KKR places $1.1B bet on high-risk CMBS

Private equity firm is betting on B pieces

New York /
Oct.October 12, 2017 01:15 PM

KKR is betting $1.1 billion on the riskiest commercial mortgage backed securities, trying to capitalize on new rules under the Dodd-Frank Act.

The private equity firm closed on an investment fund to buy so-called CMBS B pieces. In December federal risk retention rules went into effect, requiring CMBS issuers to keep 5 percent of bonds on their books. Issuers could get around that requirement if they sold off the riskier B notes to an investment firm, if that firm agreed to hold on to them for five years.

The idea is that B piece investors will pay close attention to underwriting, minimizing the kind of reckless lending that toppled the U.S. real estate market in 2007.

“What we determined was there was going to be a need for an increase in capital for B-piece buyers,” KKR’s Matt Salem told the Wall Street Journal, adding that he expects $2 billion worth of B pieces to sell this year. The firm has invested around $225 million in B pieces across six transactions since December.

Rialto Capital Management, C-III Capital Partners, LNR Partners and Eightfold Real Estate Capital are also big B piece buyers, according to the Journal. Despite the new risk retention rules, CMBS issuance in 2017 will likely top last year’s $77.6 billion mark. [WSJ]Konrad Putzier


Related Articles

arrow_forward_ios
With a cooling trade war, stocks perform well, including real estate. (Credit: iStock)

Real estate stocks push up this week as U.S.-China trade tensions ease

Real estate stocks push up this week as U.S.-China trade tensions ease
416 West 25th Street and Maverick Real Estate Partners principal David Aviram (Credit: Google Maps and LinkedIn)

Chelsea landlord claims “predatory” lender is charging a crippling interest rate as punishment after losing foreclosure case

Chelsea landlord claims “predatory” lender is charging a crippling interest rate as punishment after losing foreclosure case
From top: Park Place Mall in Tucson, AZ with Brookfield Property Partners CEO Brian Kingston; Westfield Countryside in Clearwater, FL with Unibail-Rodamco-Westfield CEO Christophe Cuvillier; and The Mall at Tuttle Crossing in Dublin, OH with Simon Property Group CEO David Simon (Google Maps, Westfield, Simon, Getty)

These are the biggest malls landlords ready to hand over to CMBS lenders

These are the biggest malls landlords ready to hand over to CMBS lenders
A recent study that found 1 in 10 Black homeowners returned to renting between 1984 and 2017 (iStock)

Black homeowners twice as likely to lose homes and return to renting: Report

Black homeowners twice as likely to lose homes and return to renting: Report
Hotels in trouble: the Hilton Houston Post Oak (left) saw its value cut in half and is in foreclosure, and the Residence Inn Arlington Pentagon City is set to be torn down and turned into part of Amazon’s HQ2. (Photos via Hilton; Marriott; iStock)

Here are the markets where hotels are hurting the most

Here are the markets where hotels are hurting the most
Federal Reserve chairman Jerome Powell (Getty; iStock)

Mortgage originations at 2nd highest level in 20 years: Fed

Mortgage originations at 2nd highest level in 20 years: Fed
The increase put an end to the “recent slump” that gripped the purchase market over the past seven weeks (iStock)

Over the slump? Home-purchase mortgages jump

Over the slump? Home-purchase mortgages jump
Peter Zinkovetsky (Photo via Zinkovetsky Law Firm)

NYC attorney launches virtual closing startup

NYC attorney launches virtual closing startup
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...