New York-based private equity firm Kohlberg Kravis Roberts (KKR) has entered into an agreement with Abacus Property Group to acquire a 70 percent interest in three towers of the World Trade Centre in Melbourne for A$120.4 million (€83.79 million; $112.2 million). The deal reflected an initial passing yield of 9.3 percent.
This acquisition, which sees KKR stump up 75 percent of the equity required to buy the interest, represents its first private real estate investment in Australia. Abacus, a US property firm, has committed the remaining equity.
“We are very pleased to expand our real estate business to the Australian market,” said Bryan Southergill, director of real estate at KKR Asia. “We look forward to working with our partners, Abacus and Asset 1 WTC, to achieve our investment objectives on this uniquely placed asset in the Melbourne market.”
Adjacent to Melbourne’s central business district, World Trade Centre is part of the Northbank precinct –a commercial, retail and residential district. Under the deal, KKR and Abacus will acquire major interests in towers 2, 3 and 4 spread, spread over 538,200 square feet. The area, which includes a retail arcade, childcare facility and a commercial car park, is 90 percent occupied, with an average lease of five years.
KKR has been an active investor in private real estate for a limited period of time, and in Asia for even less time. Its first investments came in China although this year it has been diversifying and expanding its presence in Asia, with a series of property deals announced this year. In July, it provided a INR 7.5 billion loan, jointly with Standard Chartered Bank, to Wadhwa Group developers in India for a residential project, for example. That deal was preceded by the acquisition of K Twin Towers in Seoul.
In January, KKR raised $1.2billion of equity for its KKR Real Estate Partners America (REPA) fund; the largest first-time real estate opportunity fund raised since the global financial crises. Through that fund, KKR can also invest in Europe.
In Asia so far, however, it has followed a deal-by-deal investing approach.