NEW YORK CITY—“We fundamentally focus on themes that have really strong drivers for demand,” Ralph Rosenberg, global head of real estate at KKR, said in a Bloomberg News interview Wednesday. “So right now we're really focused on all the housing themes—seniors housing, student housing, multifamily housing—alongside the theme of looking at the Sunbelt states and the migration of population to the major cities in the South, where there's low tax jurisdiction and, obviously, great weather.”
Rosenberg made his comments as KKR announced the final close on its KKR Real Estate Partners Americas II, the successor to a value-add and opportunistic vehicle which completed fundraising in December 2013. At $2 billion, REPA II exceeds the size of REPA I as well as KKR's initial target for the newer fund.
REPA II includes approximately $230 million of capital from KKR's balance sheet and employee commitments. The Wall Street Journal reported Wednesday that KKR has already committed or spent about $250 million of the new fund, which drew on both new and existing investors globally, including public pensions, sovereign wealth funds, insurance companies, financial institutions, foundations, endowments, family offices and high net worth individuals.
In targeting apartments on one hand and seniors housing on the other, Rosenberg acknowledged Wednesday that KKR has identified a “barbell” effect in terms of demographics, with Millennials and Baby Boomers representing different ends of the generational spectrum. However, he added, “about a million people turn 18 every year in the US, and that obviously feeds into the student housing theme as well.”
A comparative latecomer to the real estate party that has seen the Blackstone Group in attendance since the early 1990s, KKR launched its dedicated real estate platform in 2011 under Rosenberg's leadership. When seeking out opportunities in the sector, Rosenberg told Bloomberg's Alix Steel, “We're leveraging our whole franchise at KKR. We've got differentiated sourcing channels, access to incredible information across our private equity franchise, our global macro franchise and our special situations franchise. And we've got great operating capability as well.”
Since the real estate platform was launched, KKR has invested or committed over $5 billion in capital across more than 60 real estate transactions in the US, Europe and Asia as of this past Sept. 30. The global real estate team consists of over 50 dedicated investment professionals, spanning both the equity and credit sides.
Asked whether the mall business might offer opportunities for deploying some of REPA II's capital, Rosenberg told Steel, “Selectively, we will look at US malls. Again, we have the great opportunity to combine our real estate expertise with our private equity retail expertise and our distressed investing expertise. You add all that up and you can selectively target opportunities in the retail real estate space.”
KKR's real estate activities aren't limited only to investments in real property. Last October, the firm closed on KKR Real Estate Credit Opportunity Partners at $1.1 billion. In common with REPA II, RECOP exceeded its target capital raise; it's geared toward generating attractive risk-adjusted returns for investors through the purchase of junior tranches of CMBS.
Further, KKR is providing real estate debt along with buying it up. The asset management giant's mortgage REIT, KKR Real Estate Finance Trust, began trading on the New York Stock Exchange last May.
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
