Kohlberg Kravis Roberts & Co. L.P.
), the U.S. based private equity firm, recently raised its first
real estate fund worth $1.5 billion. The fund - Kohlberg Kravis
Real Estate Partners Americas LP - focuses on North America and
Western Europe, with property-level equity and debt as well as
businesses with sizable real estate holdings as their main avenue
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While Kohlberg Kravis raised the major portion of the fund ($1.2
billion) from investors, the remaining amount was gathered
Raising funds for the first time can be challenging amid the
not-so-stable economic scenario. Therefore, the latest move
reflects Kohlberg Kravis's fund raising ability and enhances the
chances of increased earnings in the forthcoming quarters.
Following the announcement of the news on Dec 23, the stocks
gained marginally and closed at $24.44 per share on Dec 24.
Kohlberg Kravis, known for its strategic acquisitions, has always
shown interest in the real estate market. The company has a real
estate team in operation since 2011 and has been involved in 14
transactions, committing equities worth more than $850 million
for the same.
With the overall economy recovering, the real estate market has
shown an impressive rebound, thereby posing a lucrative source of
increased profitability for firms like Kohlberg Kravis.
Government support in the form of its sloppy monetary policy has
improved the unemployment rates which in turn increased the
property demand in the housing market. Moreover, the near zero
interest rate made finance for these property investment cheaper,
further accelerating the demand.
However, with the Federal Reserve's (Fed) proposed tapering of
the bond buyback by $10 million, the interest rates might surge
to some extent, making finance costlier. Nevertheless, Ralph
Rosenberg, Kohlberg Kravis's global head of real estate, assured
(in a telephonic interview with Bloomberg) that he does expect
the same to happen in the upcoming two years.
Real estate prices are on a high and we expect a slide only if
the interest rate rises substantially. However, this is not
likely in the near term, as the Fed will maintain the low
short-term interest rate for a while despite tightening its
Currently, Kohlberg Kravis carries a Zacks Rank #3 (Hold). Other
better-ranked investment managers include
Artisan Partners Asset Management Inc.
Brookfield Asset Management Inc.
). All these stocks carry a Zacks Rank #1 (Strong Buy).