KKR & Co., co-founded by Henry Kravis and George Roberts, raised $1.5 billion for its first real estate fund, with most of the money to be spent in North America and as much as a quarter of it in western Europe.
Target investments for the KKR Real Estate Partners Americas LP fund include property-level equity and debt and businesses with sizable real estate holdings, the New York-based private-equity firm said in a statement.
“We have a very deep and robust pipeline of opportunities,” Ralph Rosenberg, KKR’s global head of real estate, said in a telephone interview. “It’s harder to find things today than a year ago, but there is still a whole world of things to do with capital to help reposition assets.”
KKR and TPG Capital are among U.S. private-equity firms expanding in real estate to diversify beyond corporate takeovers and pursue higher yields than government bonds offer. KKR has completed 14 property deals since it formed a real estate unit in 2011, using mostly its own cash and money from its credit division. They include a housing development for oil workers in North Dakota, U.K. retail warehouses and the management business of Sunrise Senior Living Inc.
Even with interest rates expected to rise, making property purchases more expensive, commercial real estate prices don’t appear poised to fall soon, Rosenberg said.
“Prices should come down when Treasury rates go up to over 4 percent, but I think we’re probably a couple years away from that happening,” he said. The 10-year Treasury note yields about 2.93 percent, according to data compiled by Bloomberg.
KKR Real Estate Partners Americas won pledges from pensions including the Teacher Retirement System of Texas and the Maine Public Employees Retirement System, as well as from sovereign-wealth funds, insurance companies and family offices, Rosenberg said. KKR personnel and the firm’s credit unit committed about $300 million, the company said.