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KKR closes second Americas fund on $2bn

Unlike its debut vehicle, the firm is focused on deploying its second fund in defensive real estate investments, such as demographic-driven housing trends, said real estate head Ralph Rosenberg.

KKR has wrapped up fundraising for its latest Americas-focused vehicle on $2 billion, the firm said on Wednesday.

The New York-based firm launched KKR Real Estate Partners Americas II in the fourth quarter of 2015 with a $1.5 billion target, PERE previously reported.

KKR closed its debut opportunistic vehicle in December 2013 on $1.5 billion, PERE previously reported. The firm had invested about $948.5 million of REPA I’s capital as of June 30, with the fund’s investment period having ended in May.

KKR’s real estate head Ralph Rosenberg said that unlike the first vehicle, which invested in mid-cycle real estate opportunities, the firm is focused on defensive investments with its second fund. While REPA I invested in some hospitality and retail assets, for example, REPA II is investing in demographic-driven housing such as student housing, senior housing and entry-level multifamily for renters priced out of buying homes. The firm also shifted its geographic areas of focus, looking at investing across property types in the sunbelt states.

“The first time we went out to the market [with REPA I], a lot of those LP conversations were about if we had done enough to prove the concept,” Rosenberg said. Because REPA I performed well, “the discussions that we were having in the raising of Fund II was where we are in the cycle and what types of themes are we going to pursue relative to the first fund.”

REPA I generated a 16 percent net internal rate of return and a 1.4x multiple as of March 31, the most recently-available data.

REPA II’s investor base included state pension plans, insurance companies, endowments, foundations and international retail capital. Over 90 percent of REPA I investors re-upped for the second vehicle, Rosenberg said. Those repeat investors included the Hess Foundation and Maine Public Employees Retirement System, according to PERE data.

KKR did not use a placement agent for REPA II. Law firm Simpson Thacher advised the fund.

The firm invested $230 million in the fund, compared with $200 million in REPA I.

KKR has deployed about 15 percent of REPA II’s capital. Investments include student housing near Alabama’s Auburn University and a senior housing portfolio acquisition.

The firm managed $13.1 billion in real assets commitments and $153 billion overall as of September 30, according to its third-quarter earnings.