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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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.

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✍️ Editor’s Picks

Banking betrayal: Big banks are looking to unload underperforming CRE loans to avoid being forced to realize losses, seeking discreetly discounted sales with brokers.
Campus delay: Apple (AAPL) delayed construction of its Research Triangle Park campus, stalling plans for 3K jobs in North Carolina.
Bigger war chest: Goldman Sachs (GS) raises $3.4B for its Vintage Real Estate Partners III fund, 23% more than the previous pool.
Permit power surge: Single-family permits in the US surged 25.3% YoY to over 336K YTD in 2024, with all regions seeing growth.
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

Building confidence: 70% of respondents to an NMHC survey reported construction delays, down from 81% in March, with rising repriced deals.
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.
Rent-stabilized genius: In a $43M sale, Dalan Management sold 35% discounted rent-stabilized buildings on the Upper West Side to NJB Management.
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.
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

Investment boom: Dalfen Industrial sold a 236.6KSF industrial building in South Florida to LBA Realty for $55M, doubling its 2020 purchase price.
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.
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.
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

Prized property: A South Congress Avenue retail building boasting 95% occupancy sold to an undisclosed buyer in Austin’s popular SoCo District.
Reimagining retail: Target (TGT) reorganized its C-suite to boost grocery sales, which dropped over 3% to $24.1B in Q1.
Real estate ripple: Northbrook-based Pine Tree acquired The Fountains shopping center in Plantation for $70M, at $160 PSF.
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

Prime properties: Only 8% of US office buildings are thriving, with prime properties commanding an 84% rent premium.
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.
Greenhouse gains: Capital Commercial Investments will soon purchase the Offices at Greenhouse in Houston for $17.6M, or $87 PSF.
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

Hotel rebound: The hospitality sector in San Antonio’s Pearl district is booming with new hotels, showing significant growth despite the pandemic.
Espionage exposed: Aimbridge Hospitality is suing ex-executive Burg for alleged bribery and theft of trade secrets, resulting in millions lost.

PRODUCT REVIEWS & GUIDES

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📈 CHART OF THE DAY

Figure 1: CAGR of Rent by Submarket Type, Since Q1 2022

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%.