Andrew Kohlberg, the son of Kohlberg Kravis Roberts co-founder Jerome Kohlberg, is seeking to raise his debut private equity real estate fund through his firm, Kisco Senior Living (KSL), targeting $350 million.
After Andrew's brother James went into the family private equity business in 1987, forming Kohlberg & Company with his father, Andrew formed KSL in 1990 and purchased his first retirement community. The decision to raise a private equity real estate fund though doesn't mean Andrew is straying too far from the family. KSL is linked to Kisco Management, the Kohlberg family office. Andrew also has additional responsibilities as managing principal of Kisco Real Estate Holdings and supervising his family's investments in real estate.
The KSL Communities Fund I, anchored with $50 million from the general partner and its affiliates, will target both debt and equity investments in the senior housing sector, according to documents seen by PERE. The fundraising effort is being directed at investors that “desire a complementary investment programme to core real estate investment”.
Of course, Andrew isn't a pioneer in the sector. Senior living and senior-targeted healthcare businesses have become popular with investment firms over the past several years in countries with aging populations. Private equity real estate firms in the space include LaSalle Investment Management, Morgan Stanley Real Estate and The Carlyle Group among many others.
KSL's fund intends to target minimum net IRRs of around 20 percent by using longer holding periods than most “typical” real estate investments. KSL, though, said in the document it would attempt to return invested capital more quickly by repositioning and refinancing the assets. KSL added it would also target senior living communities being sold at a discount by distressed sellers and will develop some assets.
The fund will also explore opportunities in debt which could be converted into an equity ownership position. A spokeswoman for KSL declined to comment.
Although KSL Communities Fund I will be KSL's first investment fund, the company is no stranger to the type of investing the fund will do. Since inception, the company has both acquired and developed senior living assets including independent living, assisted living and Alzheimer's care across California, Florida, Nevada, North Carolina and Virginia.
Currently, four communities are in various stages of development and the company has more than $544 million in assets under management based on December 2008 appraisals. In addition, KSL has acquired distressed mortgages and distressed assets and has stabilised both individual assets as well as portfolios, according to the documuments.