Private equity giant KKR has become the latest global investor to upscale in Asia after agreeing to buy a Japanese REIT manager held jointly by Mitsubishi Corporation and UBS Asset Management for $2 billion.
KKR will acquire the outstanding shares of 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. MC-UBSR manages a pair of Tokyo-listed real estate investment trusts with a combined $15 billion in assets under management.
For Manhattan-based KKR — best known for its private fund strategies and record-setting buyouts of large American companies — the deal deepens its presence in Japan and expands its global real estate business to $55 billion in assets under management.
“Japan is one of the most important and high-volume real estate markets in the world, and is a market we have been dedicated to investing in with a local team since 2006,” KKR Japan CEO Hiro Hirano said Thursday in a release. “MC-UBSR has an excellent track record of serving investors across its REIT offerings and a strong commitment to enhancing its investments through a strategic approach to ESG.”
Japan Expansion Underway
The acquisition, which is expected to close in April, brings in 170 staff who manage two large REITs, Japan Metropolitan Fund Investment Corporation (JMF) and Industrial & Infrastructure Fund Investment Corporation (IIF). Under the terms of the deal, KKR will also acquire the units in the two trusts currently held by Mitsubishi at market price.
JMF, with $11 billion in assets under management as of last August, invests in 128 retail, office, hotel and other properties in urban areas across Japan. IIF, with $4 billion in assets under management as of January, holds 74 industrial and infrastructure properties.
The acquisition of the J-REIT manager brings KKR into new territory, with the investment giant overseeing just two other REITs globally – both in the US.
By acquiring the Japanese firm on its own balance sheet, rather than making use of one of its funds, the company is signalling its intent to hold MC-UBSR long term, with the target company’s local team seen as integral to both the transaction and the future of the Japan business.
The transaction provides KKR’s global real estate business, which managed $41 billion in client assets as of last December, with immediate scale in Asia’s second-largest economy.
Boosting Asian Presence
KKR has accelerated its Asia Pacific property acquisitions since the 2018 hiring of John Pattar to lead the company’s real estate efforts in the region. The firm announced the $1.7 billion final closing of its first dedicated Asia real estate fund in early 2021.
News of KKR’s expansion in Japan comes the same week that Sweden’s EQT announced plans to buy Baring Private Equity Asia for €6.8 billion ($7.5 billion) in a cash-and-stock deal that would give the Nordic fund manager its first substantial presence in Asia and allow it to bring the Hong Kong-based firm’s $19 billion in assets under management into its growing portfolio.
EQT’s leap into Asia by acquiring a regional private equity player follows similar efforts by global giants like Canada’s Manulife, which last month announced plans to purchase a significant minority stake in Hong Kong-based Arch Capital Management, and British investment manager Schroders, which took a similar route in buying a majority stake in Hong Kong’s Pamfleet in 2020.