Chris Lee (left) and Justin Pattner.
Chris Lee and Justin Pattner
Partner and president at KKR Real Estate; partner and head of real estate equity for the Americas at KKR
It pays to do your homework.
Chris Lee and Justin Pattner do just that in their decision-making for global investment giant KKR’s real estate equity business. The pair and their team tap into KKR’s other lines, including private equity and real estate credit, to figure out where to invest. KKR’s real estate equity line had $37.7 billion in assets under management as of March 31 (as part of a larger $81.3 billion real estate pot).
“We have access to a ton of top-down information,” Pattner said. “That is where things start with us.”
Things tend to end in some specific places. That’s not an accident, and it speaks to KKR’s success in a relatively short period of time (the firm’s overall real estate platform launched in 2011).
“We think the big demand generators are in consumer preferences, corporate strategy and demographics,” Lee said. “And, so, we invest behind themes we see driving the global economy, in particular the U.S. economy, that fit into those buckets — and then try to find real estate investments that we think will outperform based on the trends that we have seen in those categories.”
Within those consumer, corporate and demographic demand generators are several asset classes, and that’s where KKR goes. These include rental housing, property that services e-commerce, and real estate related to what Pattner described as supply chain security. In June 2024, for instance, KKR paid around $2.1 billion for an 18-asset multifamily portfolio spread across eight states. It bought a four-property warehouse portfolio in central Florida a few months later for a reported $140 million.
That does not include commoditized office space, or more cyclical and potentially oversupplied niches such as life sciences and big-box industrial. The pair stressed that the data there suggests those asset classes are not attractive targets at the moment.
As for what’s ahead, the continued pricing dislocation and supply shortages in CRE are opportunities for a firm with KKR’s bench and data. “Every time we’ve seen real estate corrections with a pullback from institutional investors,” Lee said, “it has usually preceded a very strong relative outperformance for real estate.”
