KKR Reveals Property Expansion Strategy with London Housing Deals On The Horizon

on Nov 15, 2012
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**KKR to Invest in London Housing**

US-based global investment firm KKR & Co. LP (NYSE:KKR) has unveiled plans to expand its real estate unit, which since forming last year has made five deals in US and one in Europe. According to Bloomberg, citing KKR’s property division head, Ralph Rosenberg, this strategy involves investments in European assets, as well as housing developments in London.

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In the UK capital, KKR is seeking to meet demand for housing from both UK residents and international homebuyers and renters. Rosenberg said: “We’re bidding on a couple things right now. We’re looking at doing ground-up construction of rental and for-sale apartments.”
**London Rental Market**
The London rental market, which is part of KKR’s real estate unit growth plans, has been pointed at by some analysts as an area which development can be beneficial for investors, since the demand of rental stock in the capital is increasing along with its average price.

According to an index compiled by HomeLet, in October, the average home rent in greater London reached £1,240 a month, rising more than 6 per cent from a year earlier. This price is also up 16 per cent from the same month in 2010 and 32 per cent from October 2009, when rents averaged £940 a month.
HomeLet’s managing director Ian Fraser said in a report published earlier this week: “Average rental prices in greater London appear to be far more buoyant than the rest of the UK. The continued increase in achieved rental values highlights the growing pressures on the supply and demand of rental stock in the capital.”

**KKR and Peers Focusing on Real Estate**
Since Rosenberg’s arrival at the company in March 2011, KKR has invested about $350 million (220 million) of equity in property deals as part of a push by US private-equity firms to expand in the property business. Apart from KKR, other peers have recently created real estate units. Last year, US-based investment firm TPG Capital LP also launched their real estate division to diversify beyond corporate takeovers and exploit investor appetite for higher-yielding assets at a time of record-low interest rates on alternative investments such as government bonds.

!m[](/uploads/story/824/thumbs/pic1_inline.png)In expanding in real estate, KKR and TPG still lag behind Blackstone Group LP (NYSE:BX), the world’s largest private-equity firm and manager of about $50 billion (£31.5 billion) of property assets. The New York-based company this year raised a $13.3 billion (£8.4 billion) real estate fund — a record for the industry.
Despite its to-date minor interest in the property market, KKR’s recent pace of real estate investment is heightening the prospect of the firm raising further outside capital for its property unit next year and establishing a better position in the real estate market. According to Rosenberg, KKR is currently working on deals that “could easily consume another $200 million (£126 million) or $300 million (£189 million) of equity in the next quarter.”

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