Four Senators Question KKR About June Multifamily Acquisition

KKR has acquired 18 new multifamily assets from a closed-ended fund sponsored by Quarterra Multifamily for $2.1 billion. Now four Democratic senators are asking difficult questions about company plans for the properties.

The recently built, Class A portfolio comprises more than 5,200 units located primarily in coastal and sunbelt markets. These regions include California, Washington, Florida, Texas, Georgia, North Carolina, Colorado, and New Jersey. The portfolio is largely mid and high-rise buildings in high-growth metropolitan areas. The supply of new units in those areas will slow significantly in the next few years.

“We believe this is a great moment to invest in real estate, as transaction activity starts to pick up on the heels of two-years of dislocation in commercial real estate markets,” Justin Pattner, partner at KKR and head of real estate equity in the Americas, said at the time. “Across our platform we are finding opportunities where our scale, strong relationships, multiple pools of capital and local knowledge give us advantages as a buyer of large pools of high-quality, irreplaceable assets.”

At the time, the Wall Street Journal reported that the acquisition was KKR’s “largest-ever purchase of apartment buildings.”

The Senators, addressing co-chief executive officers Joseph Bae and Scott Nuttall, wrote “with concern” about the private equity firm’s intentions. The letter said rents were “already spiking in many Midwestern and Northeastern cities and towns with median rent for a multifamily unit in America increasing by 26 percent since January 2020.”

KKR sent a statement to GlobeSt.com that said, in part, “Our investment in high-end, newly constructed apartment buildings is supporting the development of much-needed new housing which is vital to the economic and population growth of many US cities.”

According to multiple industry analyses like that of Apartment List in October 2024, median rent has plunged by 0.7% year-over-year, or about $10 for October, hitting $1,394. Year-over-year rental comparisons have been negative for almost 18 months. However, it is still $200 more than a few years ago before the pandemic.

“This would not be the first time that a private equity firm like KKR has used a housing crisis to rake in profits by driving up rent costs and squeezing American families,” the Senators wrote. “Given our concerns about this transaction, along with the lengthy history of private equity firms’ adverse impact on renters’ costs and quality of life,” they asked for responses to four multi-part questions by November 6, 2024.

They asked about the “methods you will use to determine rent and fee levels in the 5,200 apartment units”; what the company would do to “ensure tenants’ safety and health”; plans for “how long-term tenants, including older tenants and tenants of color, will have the opportunity to stay in their homes”; and the yields KKR anticipates achieving over the next five, 10, and 20 years.