KKR has amassed a record $42bn pipeline in private real estate loans, marking its second commercial real estate lending milestone this year, according to a leadership update reported by Bloomberg.

The expansion underscores private credit’s growing role in property financing as traditional banks pull back amid elevated interest rates and market volatility.

The firm’s real estate credit strategy, led by Matt Salem, Joel Traut, and Patrick Mattson, is focused on senior-secured loans backed by income-generating assets. These typically feature loan-to-value ratios of 60-70%, offering downside protection and an inflation hedge through floating-rate structures.

In a note to investors, KKR attributed its pipeline surge to widening spreads and stalled issuance in the CMBS market, describing the situation as “Liberation Day” for alternative lenders. The dislocation in securitised lending has created compelling opportunities across the US and Europe.

KKR is currently seeing risk-adjusted returns of 12%-14% on property loans, Salem said in an interview. However, he noted that macro risks, including inflation and a potential recession, remain top of mind. He also cited emerging tariff risks as a possible headwind, particularly for logistics real estate in US port cities.

Despite the broader uncertainty, KKR anticipates strong lending activity driven by a slowdown in new construction and more favourable property valuations. The firm continues to expand its global platform, particularly in Europe, to meet increasing demand.

In February, KKR raised over $850m for its Opportunistic Real Estate Credit Fund II, targeting first mortgages on high-quality assets and select commercial mortgage-backed securities.

Source: Bloomberg

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