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KKR Kicks Off 2018 by Raising $2 Billion for Real Estate Investment Fund

Value-Add Funds Continue to Lure Investors
January 10, 2018
Ralph Rosenberg, KKR's Global Head of Real Estate. Credit: KKR

Global investment firm KKR kicked off the private equity fundraising markets with a strong start in 2018. The New York-based firm held final close this week on its KKR Real Estate Partners Americas II (REPA II), a $2 billion fund dedicated to value add and opportunistic real estate investments primarily in the U.S.

REPA II is the successor fund to KKR Real Estate Partners Americas, which completed fundraising in December 2013 with $1.5 billion in capital commitments.

The half a billion dollar increase is consistent with CRE fundraising trends set in last year.

While 2017 was a record-breaking year in some other private capital asset classes, money raised for closed-end, private real estate funds did not match the fundraising activity seen in recent years, according to year-end data from Preqin, an alternative assets industry information provider.

Altogether, 263 real estate funds reached a final close in 2017 raising a combined $109 billion in investor commitments. Preqin expects these totals to increase by up to 10% as more funds disclose totals, but nonetheless it appears even with that increase 2017 totals will not approach the record $136 billion raised by 351 funds for real estate investment in 2015.

Different real estate strategies did see markedly different fundraising trends last year. Opportunistic funds have seen their share of fundraising decline from 2016. By contrast, value added funds - such as REPA II -- and debt vehicles became more prominent, with debt funds in particular marking a record annual haul of $28 billion in total capital raised.

"The private real estate market is currently running in counterpoint to the wider private capital industry," noted Oliver Senchal, head of real estate products for Preqin. "Whereas private equity and private debt funds have both marked record years in 2017, the real estate asset class has seen activity retreat slightly over the past 12 months."

Fundraising levels are still high - Senchal said this is the fifth consecutive year in which funds have raised more than $100 billion - "But we are not seeing a surge of activity," he said, adding this could be a sign of growing sentiment that the market may be at risk of becoming overheated.

KKR Real Estate's latest fund received commitments from the usual suspects, including public pensions, sovereign wealth funds, insurance companies, financial institutions, foundations, endowments, family offices and high net worth individual investors.

Since launching a dedicated real estate platform in 2011, KKR said it has invested or committed over $5 billion in capital across more than 60 real estate transactions in the U.S., Europe and Asia as of September 30, 2017.

Ralph Rosenberg, KKR's global head of real estate, went on Bloomberg TV this morning to discuss his firm's latest fundraising success.

"We fundamentally focus on themes that have really strong drivers for demand," Rosenberg said. "So right now we're really focused on all the housing themes, senior housing, student housing, multifamily housing, alongside the theme of looking at the Sunbelt states and the migration of thee populations to the major cities in the South."

Other Capital Raising Activity from JVM Realty, Pacific View Asset Management


Separately, Oak Brook, IL-based JVM Realty Corp. closed its Fund 6 and Premier Fund II equity funds. Combined, the funds raised $109 million.

The two funds are currently co-invested in four apartment communities in Indianapolis, Kansas City and suburban Chicago, and are set to co-invest in a fifth community later this month. Premier Fund II has invested in an additional community in Aurora, IL.

In the end, the total acquisition cost of the six communities will be $332.4 million. Investors in the two funds include hundreds of high net worth individuals, trusts and insurance companies.

And in San Francisco, Pacific View Asset Management, an investment advisory firm, announced that it and joint-venture partner Argonaut Investments launched the PVAM Argonaut Property Fund.

The fund, which utilizes a private equity model, is targeting $50 million of equity commitments and will focus on investing in neighborhood and community necessity-based anchored shopping centers, generally targeting properties in the Western U.S.

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