Investor KKR has teamed up with residential development alternative lender Urban Exposure to launch a £165m joint venture (JV) focused on financing “mainstream housing”.
The JV, which will open with initial £165m size and aim to expand, and aims to target what the two firms believe is a significant opportunity to grow mainstream housing in the UK. The government recently committed £866m to fund work to free up more sites for housing developments as it targets building 300,000 new homes each year.
KKR’s investment is being made through its credit funds, which currently have assets under management of $60.7bn. It is the second joint venture in the residential sector that KKR has entered into this month, having formed a partnership with Round Hill Capital to target the student accommodation sector seeding with acquisition of a 7 acre site in the Netherlands.
Since 2010, Urban Exposure has arranged loans with a gross development value of £1.9bn, generating returns of around 21%. It has a current pipeline of approximately £700m, consisting of 18 substantially advanced development loans spread across the UK from the north and Midlands to the south and Greater London.
This move marks its first venture focused on mainstream housing having previously predominantly focused on the affordable housing sector. Earlier this year, the residential development finance and asset management group announced plans to list on the junior stock market AIM in a £150m IPO four years after shelving plans for a float.
Varun Khanna, director at KKR credit, said: “KKR is excited to partner with Urban Exposure, working closely with management to find opportunities to create value in an evolving UK residential property market. The strength of our platform, outstanding management team and favorable market fundamentals will enable us to support SME developers in building affordable housing for the benefit of the UK.”
Randeesh Sandhu, chief executive of Urban Exposure said: “We are pleased to have closed this joint venture, which is a continuation of our strategy to grow our third-party asset management business whilst also continuing to deploy our balance sheet lending funds. The scale of the venture means we can offer further significant support to SME developers as they seek funding for mainstream housing projects across the UK. We believe the venture will demonstrate our ability to deliver shareholder value by combining our experience with KKR’s significant financial and operational expertise.”