KKR, Dalan Management Closed $225 Million Apartment Purchase in Brooklyn

July 25, 2022

KKR, Dalan Management Closed $225 Million Apartment Purchase in Brooklyn

July 25, 2022

KKR, Dalan Management Closed $225 Million Apartment Purchase in Brooklyn

July 25, 2022 | James Sprow | Blue Vault

A new 13-story apartment building in downtown Brooklyn has been sold for $225 million to investment firm KKR and apartment operator Dalan Management, a year and a half after the contract was signed. The sale of 260 Gold didn’t close until June 9 after Bruman Realty finished the construction and fully leased the property.

Brooklyn landlords Abe Mandel and Joseph Brunner sold the building through their firm Bruman Realty as part of a $1.3 billion portfolio deal for 14 other Brooklyn properties that was finalized in December 2020, according to Cignature Realty’s Peter Vanderpool, who brokered the sale.

KKR Real Estate Select Trust Inc. accepted its first investor subscriptions in July 2021 and as of December 31, 2021, it had a diversified portfolio of $710.7 million of net asset value across 32 individual property investments. It delivered a total return to Class I investors of 26.1% in 2021 as well as a 5.2% net distribution rate (Class I), according to its 2021 Shareholder Report filed with the SEC.

The RealDeal July 21, 2022 Article About KKR’s Brooklyn Investments

“In its quest to double its $36 billion real estate portfolio over the next few years, KKR told The Real Deal in December that it would focus on markets and sectors it felt were poised for a rebound.”

“The 365-unit rental tower at 80 DeKalb Avenue, which KKR, in partnership with Dalan Management, picked up from Brookfield Properties for $190 million, may offer that upside.”

“Among the earliest of several towers that now make up Downtown Brooklyn’s skyline, the property was developed by Forest City Ratner in 2007 and came to Brookfield’s portfolio through its $7 billion acquisition of Forest City Realty Trust in 2018.”

“Just 20 percent of its units, which range from studios to two-bedrooms, are set aside as affordable, meaning KKR is buying nearly 300 market-rate apartments at a time when rents in Brooklyn are spiking. The median rent for a one-bedroom apartment in the borough hit $3,000 in June, according to a monthly report by appraiser Miller Samuel, a 13.2 percent increase from the same time last year.”

“Discounts are also disappearing, and some tenants who scored deals on apartments last spring and summer have reported renewals as high as 40 percent in recent months. All that growth means better returns for landlords and in the case of KKR, its investors.”

“A source with knowledge of the 80 DeKalb deal said KKR Real Estate Select Trust, a fund KKR launched in May 2021, purchased the rental tower. The fund allows individual investors to get in on “income-generating commercial real estate,” plus private real estate debt, according to a KKR press release.”

“KKR has taken a shine to New York’s pandemic-discounted assets in recent years, telling TRD that prior to Covid, the city’s prices ran too hot. Its first major deal in the city, the $860 million purchase of a 14-building Brooklyn rental portfolio — including 260 Gold Street, a 286-unit rental tower in Downtown Brooklyn — closed in the summer of 2020. At the time, nearly half of all new leases in Brooklyn came with concessions, and rental inventory had reached an eleven-year high.”

“Now, prices commanded by multifamily assets in the borough are exceeding pre-pandemic levels. By March, the average price per unit had topped $374,000, ahead of 2019’s average of about $372,000, according to reports by Ariel Property Advisors. KKR bought 80 DeKalb for around $520,000 per unit.”

Sources:  TheRealDeal KKR Buys Downtown Brooklyn Rental Tower For $190M (therealdeal.com); Costar; The Commercial Observer