Real Estate Select Trust Inc. Fund (KRSTX) · NASDAQ:KRSTX
Real Estate Select Trust Inc. Fund (KRSTX) — KKR Real Estate Select Trust — Investor Presentation (February 2023)
62 slides from Real Estate Select Trust Inc. Fund (KRSTX)'s investor presentation, February 2023
Slide 1: KKR Real Estate Select Trust Inc. (KREST)
KKR REAL ESTATE SELECT TRUST INC. (KREST) FEBRUARY 2023 This presentation should not be viewed as a current or past recommendation or a solicitation of an offer to buy or sell any securities or Investment Product | Not FDIC Insured to adopt any investment strategy, and must be read in conjunction wi
Slide 2: Important Information
Important Information KKR Real Estate Select Trust Inc. (“KREST”) is a non-diversified, closed-end management investment company that intends, under normal market conditions, to invest at least 80% of its net assets (plus the amount of its borrowings for investment purposes) in a portfolio of real e
Slide 3: Important Information: Other Important Disclosures
Important Information Other Important Disclosures The information in this presentation is only as current as the date indicated and may be superseded by subsequent market events or for other reasons. Nothing contained herein constitutes investment, legal, tax or other advice nor is it to be relied o
Slide 4: Important Information: Index Definitions
Important Information Index Definitions Any indices referred to in this presentation are used for purposes of comparison to the performance of certain capital markets. The return figures for each index do not reflect the deduction of any taxes, expenses, transaction costs or advisory fees. Broad-bas
Slide 5: Table of Contents
Table of Contents Page I. Introduction to KREST 6 II. KKR and KKR Real Estate Overview 10 III. The KREST Investment Strategy 14 IV. Why Private Real Estate 19 V. KREST Performance 32 VI. Summary of REIT Taxation 34 VII. Summary of KREST Terms and Structure 36 VIII. KREST Portfolio Detail 39 5 of 62
Slide 6: Introduction to KREST
KKR Introduction to KREST
Slide 7: KREST provides access to private real estate equity and credit
KKR Real Estate Select Trust Inc. (“KREST”) KREST provides access to the potential benefits of private real estate equity and credit in a single, diversified fund Seeks to deliver tax-efficient yield with appreciation potential to income- 01 oriented investors through diversified real estate investm
Slide 8: KREST Overview
KREST Overview KREST’s Investor Strategy Experience: • Balanced portfolio diversified across three investment pillars: • Daily NAV • Stabilized Real Estate • Prime Single Tenant • Daily Subscriptions via a • Real Estate Credit Ticker • Exposure to high-growth markets across the U.S. and • Monthly Di
Slide 9: KREST Portfolio Snapshot
KREST Portfolio Snapshot KREST has built a well-diversified and scaled portfolio that has delivered attractive income and total returns to shareholders ITD NET RETURN NET DISTRIBUTION RATE TOTAL ASSETS (GAAP) NET ASSET VALUE FUND-LEVEL GROSS LEVERAGE Fund Statistics 14.43% (Class I) 5.20% $1.6B $1.6
Slide 10: KKR and KKR Real Estate Overview
KKR and KKR Real Estate Overview
Slide 11: KKR Overview
KKR Overview Established in 1976, KKR is a global investment firm with industry-leading investment experience and a strong culture committed to teamwork Over 46 Years ~$504B in ~2500 Multi-asset 23 ~$25B client AUM employees expertise offices invested of investment invested in including over 750 acr
Slide 12: KKR Real Estate Platform Overview
KKR Real Estate Platform Overview KKR Real Estate: A Leading Global Platform Competitive Advantages • Fully-Integrated Platform: Global real estate platform across real estate equity and credit $207B Invested & Loans in Real Estate Assets 1 • Differentiated Sourcing Capabilities: One-Firm approach t
Slide 13: KKR Real Estate Global Investment Experience
KKR Real Estate Global Investment Experience Fully-integrated, collaborative platform across global real estate equity and credit that has invested and managed $207 billion in real estate assets and loans1 Real Estate Equity2 Real Estate Credit ~$34.5 billion loans originated ~$8.5 billion invested
Slide 14: The KREST Investment Strategy
The KREST Investment Strategy
Slide 15: KREST's Flexible Investment Strategy
KREST’s Flexible Investment Strategy Three complementary strategy pillars seek to create a well-balanced portfolio that seeks to combine the potential for growth, a level of downside protection and potential inflation hedging while aiming to generate less correlated, resilient and tax-efficient curr
Slide 16: Investment Strategy: Stabilized Real Estate
KREST Investment Strategy: Stabilized Real Estate INVESTMENT STRATEGY CASE STUDIES Seek to invest in stabilized, income-producing assets, Industrial - MB Parts Korea DC, Anseong, Korea targeting: • 353k SF, purpose-built asset that has served as Mercedes-Benz' sole • Favorable supply/demand dynamics
