KKR aims for $2.5B with second Asia real estate fund

New York PE firm sees strong opportunities in Japan, Australia, and Southeast Asia.

KKR & Co. is raising a second Asia real estate fund, targeting $2 billion to $2.5 billion to spend across the region, according to people familiar with the matter.

The new fund has amassed about $600 million since late 2022, and the US investment firm is seeking to finish fundraising by the end of 2024 to early 2025, said the people, who asked not to be identified as the matter is private.

Similar to KKR’s first Asia real estate fund, which closed in January 2021, the second will deploy an opportunistic strategy as it invests in property assets in markets including Japan, Australia and Southeast Asia, one of the people said.

The final amount raised and the timeline of the fund’s closing may change depending on market conditions, the people said.

A representative for KKR declined to comment.

KKR’s move comes at a difficult time for fundraising globally, as higher borrowing costs and economic uncertainty leave investors wary. There have been bright spots, however, such as private credit or real estate in certain Asia markets.

One of them is Japan, where low interest rates are attracting investors. Commercial property investment volume in the country jumped 52% in the first half of 2023 from a year earlier, while globally it fell 54%, according toJones Lang LaSalle.

Although real estate investment volume in Asia-Pacific has fallen this year, the drop is only about half of the decrease in the Americas and Europe, JLL said. Sectors like multi-family residences or hotels are also still attracting investors in the region.

Investors also might continue to put money into Asia-focused private capital funds as they seek diversification, according to a Preqin report.

KKR raised $1.7 billion for its first Asia real estate fund, which closed in January 2021. Proceeds were used for investments in assets such as the Namsan Green Building in Seoul and the Hyatt Regency hotel in Tokyo.

The New York-based private equity giant has been focused on business in Asia, in recent years raising $15 billion for a fourth Asia buyout fund, and its first credit and real estate funds for the region. Last year, KKR bought a Japanese real estate investment trust manager in a deal worth about ¥230 billion ($1.5 billion).

Globally, KKR’s real estate team manages $64 billion in assets as of June 30.