanese conglomerate and the Swiss bank — for $2 billion in 2022 in an all-cash, balance sheet transaction using no client funds.

The renamed KJR Management oversees a pair of Tokyo-listed REITs with a combined $12.5 billion in assets under management.

JMF’s most recent deal was the May purchase of a 70 percent stake in a commercial building on the southern island of Okinawa for JPY 2.5 billion. Last December, the trust nearly doubled its apartment portfolio with the acquisition of an apartment building in Nagoya and a stake in a portfolio of multi-family assets for JPY 3.8 billion in total.