KKR property deal threads the needle in Japan

Olympics 2020: from the sidelines
City skyline and harbour are seen at sunrise from a quarantine bus window during the Tokyo 2020 Olympic Games in Tokyo, Japan July 24, 2021. REUTERS/Maxim Shemetov

MELBOURNE, March 18 (Reuters Breakingviews) - KKR is getting bigger in Japan. The buyout shop on Thursday struck a deal to buy one of the country’s biggest property managers from Mitsubishi Corp (8058.T) and UBS (UBSG.S) for $2 billion. It’s a shrewd acquisition in more ways than one.

KKR will significantly beef up its regional and sector presence by owning MC-UBSR and the $14.5 billion of office, retail, hotel and industrial property assets it controls through two publicly traded real estate investment trusts. Such growth and diversification are an important part of the story for private equity investors these days. Citi analysts reckon the valuation of 20 times estimated pre-tax, fee-related earnings for 2023 stacks up well compared to other recent deals.

By using only cash from its balance sheet for the acquisition, KKR also sidesteps any tricky borrowing talks. Many Japanese banks just opened tough, and potentially costly, negotiations on a roughly $10 billion restructuring of KKR’s auto-parts maker Marelli read more . It’s one more reason to keep a rainy-day fund. (By Jeffrey Goldfarb)

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(The author is a Reuters Breakingviews columnist. The opinions expressed are their own.)

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