• New strategic transaction combines the real estate investment and asset management acumen of KKR and MC-UBSR to strengthen a leading Japanese REIT management business
• Strong alignment of interest through KKR’s direct investments in MC-UBSR’s listed J-REITs
• Acquisition deepens KKR’s presence in Japan and expands its US$41 billion global real estate business to US$55 billion¹
• Concludes two decades of successful joint venture for Mitsubishi and UBS Asset Management

KKR & Co. Inc., Mitsubishi Corporation and UBS Group and UBS AG recently announced the signing of a strategic transaction by a subsidiary of KKR, which is acquiring all of the outstanding shares of Mitsubishi Corp.-UBS Realty Inc. (“MC-UBSR”) from Mitsubishi and UBS Asset Management (“UBS-AM”) in an all-cash transaction valued at JPY230 billion (US$2 billion).

MC-UBSR is one of the largest real estate asset managers in Japan. Founded in 2000 as a joint venture between Mitsubishi and UBS-AM, MC-UBSR is a pioneer in the Japanese real estate investment trust (“J-REIT”) segment. Today, it is one of the largest real estate asset managers in Japan with JPY1.7 trillion (US$15 billion) in assets under management.² The business has approximately 170 dedicated professionals managing two Tokyo Stock Exchange-listed REITs: Japan Metropolitan Fund Investment Corporation (“JMF”) and Industrial & Infrastructure Fund Investment Corporation (“IIF”).

JMF, with approximately JPY1.3 trillion (US$11 billion) in assets under management as of August 31, 2021, invests in retail, offices, hotels and other assets located in urban areas. IIF, with approximately JPY 0.5 trillion (US$4 billion) in assets under management as of January 31, 2022, focuses on industrial and infrastructure properties in Japan. Both REITs have established environmental, social, governance (“ESG”) programs and are included in the MSCI Japan ESG Select Leaders Index.

Commenting on the transaction, Katsuji Okamoto, President & CEO and Representative Director of MC-UBSR, said, “Mitsubishi and UBS-AM showed us unwavering support over the years, enabling MC-UBSR to become Japan’s outright top J-REIT manager. We are excited to welcome KKR, which brings significant resources and relationships to MC-UBSR, and is well-placed to work with our experienced team to extend our long and successful track record of delivering strong results for the unitholders of JMF and IIF and take the business to the next level.”

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“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. 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. We look forward to working with and supporting a team that has served investors so well over the last two decades, and we anticipate that our combined strengths will further enhance MC-UBSR’s ability to deliver for new and existing clients and unitholders,” said Hiro Hirano, CEO of KKR Japan and Co-Head of Asia Pacific Private Equity at KKR.

Takuya Kuga, Group CEO-designate, Urban Development Group of Mitsubishi, said, “We are pleased to have supported MC-UBSR’s development and operations over these past 20 years, and are proud to have grown MC-UBSR into Japan’s leading REIT manager. Mitsubishi continuously strives to optimize and strengthen its business portfolio, and will continue to expand its real estate development and asset management businesses in Japan, led by its wholly owned subsidiaries, Mitsubishi Corporation Urban Development, Inc. and Diamond Realty Management Inc, along with accelerating its initiatives in overseas real estate and large-scale urban development/management business. Welcoming a high-caliber real estate and diversified investment firm like KKR is a major endorsement of MC-UBSR, its team and its business, and we look forward to working with KKR and MC-UBSR.”

Suni Harford, President of UBS Asset Management, said, “In partnership with Mitsubishi, we are proud to have developed MC-UBSR into a leading real estate platform in Japan. We are confident that KKR is well placed to take this business forward and wish the MC-UBSR team every success for the future. The Japanese market remains a cornerstone of our Real Estate & Private Markets business in Asia Pacific, and we remain focused on serving the needs of our clients and capturing growth opportunities in this strategically important region. Through our rapidly growing real estate investment unit, UBS Japan Advisors, we will continue to advise our clients on Japanese property investments.”

UBS’s asset management, wealth management, and investment banking businesses operating in Japan are unaffected by the transaction.

Strategic Rationale

• KKR is committed to supporting the existing strategy and continuity of MC-UBSR and looks to leverage its network and global resources to create value for JMF and IIF unitholders. The strategic transaction combines the real estate investment and asset management acumen of both KKR and MC-UBSR, and is expected to bolster the acquired operation’s status as a leading J-REIT business with enhanced opportunities for organic and inorganic growth.
• Acquisition of the asset manager deepens KKR’s commitment to Japan, where KKR has had a local presence and team since 2006. The transaction also provides KKR’s global real estate business – which manages US$41 billion in client assets as of December 31, 2021 – with immediate scale in a large, important market.
• Creates strong strategic synergies between MC-UBSR’ dedicated team of real estate professionals in Japan and KKR’s 135-person global real estate team. Today, in addition to its institutional investment funds, KKR invests on behalf of individual investors through listed and privately offered REITs, including KREF, a publicly listed REIT that focuses on originating senior commercial mortgage loans, and KREST, a REIT that thematically invests in income-oriented commercial real estate equity and debt primarily in the U.S.

Key Transaction Terms

• 76KK, a subsidiary of KKR, to acquire all of the outstanding shares of MC-UBSR in an all-cash transaction valued at JPY230 billion (US$2 billion).
• 76KK will also acquire the units in JMF and IIF currently held by Mitsubishi at market price, thereby strengthening the alignment of interest between KKR and the unitholders of JMF and IIF.
• MC-UBSR’s existing experienced management team of professionals is expected to remain in place and continue to manage JMF and IIF. KKR intends to work closely with the existing team to integrate the business with KKR’s US$41 billion real estate business.
• The investment will be held on KKR’s balance sheet, not in any client funds.
• The transaction is expected to be immediately accretive to KKR on a Fee Related Earnings per share basis.
• The transaction is expected to close in April 2022 and is subject to required regulatory approvals and certain other customary closing conditions.

Additional Information

• KKR, MC-UBSR, Mitsubishi and UBS have published additional information for shareholders on their websites, www.ir.KKR.com, www.mc-ubs.com, www.mitsubishicorp.com and www.ubs.com, respectively.
• Simpson Thacher & Bartlett LLP and Nagashima Ohno & Tsunematsu served as legal advisers to KKR and Sumitomo Mitsui Banking Corporation served as financial adviser to KKR.
• UBS Investment Bank acted as exclusive financial advisor to Mitsubishi, UBS-AM and MC-UBSR. Nishimura & Asahi served as legal advisers to Mitsubishi. Mori Hamada & Matsumoto served as legal advisers to UBS-AM. Anderson Mori & Tomotsune served as legal advisers to MC-UBSR.

Source: KKR & Co.