On Christmas Eve, giant publicly listed private equity giant KKR, led by two of its founders Henry Kravis and George Roberts, announced it has now closed its first real estate specific investment fund, raising US$1.2 billion of new money to invest on a discretionary basis in North America and in Europe. With other committed funds from within KKR, including from some of its personnel, the new fund will have over US$1.5 billion to play with.
Henry Kravis George Roberts / Getty
Since KKR has more than US$90 billion in assets worldwide the firm inevitably rubs shoulders quite often with the major players, and the deals, in the real estate business. To take advantage of the strategic insights into potential opportunities for real estate investing this could offer, the firm founded its own dedicated real estate division in 2011 for the first time, led by Ralph Rosenberg and with a compact team of 15 professionals in New York, Hong Kong and London.
The new team made its first investment in the Spring of 2012, and has already warehoused in advance for the new fund a total of over US$850 million of deal commitments in 14 different transactions, all so far with its own corporate balance sheet as obligor. Presumably most of these will now be transferred immediately into the new fund to avoid the question of double-dealing.
Ralph Rosenberg, the head of what KKR calls its “Global Real Estate Platform”, said with the announcement, “We believe the current market opportunity has the potential to create strong value-driven investment opportunities where we at KKR can leverage our sourcing channels, insights through our industry groups and portfolio companies and operating capabilities to create differentiated investment opportunities for our limited partners.”
While KKR is late to the party, as commercial real estate values have been rising strongly for some time in many developed markets, the firm clearly believes there is still time to profit, before the next credit crunch eventually brings prices down again with higher interest rates.
KKR states the new fund will continue to target real estate opportunities – including property-level equity, debt, special situations transactions and businesses with significant real estate holdings – that can benefit from KKR’s deep, longstanding global relationships, access to information, financial structuring and capital markets capabilities and real estate operational expertise.
KKR began soliciting third party capital for the new fund, in the second quarter of 2013, so it has been essentially about a six-nine month sell-to-closing time frame, which is pretty good for a private fund.
The head of KKR’s Client and Partner Group, Suzanne Donohoe, stated, “We believe the strong support from the market for the fundraise was due to the compelling nature of the opportunity and the power of the team. We are very excited that we were able to attract new and existing KKR investors from leading public and private pension funds, sovereign wealth funds, insurance companies and family offices.”
Founded in 1976 by Henry Kravis , Jerome Kohlberg and George Roberts, KKR is a New York Stock Exchange listed global investment firm with more than US$90 billion in assets under management.
With offices around the world, KKR seeks to create value by bringing operational expertise to its portfolio companies and through active oversight and monitoring of its investments. KKR complements its investment expertise and strengthens interactions with fund investors through its client relationships and capital markets platform.