KREST’s flexible strategy is designed to create a balanced, high-quality, income-oriented portfolio of real estate equity and credit.
Three Key Pillars
Three complementary strategy pillars seek to create a well-balanced portfolio that aims to combine the potential for growth while aiming to generate less-correlated and tax-efficient current income
1
STABILIZED REAL ESTATE1
Seeks to invest in stabilized, income-producing assets with long-term growth potential for both rents and property values
Target sectors and markets that we believe benefit from themes supporting long-term growth and favorable supply/demand
2
PRIME SINGLE TENANT (Trophy Triple-Net-Leased RE)
Seeks to create high, contractual, distributable tax-efficient yield, complementing the long-term appreciation potential of trophy real estate
Seeks to invest in high-quality, new assets in irreplaceable locations
Long-term leased creditworthy tenants
Lease is paired with long-term fixed rate debt
3
REAL ESTATE DEBT
Seeks to generate contractual yield, investing in loans with structural seniority secured by quality real estate assets and sponsors
Floating rate loans that provide a level
of embedded inflation hedge and may protect against rising rates
Priority over cash flows backed by
high-quality assets and sponsors
Real estate securities may provide a source of liquidity1
(1) Stabilized income-oriented real estate generally means that a property is well leased to tenants and does not require material capital improvements.
Learn More About KKR’s Real Estate Expertise And KREST’s Investment Strategy
Recent Trends
Real Estate Property Values Have Reset
Dramatic rise in interest rates has caused a global repricing of real estate and suppressed transaction volumes
Private real estate entry points, in both real estate equity and credit, are now potentially attractive, having reset more than large-cap publicly-traded equities
We Believe Supply-and-Demand Dynamics Look Favorable
Long-term drivers of demand like demographic shifts, household formation that has outpaced new construction, and trends like urbanization support residential sectors
Well-located logistics facilities are in high demand as e-commerce grows and supply chains shift to reshoring and nearshoring.
Rising costs of labor and construction materials have made building more expensive, and the pipelines of new supply for real estate have slowed as a result
Real Estate Credit
Bank retrenchment creates opportunity for alternative lenders
Base rates and spreads are higher than historical averages
E-Commerce Penetration Accelerating Pre-COVID
Source: U.S. Census Bureau; Retail e-Commerce Sales Report. Data as of December 31, 2020.
Industrial Occupancy Has Outpaced Other Real Estate Sectors
(1) Represents retail and office.
Source: Greenstreet Advisors. Data as of December 31, 2020.
Demand For Housing Has Exceeded New Supply
Household formation has outpaced housing starts
Sources: RCG tabulation of Census Data, Zelman and Associates, Trend estimates for 2021E based on Zelman and Associates, US Census Bureau: Housing Vacancies and Homeownership Series TTLHHM156N as of January 2021; US Department of Housing & Urban Development: New Residential Construction Series HOUST as of January 2021; US Department of Housing & Urban Development: New Residential Construction Series PERMIT as of January 2021.
Homeownership Decline More Pronounced Across Households With Income <$150k
Source: Steven Ruggles, Sarah Flood, Ronald Goeken, Josiah Grover, Erin Meyer, Jose Pacas and Matthew Sobek. IPUMS USA: Version 10.0. Minneapolis, MN: IPUMS, 2020. Greater share of U.S. population is utilizing rental housing.
Migration To Southern And Western Areas Of The United States Is Not A New Phenomenon
Source: US Census Bureau. Data as at December 31, 2020.
Increased Office Space Per Employee To Address Social Distancing In The Workplace And More Creative Uses Of Space
Source: The RUTH Group. Data as at December 31, 2019.
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If you are interested in investing in KREST, please contact your financial advisor.
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