KKR raises $780m in private REIT

After scraping plans for a business development company, the New York private equity giant has raised a pool of capital for real estate investing, and has plans to take the entity public.

Kohlberg Kravis Roberts, the leveraged buyout pioneer, has raised $780 million (€634 million) for a new real estate investment trust (REIT), according to an SEC filing.

 

The private REIT was raised by investment bank Friedman, Billings, Ramsey, a firm that has gained an expertise in the private placement of REITs. The new entity, KKR Financial, was created through the private sale of 78 million shares priced at $10 per share, according to information filed by Friedman Billings.

 

In April, KKR filed a registration statement for the proposed $750 million (€629 million) initial public offering of KKR BDC, a business development company affiliated with the firm that was to make debt and equity investments in public companies.

 

That effort, as well as the proposed BDCs of several other private equity firms, has been abandoned due to investor resistance. Only Apollo Advisors managed to raise $930 million in an IPO for its BDC.

 

Some market sources have speculated that KKR and other private equity firms are attracted to publicly traded vehicles because they provide ‘permanent capital’ – investment capital that does not need to be re-raised every few years.

 

KKR has reportedly hired a team of former Wells Fargo executives to manage the REIT, including Paul Hazen, the former CEO of the bank, Saturnino Fanlo, Wells Fargo’s former treasurer and Dan Netjes, a portfolio manager in the bank's treasury division. In 2001, Hazen was named chairman of the board of directors of Accel-KKR, a technology investment joint venture between the buyout firm and venture firm Accel Partners.

 

KKR will reportedly eventually file to take KKR Financial public as the shares, placed through Rule 144A, have registration rights that come due within 12 months.

 

KKR has recently had close interaction with another private REIT. Earlier this year, CNL Hospitality, a private REIT, agreed to buy luxury hotel holding company KSL Recreation from the buyout firm for $1.2 billion.