KKR Targets Opportunistic Investments With New $850M Credit Fund – Commercial Observer
KKR (KKR) is taking the initiative to finance properties in the U.S. and Europe with a new $850 million credit fund.
The KKR Opportunistic Real Estate Credit Fund II (ROX II) will target first mortgages tied to high-quality properties while also acquiring commercial mortgage-backed securities (CMBS) loans, as the firm believes commercial real estate asset values have hit rock bottom, KKR announced Friday.
As high interest rates linger at all-time highs, the fund will also serve as a vehicle for landlords to access private credit and eschew bank loans.
“Our extensive borrower relationships, built over the past decade, have enabled us to continue our disciplined deployment into an attractive market,” Joel Traut, partner and head of originations for real estate credit at KKR, said in a statement. “We believe private capital will play an increasingly important role in the commercial real estate market as loan demand continues to climb, and this positions us very well to deliver attractive risk-adjusted opportunities for our investors.”
The fund will benefit owners of multifamily or industrial buildings that may be unable to raise rents due to new supply coming into the market, Matt Salem, partner and head of real estate credit at KKR, told Bloomberg, which first reported the announcement.
“The asset class offers attractive absolute and relative returns, underpinned by the opportunity to lend on high-quality, well-located assets at conservative leverage levels on reset property values,” Salem said in a statement. “We have designed our ROX II strategy with a flexible mandate to participate in what we view as the best risk-adjusted opportunities we see across our platform, with the objective of delivering attractive returns coupled with significant current income and a focus on downside protection.”
The announcement of the fund follows the global investment firm’s plans to wrap the management of infrastructure and real estate assets under one leader, Raj Agrawal, playing partly on the demand for data center space following the advent of artificial intelligence, Commercial Observer reported near the end of January.
Mark Hallum can be reached at mhallum@commercialobserver.com.
