KKR Closes Fund With $950M in Commitments

Like its predecessor investment vehicle, KKR Real Estate Credit Opportunity Partners II will focus on the acquisition of new-issue conduit CMBS.
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KKR has completed the final closing of KKR Real Estate Credit Opportunity Partners II, with capital commitments totaling $950 million. The investment vehicle follows in the footsteps of its predecessor fund, focusing on the acquisition of junior tranches of newly issued conduit commercial mortgage-backed securities, or the CMBS B-Piece, in addition to the purchase of non-risk retention conduit CMBS and other real estate securities.

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Launched in March 2019, RECOP II had raised a total of $459 million in committed capital by April 2020. The fund attracted a list of investors that includes Virginia Retirement System and Indiana Public Retirement System, according to PERE’s 2020 ranking of the world’s largest real estate debt fund managers. It is unclear if KKR Real Estate Finance Trust Inc., which is externally managed by KKR, contributed to RECOP II after having made an approximately $36 million equity investment in RECOP I. RECOP II’s final close comes roughly 18 months after RECOP I completed its final closing, with a total capital raise of $1.3 billion.

As of the close of the second quarter of 2020, RECOP II had finalized nine risk retention transactions. With RECOP I and II having realized an aggregate 36 investments, KKR holds the distinction of being the most active CMBS B-Piece buyer of third-party risk retention structures since December 2016, when risk retention regulations were instituted. As KKR notes in a press release, the global investment firm has invested nearly $1.3 billion into conduit risk retention since 2017 and believes the market has exhibited the need for private, long-dated risk retention capital.

Busy season

KKR is having an active summer in the real estate space, having already completed a handful of notable transactions. In a $650 million deal in June, a KKR-led consortium acquired a 6 percent equity stake in Vinhomes, the leading integrated commercial and residential real estate developer in Vietnam. And earlier in July, the firm enhanced its industrial holdings with the $260 million acquisition of two Amazon distribution and fulfillment centers totaling approximately 2.5 million square feet in Chicago and Charlotte, N.C.