KKR Has Fivefold Gain in First Property-Investment Sale

KKR & Co.’s sale of a stake in a senior-residence management business, the first exit of a U.S. property deal by the firm’s real estate unit, resulted in a fivefold gain on its investment.

The sale of the interest in Sunrise Senior Living LLC’s management unit was completed yesterday, according to statements from McLean, Virginia-based Sunrise and one of the buyers, Revera Inc., a Canadian provider of senior-living services. Revera’s partner in the purchase was Health Care REIT Inc., which finished buying Sunrise’s properties last July.

KKR and two partners agreed in February to sell their stake for about $400 million, according to a letter to investors, a copy of which was obtained by Bloomberg News. Including a dividend of about $101 million received last May, total proceeds from the Sunrise deal came to more than five times the $82 million the group invested in January 2013, according to the letter. The majority of the initial funds came from KKR.

The transaction was New York-based KKR’s first sale of a real estate investment since starting its property unit three years ago. Private-equity firms are taking advantage of stocks near record highs as they return money to their investors. Blackstone Group LP, the largest manager of alternatives to traditional stocks and bonds, took public three hotel companies beginning last November.

The KKR group last year bought Sunrise’s existing management contracts covering 282 communities, leasehold interests in 15 developments, and 12 land parcels. Beecken Petty O’Keefe & Co. and Coastwood Senior Housing Partners LLC were the other investors in the deal.

$1.5 Billion

KKR has made about 15 property investments since it hired Ralph Rosenberg, a former Goldman Sachs Group Inc. partner, as its first head of real estate in March 2011. The firm raised $1.5 billion for its first real estate fund in December.

Kristi Huller, a spokeswoman for KKR, declined to comment on the Sunrise transaction.

Revera, a unit of Canada’s Public Sector Pension Investment Board, now owns 76 percent of Sunrise, and Health Care REIT has the rest. Sunrise manages senior-housing communities across Canada, the U.S. and the U.K.

“The business is well-positioned to continue its strong performance and industry-leading service,” Tom DeRosa, chief executive officer of Toledo, Ohio-based Health Care REIT, said yesterday in an e-mailed statement. The real estate investment trust “is committed to having relationships with the best operating and financial partners.”

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