- KKR launched an $850M real estate credit fund to capitalize on distressed property values in the US and Europe.
- The fund will focus on first mortgages and CMBS acquisitions, providing landlords with alternative financing amid high interest rates.
- KKR believes commercial real estate asset values have bottomed out, presenting an opportunity for risk-adjusted returns.
Global investment firm KKR Group (KKR) is doubling down on real estate credit with the launch of the KKR Opportunistic Real Estate Credit Fund II (ROX II), an $850M fund aimed at financing high-quality properties.
The fund will target first mortgages and commercial mortgage-backed securities (CMBS), reflecting KKR’s belief that commercial real estate asset values have hit their lowest point, as reported by Commercial Observer.
Strategic Move
With high interest rates making traditional bank loans less attractive, private credit has become a more viable option for landlords.
Joel Traut, partner and head of originations for real estate credit at KKR, emphasized the firm’s decade-long borrower relationships as a key advantage. “We believe private capital will play an increasingly important role in the commercial real estate market as loan demand continues to climb.”
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Focus on Stable Returns
According to Matt Salem, KKR’s head of real estate credit, the fund will be particularly beneficial for multifamily and industrial owners struggling to raise rents due to rising supply.
“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 noted.
ROX II is designed to generate stable income with a focus on downside protection, making it an attractive option for investors seeking exposure to commercial real estate credit.
The Bigger Picture
As traditional financing remains constrained, private lenders like KKR are expected to play a larger role in commercial real estate. With ROX II, KKR is positioning itself at the forefront of the sector’s recovery, ready to deploy capital into what it sees as a market bottom.
This latest fund launch follows KKR’s broader real estate and infrastructure strategy. The firm recently consolidated the management of these asset classes under Raj Agrawal, a move that aligns with the rising demand for data centers and AI-driven real estate investments.
