Four Senate Democrats with a history of private equity skepticism are raising concerns over KKR & Co.’s $2.1 billion acquisition of a 5,200-unit multifamily portfolio.
“We are deeply concerned that KKR’s multi-billion dollar real estate purchase could result in even higher rents, exacerbating America’s housing crisis,” said Sen. Elizabeth Warren, D-Mass., Sen. Raphael Warnock, D-Ga., Sen. Peter Welch, D-Vt., and Chair of the Senate Finance Committee Ron Wyden, D-Ore., in an Oct. 23 letter to KKR’s co-CEOs Joseph Bae and Scott Nuttal.
KRR, which has $624 billion in assets under management, said in June that it had purchased a portfolio of 18 multifamily assets from a closed-ended fund sponsored by Quarterra Multifamily. The units are concentrated primarily in coastal and sunbelt markets including California, Washington, Florida, Texas, Georgia and North Carolina, Colorado and New Jersey, according to a KKR news release. The portfolio is a mix of mid-rise and high-rise buildings.
Citing data from the National Low Income Housing Coalition, which shows workers making minimum wage in 33 states do not earn enough to afford a one-bedroom apartment, the senators pressed KKR to answer several questions and prompts in writing by Nov. 6, including:
-Please explain what methods you will use to determine rent and fee levels in the 5,200 apartment units KKR recently acquired.
-How will you ensure tenants’ safety and health are maintained in these units?
-What investments will KKR make in property upkeep and maintenance?
-What yield does KKR anticipate receiving on this investment over the next five, 10, and 20 years?
In its news release announcing the purchase, KKR said it will work with multifamily operators Carter-Haston, MG Properties and Dalan Real Estate to operate the properties.
KKR response
In a statement in response to the letter, KKR said its investment in the “high-end, newly constructed apartment buildings is supporting the development of much-needed new housing which is vital to the economic and population growth of many U.S. cities. These properties provide residents with a high-quality housing option that offers affordable value in their respective markets and proximity to attractive employment opportunities and cultural amenities. We work with expert local property managers to invest in great living experiences and hold our partners to high standards for tenant satisfaction, transparency and fairness.”
Congressional Democrats, including Warren, have frequently raised concerns with private equity in recent years.
Earlier this month, Warren and 12 co-sponsors in the House and Senate reintroduced the Stop Wall Street Looting Act to reshape the private equity industry. Democrats have also introduced bills focused on private equity investments in the healthcare sector.
