Matt Salem, Patrick Mattson, Joel Traut and Rene Theriault
Managing Director and Chief Operating Officer of Real Estate Credit; Partner and Head of Real Estate Credit; Managing Director and Head of Securities Investing for Real Estate Credit; Partner and Head of Originations at KKR
Last year's rank: 33
“Buy when there is blood in the streets.” So goes the famous quote from Baron Rothschild. It’s advice that KKR apparently took to heart.
In March and April of last year, when much of the financial world was hunkering down and trying to assess its exposure, the investment firm was out raising capital with an eye toward putting it to work during the pandemic. Matt Salem noted KKR raised $4 billion in an eight-week period for strategies focused on investing in the near-term dislocation, $450 million of which went toward its real estate credit business.
“We strategically grew our business in that April timeframe last year by adding dedicated private capital in our real estate direct-lending business,” he said.
KKR, Salem noted, was better situated than many to weather the pandemic. While a number of mortgage REITs found themselves in the midst of a liquidity crunch, KKR’s Real Estate Finance Trust (KREF) wasn’t among them, due to a financing strategy that relies primarily on not-mark-to-market facilities and low exposure to the most impacted sectors, such as hospitality and retail, Salem said. The firm’s multifamily-heavy portfolio was also relatively insulated from the crisis.
“We had been positioning our portfolio much more defensively well before COVID,” Salem said, explaining KKR’s pre-pandemic thinking. “We were thinking that it was late-cycle in the economy and late-cycle in real estate values. We had seen a lot of spread compression and competition in the lending markets, and so made the decision that instead of pursuing a little extra return for a lot of extra risk, we were going to do the opposite.”
Operating from this position of strength, KKR increased its real estate credit assets under management from $3.5 billion in March 31, 2020, to $15.4 billion in Dec. 31, 2020, and achieved originations of more than $2 billion across its strategies.
KREF was the first mortgage REIT to return to the market following the start of the COVID-19 pandemic and originated more than $565 million in new loans during the fourth quarter of 2020.
Perhaps the only potential hiccup in KKR’s plans is the fact that the market’s rapid rebound could limit opportunities to use some of the capital it raised last spring. That, though, would probably qualify as a good problem to have.—A.B.
