KKR clamps down on REIT withdrawals, joining Blackstone, Starwood

Private equity firm says real estate trust “has strong liquidity position”

A photo illustration of KKR’s Billy Butcher (Getty, KKR)
A photo illustration of KKR’s Billy Butcher (Getty, KKR)

KKR is pumping the brakes on withdrawals from its real estate investment trust, mirroring similar moves by Blackstone and Starwood Capital amid a rising number of redemption requests from shareholders.

The private equity firm’s KKR Real Estate Select Trust disclosed in a regulatory filing Wednesday that investors holding more than 8 percent of the vehicle’s roughly $1.6 billion in net assets sought to withdraw their money during a first-quarter offering period, far exceeding a quarterly limit of 5 percent. Barron’s first reported the filing.

“Within KREST, we are balancing providing access to private real estate, which is an illiquid asset class, with the recognition and understanding that … regular liquidity is an important feature for KREST shareholders,” Billy Butcher, the investment fund’s CEO, wrote in the filing. “We believe that KREST has a strong liquidity position.”

The trust reported liquid holdings of 36 percent of net asset value as of the end of last year. It generated a net total return of more than 8 percent for the year and received roughly $947 million in subscriptions.

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KKR is the latest investment firm to curb withdrawals from its real estate fund. Blackstone and Barry Sternlicht’s Starwood Capital curbed redemptions from their respective non-traded REITS in November in response to a pronounced uptick in requests.

Those moves to limit withdrawals drew unwelcome scrutiny about the mechanics of the high-flying investment vehicles and their guardrails limiting withdrawals. The caps are intended to prevent a quick selloff of assets from the investment funds, but can also hinder confidence in them particularly after an influx of new capital from smaller investors.

The Securities and Exchange Commission reportedly reached out to Blackstone and Starwood last month to understand the market impact and circumstances of their decisions, including whether any of the companies’ affiliates had cashed out before other shareholders. Neither firm has been accused of any wrongdoing.

— Pat Ralph

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