KKR Sees 240% Gain on Florida Condo Tower in Real Estate Bet
KKR Sees 240% Gain on Florida Condo Tower in Real Estate Bet
(Bloomberg) -- KKR & Co. generated a 240% profit on a luxury condo project in Florida that is part of the firm’s real estate strategy in the U.S. Sun Belt.
The firm, along with partner Gulf Bay, developed an 81-unit waterfront residential tower in Naples, Florida, called Mystique at Pelican Bay. The 2015 joint venture started with an initial $80 million investment to purchase the land and construction was completed four years later.
The firms have since sold all of the condo units, generating approximately $500 million in proceeds, according to Roger Morales, KKR’s head of real estate acquisitions.
For KKR, that was about 2.4 times the multiple of invested capital, said a person with knowledge of the deal who asked not to be named because the information is private. Morales declined to comment on property returns.
“This project was special because it was one of the last waterfront sites in Naples,” Morales said in an interview. “The pandemic really accelerated the flight to these waterfront communities.”
Naples has been a magnet for affluent retirees and snowbirds whose lifestyles are suited for condos they can lock and leave with ease.
The Naples Area Board of Realtors reported the median condo price jumped 24% in the year through September to $355,000. That compares with a statewide median of $255,000, up 19% from a year earlier, according to the Florida Association of Realtors.
The Naples project was part of KKR’s real estate strategy to follow jobs and population growth to the Sun Belt. KKR, which had $36 billion in real estate assets as of Sept. 30, has made several other bets as part of this strategy, including a pair of office buildings: 1111 Brickell in Miami and the Salesforce Tower in Atlanta.
KKR has acquired about $1.8 billion in real estate assets across Florida, with properties ranging from warehouses to apartment buildings, Morales said.
The firm made the Pelican Bay condo investment through its first dedicated real estate fund, which raised $1.5 billion in 2013. That fund has generated a 12% net internal rate of return since inception through Sept. 30, according to a regulatory filing.
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