KKR Japan REIT Adds to Tokyo Apartment Pipeline With $33M Acquisition

One of the busiest global investors in Japan real estate is adding another asset to its portfolio, as KKR’s Tokyo-listed REIT has agreed to acquire an under-construction apartment building in the capital city’s Taito ward for JPY 4.32 billion ($33 million).

Japan Metropolitan Fund Investment Corporation will buy JMF-Residence Asakusabashi 3-chome upon the 13-storey project’s scheduled completion in April 2024, the REIT’s manager said in a stock filing. A deposit of JPY 442 million was paid last week, and JMF plans to fund the acquisition with cash on hand and a planned debt offering.

The seller of the property is an undisclosed domestic company with no capital, personal or business relationships with JMF or the manager, according to the filing. The acquisition follows the $9 billion trust’s purchase of two rental residential assets in Greater Tokyo for JPY 5.39 billion ($41 million) in deals announced last month.

“While the conditions in the real estate trading market remain harsh, the acquisition of the property will contribute to the progress of asset replacement and an improvement in the portfolio quality,” the manager said.

Bucking Population Trends

Located in Taito’s Asakusabashi district, the apartment project is a six-minute walk from Asakusabashi station on the JR Sobu commuter rail line and a nine-minute walk from Kuramae station of the Toei Subway, a separate system from the Tokyo Metro. The 72-unit building’s first floor will be tenanted by a supermarket.

Taito, located in the northeastern portion of Tokyo’s wards area, is expected to buck the nationwide trend of decreasing population and experience 11.3 percent growth from 2020 levels by 2045, the manager said, citing government research.

The finished project will feature 2,926 square metres (31,495 square feet) of total leasable area, with the property transacting at JPY 1,476,418 ($11,175) per square metre of TLA. The manager anticipates a net operating income yield of 3.6 percent (3 percent after depreciation), meeting the target of the asset replacement strategy despite the asset’s central Tokyo location.

In late March, JMF acquired 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. As with those two rental properties, the trust intends to set up a pass-through master lease agreement for the Asakusabashi project.

High-Conviction Market

Manhattan-based KKR bought KMF’s manager — formerly known as Mitsubishi Corp-UBS Realty, a joint venture of the Japanese conglomerate and the Swiss banking giant — for $2 billion last April 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 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).

In March, KKR teamed up with Hong Kong’s Gaw Capital Partners to buy the Hyatt Regency Tokyo from Odakyu Electric Railway for an undisclosed amount, giving the US private equity giant its first hotel asset in Japan.

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