KKR’s Biggest Multifamily Buy: $2.1B for 5.2K Apts
KKR invested $2.1B in 5.2K apartments across the US in its largest-ever multifamily acquisition in history.
Jordan B. & Han-Gwon Lung
June 27, 2024
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Good morning. KKR invested $2.1B in 5.2K apartments across the US in its largest-ever multifamily acquisition in history.
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Market Snapshot
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*Data as of 6/26/2024 market close.
Multifamily moves
KKR Bets $2.1B on Multifamily Rebound
KKR is betting big on the apartment market rebound by purchasing 18 complexes from Quarterra Multifamily for $2.1 billion, marking its largest investment in multifamily real estate to date.
Deal details: The properties encompass over 5,200 units in Class A midrise and high-rise buildings across multiple states, including Washington, California, Colorado, Texas, Florida, Georgia, North Carolina, and New Jersey.
Zoom in: The portfolio was sold by Quarterra, the multifamily development arm of home builder Lennar (LEN), which faced challenges in cities with high supply levels. KKR will collaborate with operators Carter-Haston, MG Properties, and Dalan Real Estate in managing the assets.
Portfolio growth: The deal increases KKR’s real estate portfolio by 3%, now comprising 12% of its $575 billion in assets under management. The firm sees current market conditions as favorable for long-term real estate investments, citing ongoing economic potential.
➥ THE TAKEAWAY
Why it matters: KKR’s investment signals confidence in the multifamily market’s recovery, particularly in areas previously affected by overbuilding. Despite recent challenges, KKR believes high-quality rental properties will experience rent growth, especially in strong markets like California and New Jersey.
TOGETHER WITH FNRP
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✍️ Editor’s Picks
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Banking betrayal: Big banks are looking to unload underperforming CRE loans to avoid being forced to realize losses, seeking discreetly discounted sales with brokers.
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Campus delay: Apple (AAPL) delayed construction of its Research Triangle Park campus, stalling plans for 3K jobs in North Carolina.
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Bigger war chest: Goldman Sachs (GS) raises $3.4B for its Vintage Real Estate Partners III fund, 23% more than the previous pool.
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Permit power surge: Single-family permits in the US surged 25.3% YoY to over 336K YTD in 2024, with all regions seeing growth.
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Bottom line: Douglas Elliman (DOUG) struggles with a declining share price and mounting losses despite cost cuts as it scrambles to reverse its fortunes.
🏘️ MULTIFAMILY
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Building confidence: 70% of respondents to an NMHC survey reported construction delays, down from 81% in March, with rising repriced deals.
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Affordable reinforcements: Biden introduced a new $100M affordable housing program and aims to expand the Low-Income Housing Tax Credit to combat high home prices and interest rates.
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Rent-stabilized genius: In a $43M sale, Dalan Management sold 35% discounted rent-stabilized buildings on the Upper West Side to NJB Management.
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Holy redevelopment: Former NFL player Jonathan Vilma proposed a 102-unit affordable housing project near Haverhill in Palm Beach County on a former church site.
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Inclusive initiative: A partnership plans to build a 105-unit affordable housing complex in Arlington, a high-rent area with an average 1BR rent of $2,410 per month.
🏭 Industrial
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Investment boom: Dalfen Industrial sold a 236.6KSF industrial building in South Florida to LBA Realty for $55M, doubling its 2020 purchase price.
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Storage sensation: An investor acquired a 4.3-acre Sumner property in WA with a 12.7KSF maintenance shop and 6.1KSF of office space.
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Getting it done: The remaining 24 buildings and 5MSF of industrial space in the ongoing $450M Prologis (PLD) and EQT Exeter deal finally changed hands.
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Trading spaces: GPR Ventures acquired the Rancho Cordova industrial park in Sacramento from BKM Capital for $42.7M, marking a local return to investing.
🏬 RETAIL
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Prized property: A South Congress Avenue retail building boasting 95% occupancy sold to an undisclosed buyer in Austin's popular SoCo District.
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Reimagining retail: Target (TGT) reorganized its C-suite to boost grocery sales, which dropped over 3% to $24.1B in Q1.
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Real estate ripple: Northbrook-based Pine Tree acquired The Fountains shopping center in Plantation for $70M, at $160 PSF.
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Freshening up: A new Amazon Fresh (AMZN) store in Eatontown brings the e-commerce giant’s total brick-and-mortar locations to 42 stores across 8 states, with 75 local brands featured.
🏢 OFFICE
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Prime properties: Only 8% of US office buildings are thriving, with prime properties commanding an 84% rent premium.
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Tale of two classes: Prime office space rents surged to an 84% premium in Q1, with a 14.8% vacancy rate, widening the divide in the office market.
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Greenhouse gains: Capital Commercial Investments will soon purchase the Offices at Greenhouse in Houston for $17.6M, or $87 PSF.
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Slowly stabilizing: San Francisco office vacancy rates reach a record high of 37% as the Silicon Valley market nears stability with a slight uptick in availability.
🏨 HOSPITALITY
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Hotel rebound: The hospitality sector in San Antonio's Pearl district is booming with new hotels, showing significant growth despite the pandemic.
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Espionage exposed: Aimbridge Hospitality is suing ex-executive Burg for alleged bribery and theft of trade secrets, resulting in millions lost.
PRODUCT REVIEWS & GUIDES
📈 CHART OF THE DAY
According to CBRE, the compound annual growth rate (CAGR) of major metro rents since 1Q22 varies by their proximity to downtown central business districts in a predictable manner.
Suburban rents have a CAGR of 2.4%, while downtown rents were at 1.8%. Meanwhile, ‘inner ring’ submarket rents (immediately adjacent to downtowns) had the highest CAGR of over 3%.
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