KKR Launches $2 Billion 1940 Act REIT
KKR Real Estate Select Trust Inc., a registered closed-end fund sponsored by global investment firm KKR, has been declared effective by the Securities and Exchange Commission.
KKR Real Estate Select Trust Inc., a registered closed-end fund sponsored by global investment firm KKR, has been declared effective by the Securities and Exchange Commission. The fund qualifies for tax treatment as a real estate investment trust, while also being registered under the Investment Company Act of 1940.
KKR Real Estate Select Trust will offer daily reporting of net asset value, daily subscriptions via a ticker, anticipated quarterly tenders and monthly distributions, and REIT taxation with 1099 tax reporting.
The $2 billion offering is comprised of four classes of common stock: Class S, Class D, Class U, and Class I shares. The structure is open to all investors.
Class D, Class U, and Class I shares will be continuously offered at the net asset value per share, while Class S shares also include a 3.0 percent maximum sales load and a 0.5 percent dealer manager fee. According to the prospectus, investors could be required to pay brokerage commissions on purchases and sales of Class D, Class U or Class I shares to their selling agents.
As of May 17, 2021, the NAV per share was $26.94. Generally, the minimum initial investment is $10,000 for Class S, Class D, and Class U shares, and $1 million for Class I shares.
The fund plans to invest primarily in “thematically-driven” commercial real estate, prime single-tenant real estate, and private real estate debt and preferred equity interests in the U.S., with a flexible mandate to invest globally, including developed markets in Europe and Asia.
The company describes “thematically-driven” real estate as stabilized, income-oriented commercial real estate equity investments in asset classes that it expects will benefit from secular growth trends, including multifamily, industrial, office in “innovation markets,” and select specialty sectors such as student housing, primarily in U.S. markets.
“[KKR Real Estate Select Trust] is one of the first continuously offered, 1940 Act REITs to offer global reach in private real estate to individual investors…,” said Doug Krupa, co-head of KKR’s Private Wealth Partners group. “We are excited to make [KKR Real Estate Select Trust] available to financial advisors by working with leading distribution platforms.”
KKR has invested more than $150 million from its corporate balance sheet to seed the fund, which it claims creates “strong alignment of interest” and “provides investors with a fully deployed, income-generating portfolio at launch.”
The fund’s adviser, KKR Registered Advisor, will receive a base management fee and an incentive fee. The base management fee is paid monthly at the annual rate of 1.25 percent of the average daily value of the fund’s net assets, and the adviser has agreed to waive this fee until December 31, 2021. The incentive fee is paid quarterly and is equal to 12.5 percent of the fund’s portfolio operating income for the immediately preceding quarter.
KKR noted that it received “first of its kind exemptive relief” from the SEC to be able to receive its fees in shares of the fund. KKR’s incentive fees will be based only on distributable yield and not on mark-to-market gains, the company said.
In addition, an annual servicing fee of 0.25 percent will be applicable to all share classes except Class I shares, and an annual distribution fee of 0.60 percent will be applicable to Class S and Class U shares.
KKR Capital Markets LLC serves as principal underwriter and distributor.
KKR launched its real estate platform in 2011 and has real estate assets under management of approximately $28 billion across the U.S., Europe and Asia Pacific, as of March 31, 2021.
