US-based investment firm KKR & Co said on Thursday it had closed its first fund targeting real estate investments in Asia Pacific at $1.7 billion.
The announcement comes days after KKR closed its inaugural Asia infrastructure fund, as the private equity powerhouse expands its platforms in the region.
John Pattar, KKR head of real estate Asia, told Reuters the new fund would focus on Asia’s urbanization trends, corporate carve-outs of non-core real estate assets in Japan, and also take-private opportunities in markets including Australia, Singapore, and Japan.
“Increased domestic consumption, productivity, and urbanization – combined with the acceleration of e-commerce and platform-based businesses and the evolution of the traditional office landscape – is fundamentally reshaping the region’s real estate sector,” he said.
The fund is also looking at opportunities in countries such as South Korea, which has recovered from the COVID-19 pandemic, said Hong Kong-based Pattar, a veteran real estate investor poached by KKR in 2018 to lead its Asia real estate efforts.
“We look at markets that handle COVID best,” he said. “…Asia Pacific is the first to recover in 2021.”
KKR’s real estate fundraising comes as private equity firms globally have expanded from a model of buying out companies to turn around and sell for profit. They now invest through a range of alternative asset management products including infrastructure, real estate, hedge funds, and credit.
Investment firms raised $9 billion in 47 Asia-focused real estate funds last year, following a record $26 billion raised in 2019, according to data provider Preqin. KKR’s U.S.-based rival Blackstone Group raised the region’s biggest real estate fund in 2018 at $7.1 billion.
KKR will also be competing with regional firms such as Hillhouse Capital Group, which has hired former Warburg Pincus and Blackstone dealmakers to build out its real estate capabilities.
The New York-headquartered firm launched its dedicated global real estate platform in 2011 and has about $14 billion of real estate assets under management as of the end of September 2020.
In Asia Pacific, it has deployed more than $1.5 billion of equity across about 20 real estate transactions since 2011.
Its portfolio includes office tower Namsan Square in Seoul, Oasis Shopping Centre in Australia’s Gold Coast and Hong Kong retail assets Lake Silver and Parkside.