KKR's Real Estate Credit business, co-headed by Chris Lee and Matt Salem, was established in 2015 to invest across the commercial real estate debt spectrum and offer financing solutions to commercial property owners. Its first investment vehicle was KKR Real Estate Fiancne Trust, a mortgage REIT.

Earlier this year, KKR took KREF public and the REIT began trading in early May under the KREF ticker. Previously, KKR capitalized KREF, at that time a non-traded mortgage REIT, closing on a private placement that gave it a total of $838 million of equity capital available, along with $1 billion of existing borrowing capacity across its lending facilities.

In its S-11 filing prior to the launch of a public offering in late April, KREF cited “strong demand for CRE debt capital driven by a high volume of over-leveraged, near-term loan maturities, strong transaction volume fueled by improved economic conditions and CRE fundamentals and continued global capital inflows” for US commercial real estate investment. “In addition, constrained supply of CRE debt capital driven in large part by more restrictive underwriting standards from conventional financing sources compounded by increasing regulatory pressures have created a potential opportunity for alternative lenders like us to serve as attractive debt capital solutions providers to the real estate market.”

Although KKR had made real estate investments since the 1980s, the private equity giant first launched a dedicated real estate platform in 2011. Since then, the firm has invested or committed over $4.5 billion in capital across more than 60 real estate transactions in the US, Europe and Asia as of this past June 30.

NEW YORK CITY—KKR, which has stepped up its game in real estate investing over the past two years, said Tuesday afternoon it had closed on KKR Real Estate Credit Opportunity Partners at $1.1 billion. RECOP exceeded its target capital raise and received strong backing from a diverse group of global investors, including public pensions, insurance companies, and family offices. The fund is geared toward generating attractive risk-adjusted returns for investors through the purchase of junior tranches of CMBS.

RECOP focuses primarily on investing in newly-issued CMBS B-Pieces as an eligible third party purchaser subject to the new risk retention regulations which took effect in December 2016. The risk retention mandate for CMBS calls upon lenders to retain a 5% stake in the securitization for five years.

Earlier this year, KKR negotiated and purchased the first CMBS transaction subject to risk retention. RECOP has since closed on six additional transactions representing a face amount of $517 million and a total of approximately $225 million of invested equity. KKR says the fund's seven closed investments through August 2017 make it the most active CMBS B-Piece buyer of third party risk retention structures.

“With more than $50 billion annual conduit CMBS issuance, and a limited universe of B-piece buyers, there is a growing need for capital to satisfy the new regulatory framework,” says Matt Salem, co-head of KKR's Real Estate Credit business. “We believe our long-dated capital offers a compelling risk retention solution while also generating attractive returns for our investors. In addition, the fund will benefit from KKR's extensive relationships with major CMBS issuers and our integrated 'one-firm' approach to underwriting.”

KKR's Real Estate Credit business, co-headed by Chris Lee and Matt Salem, was established in 2015 to invest across the commercial real estate debt spectrum and offer financing solutions to commercial property owners. Its first investment vehicle was KKR Real Estate Fiancne Trust, a mortgage REIT.

Earlier this year, KKR took KREF public and the REIT began trading in early May under the KREF ticker. Previously, KKR capitalized KREF, at that time a non-traded mortgage REIT, closing on a private placement that gave it a total of $838 million of equity capital available, along with $1 billion of existing borrowing capacity across its lending facilities.

In its S-11 filing prior to the launch of a public offering in late April, KREF cited “strong demand for CRE debt capital driven by a high volume of over-leveraged, near-term loan maturities, strong transaction volume fueled by improved economic conditions and CRE fundamentals and continued global capital inflows” for US commercial real estate investment. “In addition, constrained supply of CRE debt capital driven in large part by more restrictive underwriting standards from conventional financing sources compounded by increasing regulatory pressures have created a potential opportunity for alternative lenders like us to serve as attractive debt capital solutions providers to the real estate market.”

Although KKR had made real estate investments since the 1980s, the private equity giant first launched a dedicated real estate platform in 2011. Since then, the firm has invested or committed over $4.5 billion in capital across more than 60 real estate transactions in the US, Europe and Asia as of this past June 30.