KKR places $1.1B bet on high-risk CMBS

Private equity firm is betting on B pieces

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

KKR’s Matt Salem

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 Article


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

Larry Silverstein and the Tel Aviv Stock Exchange (Credit: Getty Images)

Institutional investors swarm Silverstein’s new TASE bonds

Real estate firms get (green) thumbs down as they jump into climate bonds

With Fed rate cut on the mind, markets enter the week riding high

(Illustration by Carl Wiens)

NYC’s foreign investment landscape in the era of trade wars and heightened nationalism

New York Community Bank CEO and president Joseph Ficalora (Credit: Facebook, iStock)

Freed by Dodd-Frank, NYCB is on the hunt for M&A deals

Lightstone Group Chairman and CEO David Lichtenstein and the Tel Aviv Stock Exchange (Credit: Lightstone and iStock)

Lightstone becomes third NYC developer in a week to plan new Tel Aviv bond issuance, targeting $73M