KKR Bets $2.1B on Multifamily Rebound With Landmark Purchase

KKR has completed its largest-ever acquisition of apartments, signaling confidence in a multifamily sector rebound.
  • KKR has just invested $2.1B in over 5.2K apartments across the U.S., it’s largest-ever purchase in the sector.
  • The acquisition consists of 18 new mid- and high-rise buildings in states like CA, TX, and NJ.
  • Investors are showing renewed interest in multifamily, expecting rising rents and declining supply.
Key Takeaways

According to WSJ, KKR (KKR), a prominent NY-based PE firm, just completed its largest-ever apartment purchase. The firm paid $2.1B for over 5.2K units spread across various states, including California, Washington, Florida, Texas, Georgia, North Carolina, Colorado, and New Jersey.

The transaction, which closed Tuesday, includes 18 new mid- and high-rise buildings in high-growth metros and is a strong indicator of KKR’s confidence in the sector.

Deal Details

The portfolio was sold by Quarterra, the apartment development arm of home builder Lennar (LEN). Lennar suffered losses in its multifamily division in recent quarters, particularly in cities with high levels of new supply, such as in the Sunbelt. 

The company has indicated plans to sell additional buildings to various buyers and had previously considered spinning off Quarterra, though those plans have been put on hold.

As reported on Globest, KKR will operate the assets with multifamily operators Carter-Haston, MG Properties, and Dalan Real Estate. Gibson Dunn & Crutcher LLP advised the firm on the deal.

Current Challenges

The multifamily sector has faced many challenges recently, with rent growth for new leases remaining stagnant for over a year amid the sector’s largest construction boom in 40 years. 

This slowdown, coupled with higher interest rates, has hurt valuations. According to MSCI Real Assets, apartment prices were down more than 20% in May from their July 2022 peak, and building sales were 44% lower than one year ago.

Confident Investors

But despite the current downturn, major investors like KKR are showing renewed confidence in the multifamily sector. They’re banking on dwindling apartment construction leading to lower supply and rising rents by 2026.

In addition to the $2.1B deal, KKR also recently acquired a $1.64B student-housing portfolio from Blackstone Real Estate Income Trust in April and an industrial campus in Nashville last month. 

Meanwhile, other firms like Blackstone (BX) have also been acquiring multifamily properties. The world’s largest asset manager agreed to the $10B purchase of Apartment Income REIT in April, and Brookfield (BN) bought a portfolio of 7K apartments for $1.55B just last month. 

Future Outlook

As the multifamily market adjusts to lower levels of new supply and potential rent growth on the horizon, large investors are ready to capitalize on low-hanging fruit. They’ll get plenty of those opportunities soon enough. Apartment distress is rising, with nearly $1B in distressed sales in Q1.

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