KKR has closed its second real estate credit opportunities vehicle at $950 million.
Real Estate Credit Opportunity Partners II is slightly smaller than its predecessor, which closed on $1.1 billion in 2017. It will follow the same strategy of purchasing junior tranches of new issue conduit commercial mortgage-backed securities, referred to as CMBS B-pieces.
RECOP II is an eligible third-party purchaser of CMBS B-pieces subject to US risk retention regulations that took effect in December 2016. It also has the ability to purchase non-risk retention conduit CMBS and other real estate securities.
So far, the fund has closed on nine risk retention transactions bringing the total number KKR has entered into to 36 closed investments through to end of June 2020.
Matt Salem, partner and head of KKR’s real estate credit business, said: “We are pleased to have the trust of so many investors in our second fund, which speaks to the strength of our strategy, team and reputation in the market. Having invested over $1.25 billion into conduit risk retention since 2017, we believe that the market has demonstrated the need for private, long-dated risk retention capital.”
RECOP II’s predecessor was launched as risk retention rules created new opportunities in the CMBS market. Conduit CMBS issuance is worth more than $50 billion per year but has a limited universe of B-piece buyers, Salem told Private Debt Investor in 2017.