Investment firm has already committed $8 billion in loans.
The year is a little more than half over, but global investment firm KKR has already surpassed its commercial real loan total, Bloomberg reports. KKR has committed $8 billion in CRE loans so far in 2021—more than twice its prior full-year record. The increased CRE loans come as post-COVID-19 re-openings have created higher demand for financing.
“The market is just roaring back from a volume perspective,” Matt Salem, KKR’s head of real estate credit, told Bloomberg. “Pipelines are very big across the board.”
Increased construction, debt maturation and low interest rates have led to demand for new loans. The total debt on commercial and multi-family properties in the United States increased to $3.93 trillion as of March 31. That’s a 1.1% increase during the first quarter of 2021, according to the Mortgage Bankers Association. The debt growth continued as trillions of dollars in stimulus money entered the economy, as well as COVID-19 vaccination campaigns helping revive commerce and CRE investors’ willingness to take risks.
KKR’s real estate finance unit closed on $4 billion in CRE property loans and committed to an additional $4 billion this year through June 30, Salem told Bloomberg. The committed loans surpassed KKR’s prior record of $3.1 billion, which it reached in 2019. Last year KKR loaned $1.4 billion—the decrease a result of real estate markets freezing during the pandemic. The company had $28 billion of real estate assets under management as of March 31 and plans to increase that figure to as much as $15 billion by next year, according to a recent presentation.
The company’s lending volume has increased in part because it has more financing options. It purchased Global Atlantic Financial Group Ltd., an annuity provider whose portfolio invests in longer-term real estate debt, earlier this year. Then, it created KKR Real Estate Select Trust, which holds higher-yielding debt, including mezzanine loans and preferred equity.
The firm has made loans for CRE office projects in Atlanta, Dallas, Miami, but has avoided some of the high-cost markets that have been negatively impacted by the COVID-19-related exodus.
“In New York and San Francisco, I think you’ve got to wait a little bit to see how things play through,” Salem told Bloomberg.
The firm is now financing hotel deals; it’s seeking properties that entice leisure travelers, but is taking a “wait-and-see” approach to destinations that are typically used for conventions. KKR has not found a lot of opportunities to acquire discounted, non-performing or distressed loans, Salem told Bloomberg.
“We’re much more focused on creating new loans,” he said, “and not on acquiring the scratch-and-dent ones.”
Joe Dyton can be reached at firstname.lastname@example.org.