Riding the Wave of Asset-Light Transformation -
KJRM × KKR’s CRE Carve-Out Strategy
In March 2024, 29 major logistics facilities (approx. ¥117.5 billion) owned by Logisteed were acquired by IIF, with the remaining properties acquired by a private fund established by KJRM.
This landmark large-scale CRE carve-out was realized through the collaboration between KJRM, which specializes in investment and management of industrial real estate through CRE proposals, and KKR, which excels at enhancing corporate value through private equity (PE) investments. This deal triggered a chain reaction of asset-light transformations among Japanese companies.
CHAPTER 01Transformation of Japanese Companies and the Wave of Asset-Light Strategies
Since the 2010s, the environment surrounding Japanese listed companies has changed significantly, driven by corporate governance reforms, the Tokyo Stock Exchange’s requests for companies trading below book value (PBR < 1), and the growing presence of activist investors, including overseas investors. In the logistics sector, while demand for logistics surged during the COVID-19 pandemic in 2020, the industry simultaneously faced challenges such as labor shortages and the so-called “2024 problem.”
Combined with the changing environment for listed companies, this accelerated the trend of "Asset-Light Strategies" — selling real estate to recycle capital into growth investments and maximizing the use of logistics assets.
In this context, KKR acquired Logisteed (formerly Hitachi Transport System) in 2023. Following its privatization, KKR prioritized improving asset and capital efficiency and reallocating capital toward growth, prompting consideration of Logisteed’s asset-light transformation.
CHAPTER 02Property Acquisition via IIF and KJRM’s Private Fund Platform
All of the facilities owned by Logisteed, amounting to several hundreds of billions of yen in scale, were held as physical real estate assets, raising the pressing question of how to achieve asset liquidation. To address this challenge, extensive discussions were held within KJRM, leveraging the capabilities of both Industrial & Infrastructure Fund Investment Corporation (IIF) and our private fund platform.
Drawing upon our proven track record in advancing various industrial real estate monetizations through CRE proposals, and the expertise and skills of our specialized members, we carefully examined every possible solution and selected properties that aligned with the perspectives of both IIF and private fund investors. As a result, by combining the strengths of IIF and the private fund platform, we successfully executed a large-scale CRE carve-out transaction, realizing the liquidation of assets exceeding 200 billion yen.
This epoch-making transaction went on to accelerate the trend toward asset-light strategies within the logistics industry. Logisteed, in turn, utilized the capital gained through the divestment of its real estate holdings to pursue its next stage of growth investment — culminating in the acquisition of Alps Logistics Co., Ltd. (“Alps Logistics”).
CHAPTER 03Inflation Hedging: Introduction of CPI-Linked Rent
Through this long-term sale-and-leaseback agreement with Logisteed, we secured stable long-term cash flows from a highly creditworthy tenant. A key feature of this transaction was the incorporation of CPI-linked rent into the lease agreements. By embedding inflation-linked rent, the structure hedges against future cost increases driven by inflation or rising interest rates. This approach ensures sustainable profitability of the managed properties, contributing to both cash flow stability and long-term asset value enhancement.
CHAPTER 04Executing Successive CRE Carve-Out Transactions
– Asset-Light Strategy with Alps Logistics’ Real Estate –
Following the initial carve-out transaction, Logisteed utilized the sale proceeds to acquire Alps Logistics as a growth investment. In turn, the asset-light transformation of Alps Logistics’ owned properties was also realized through the combined use of IIF and KJRM’s private fund platform, leading to the monetization of 8 properties worth ¥31.5 billion. This initiative allowed us to acquire an inflation-resilient portfolio with CPI-linked rent, while enabling Alps Logistics to reinvest the sale proceeds into further growth opportunities. The deal created a win-win relationship for all stakeholders and paved the way for sustainable growth.
In 2022, KKR became the sponsor of KJRM. By combining the strengths of KKR with KJRM’s expertise and track record, we are responding to the growing needs of Japanese companies for asset-light strategies. This collaboration marks the beginning of a new phase in supporting Japan’s industrial activities through real estate solutions. KJRM has taken a significant and transformative step forward.