KKR Partners With Healthcare Realty Trust on $1B Venture

KKR aims to contribute $600 million to a new fund supported by 12 health care properties valued at nearly $383 million


KKR (KKR) just keeps getting bigger — and maybe even healthier, too — with its assets. 

The massive real estate investment firm — holding more than half a trillion dollars in assets — announced Monday it has formed a joint venture fund with Healthcare Realty Trust, a publicly traded real estate investment trust, committing $600 million of its own money to acquire or stabilize commercial real estate assets in the health care sector. 

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The new fund is projected to eventually reach a value of more than $1 billion. 

As part of the joint venture, Healthcare Realty Trust will seed the new fund with 12 commercial health care properties valued at $382.5 million, of which KKR will make an equity contribution equal to 80 percent of the value of the properties. The 12 health care properties in the portfolio are spread across seven leading markets and are all near the campuses of prominent hospitals, according to KKR. 

The 12 properties span a combined 762,399 square feet and operate at 98 percent occupancy. 

Healthcare Realty Trust — one of the larger owners and operators of medical outpatient buildings in the U.S. — will manage the properties day-to-day and hold a 20 percent share in the joint venture. The firm expects to make back $300 million in proceeds from the seed contribution to the portfolio. 

Todd Meredith, president and CEO of Healthcare Realty Trust, said his firm may even repurchase its stock on a leverage-neutral basis in the near term and add more properties to the fund. 

“We look forward to collaborating with KKR to strategically invest in the medical outpatient sector,” said Meredith. “Looking ahead, we may contribute additional Healthcare Realty properties to the JV or pursue acquisitions, depending on market conditions.”

Peter Sundheim, managing director at KKR, described the Healthcare Realty Trust hospital portfolio as “a great match for our long-term capital.” 

“We look forward to collaborating on new investments at an opportune moment when the current deleveraging cycle is impacting all types of real estate, including in favored sectors with excellent long-term fundamentals and demand drivers,” said Sundheim. 

Eastdil Secured served as an adviser to Healthcare Realty Trust, while Newmark (NMRK) advised KKR on the transaction. 

Brian Pascus can be reached at bpascus@commercialobserver.com