PE giant KKR closes first dedicated Asia-Pacific real estate fund

The $1.7 billion investment in 'opportunistic' deals in Australia, Singapore, South Korea and Japan signals the U.S.-based company's increasing push into the region

PE giant KKR closes first dedicated Asia-Pacific real estate fund
New York-headquartered KKR launched its dedicated global real estate platform in 2011 and has about $14 billion of real estate assets under management as of the end of September 2020. File photo by Reuters.

(ATF) KKR & Co said on January 13 it had closed its first Asia Pacific real estate investment fund, just days after the U.S. private equity giant launched its inaugural Asia infrastructure fund.

The milestone signals the company's increasing push into the region. "[It] marks the next chapter of growth for KKR in Asia Pacific as we continue to expand our position ” said Ming Lu, head of KKR Asia Pacific.

John Pattar, KKR's head of Asian real estate, said the new fund would focus on Australia, Singapore, South Korea and Japan. "Increased domestic consumption, productivity and urbanisation ... is fundamentally reshaping the region's real estate sector," he said.

KKR said the fund would focus on "opportunistic" investments in the region, an area that analysts say is a key driver of growth, especially during the coronavirus pandemic. "We look at markets that handle Covid-19 best," Pattar said. "...Asia Pacific is the first to recover in 2021."

"Investors have a clear preference for opportunistic and distressed asset strategies," Henry Chin, head of Asia-Pacific research at property consultancy CBRE, noted in a investor survey released on January 13.

"On the opportunistic front, investors continue to deploy capital into a range of development projects including build-to-rent schemes ... and speculative logistic facilities," said Chin. "The current price dislocation in the public markets is also stimulating interest. Distressed assets are now back on investors’ radar for the first time since the Global Financial Crisis in 2008-2009," he added.

Flagship properties

The New York-headquartered firm launched its dedicated global real estate platform in 2011 and has about $14 billion of real estate assets under management as of the end of September 2020.

In Asia Pacific, it has deployed more than $1.5 billion of equity across about 20 real estate transactions since 2011. Its portfolio includes office tower Namsan Square in Seoul, Oasis Shopping Centre in Australia's Gold Coast and Hong Kong retail assets Lake Silver and Parkside.

“Asia Pacific’s real estate sector needs sophisticated investment and innovative operational solutions to meet the high demand for modernised properties and developments that are required to stay ahead of the region’s rapid growth," said Lu.

Investment firms raised $9 billion in 47 Asia-focused real estate funds last year, following a record $26 billion raised in 2019, according to data provider Preqin. KKR’s U.S.-based rival Blackstone Group raised the region’s biggest real estate fund in 2018 at $7.1 billion.

KKR's real estate fundraising comes as private equity firms globally have expanded from a model of buying out companies to turn around and sell for profit. They now invest through a range of alternative asset management products including infrastructure, real estate, hedge funds and credit.

The firm will be competing with regional PE powerhouses such as Hillhouse Capital Group, which has hired former Warburg Pincus and Blackstone dealmakers to build out its real estate capabilities.

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