Slide 17: Investment Strategy: Prime Single Tenant
KREST Investment Strategy: Prime Single Tenant INVESTMENT STRATEGY CASE STUDY Designed to combine the benefits of trophy real estate Prime ST – 300 Pine, Seattle, WA with long, escalating, investment-grade leases • High-quality, IG-rated or creditworthy tenants • Prime locations in high conviction o
Slide 18: Investment Strategy: Real Estate Credit
KREST Investment Strategy: Real Estate Credit INVESTMENT STRATEGY CASE STUDY Real estate credit may create yield, diversify the portfolio Real Estate Credit– NEMA, Chicago, IL and may enhance resilience: • Invest in floating rate loans, secured by high-quality real estate assets • Attractive and con
Slide 19: Why Private Real Estate
KKR Why Private Real Estate
Slide 20: Broad Opportunity Set in Private Real Estate
Broad Opportunity Set in Private Real Estate Commercial Real Estate is the 3rd Largest Asset Class in the U.S. Publicly Traded U.S. Equities U.S. Government Debt SIZE OF ASSET CLASSES ($ trillions) U.S. Commercial $51T Real Estate $28T U.S. Mortgage- U.S. Backed Securities $21T Corporate Debt $12T N
Slide 21: Private Real Estate Has Provided More Stable Returns than Public REITs
Historically, Private Real Estate has Provided More Stable Returns than Public REITs U.S. PRIVATE RE ANNUAL TOTAL RETURNS VS. U.S. PUBLIC REITS ANNUAL TOTAL RETURNS 40% Dot-com Bubble Global COVID-19 30% Financial Crisis Pandemic 20% 10% 0% -2.4% -10% -14.9% -20% -23.9% -30% -40% -38.6% 1994 1996 19
Slide 22: Private RE Income Has Outpaced Inflation Since Mid-1990s
Private RE Income Has Generally Outpaced Inflation Since The Mid-1990s… U.S. REAL ESTATE NET OPERATING INCOME (NOI) VS. CPI INFLATION Real Estate 200 Net Operating Income 190 180 CPI Inflation 170 160 150 140 130 120 110 100 1995 2000 2005 2010 2015 2020 (1995 = 100) There can be no assurance that t
Slide 23: Real Estate Returns During Inflationary Periods
…And has Historically Contributed to High Real Estate Total Returns During Inflationary Periods HIGH GROWTH / HIGH INFLATION LOW GROWTH / HIGH INFLATION 20% 20% 18% 17.3% 18% 16.1% 16% 15.0% Average Annual Total Returns 16% Average Annual Total Returns 14% 14% 12% 12% 10% 9.0% 9.4% 10% 7.9% 7.4% 8%
Slide 24: Private Real Estate Returns in Rising Rate Environments
Private Real Estate Has Historically Delivered Solid Returns in Rising Rate Environments 20% 19% 700 588 Private Real Estate Total Returns (Annualized) 18% 17% 16% 600 Change in 10-year UST Yield (bps) 16% 15% 554 14% 500 12% 12% 11% 400 10% 318 8% 263 300 8% 7% 213 6% 5% 178 165 244 137 200 4% 100
Slide 25: Thematic Private Real Estate Diversification Benefits
A Thematic Private Real Estate Strategy May Offer Portfolio Diversification Benefits Relative To Traditional Asset Classes Custom Global Private Real Global Global HY Global IG Correlation Thematic Real Global REITs Global Equities Government Estate Debt Commodities Corporates Corporates Estate Inde
Slide 26: Thematic Private Real Estate in a Multi-Asset Portfolio
Incorporating Thematic Private Real Estate Assets Into A Multi-Asset Portfolio May Improve Returns While Lowering Volatility 15.0% 0.47 0.50 12.7% 0.43 12.5% 11.7% 11.5% 0.38 0.40 10.0% 0.30 7.5% 5.4% 0.20 4.8% 5.0% 5.0% 0.10 2.5% 0.0% 0.00 Excess Return Volatility Sharpe Ratio (over risk-free rate
Slide 27: Macro Case: For-Rent Residential Real Estate
Macro Case: For-Rent Residential Real Estate Favorable Demographics and Tight Housing Supply Driving Increased Demand Housing Supply has Not Kept Up with Demand… …Resulting in Very Low Vacancy Rates CUMULATIVE GAP BETWEEN U.S. HOUSEHOLD U.S. RENTAL VACANCY RATE FORMATION AND HOUSING STARTS (%) 12% S
Slide 28: Macro Case: Industrial Real Estate
Macro Case: Industrial Real Estate Increased E-Commerce Penetration is a Strong Positive for the Sector The Pandemic Accelerated E-Commerce Penetration, Amid High Demand, Industrial Real Estate which has Plenty of Room to Deepen Vacancy Rates Continue to Decline U.S. E-COMMERCE SALES U.S. INDUSTRIAL
Slide 29: Macro Case: Medical Office Facilities
Macro Case: Medical Office Facilities Population Aging and Higher Spending on Outpatient Services Fueling Demand Medical Office Tenants (i.e. Physician Practices, Outpatient The 65+ Population is Projected to Account for a Growing Clinical & Ambulatory Surgery Centers, etc.) Tend to be Share of the
Slide 30: Macro Case: Prime Single Tenant Assets
Macro Case: Prime Single Tenant Assets1 May provide a high, growing and tax-efficient yield at a premium to investment-grade (IG) corporate bonds, combined with the long-term appreciation potential of trophy real estate • Tale of two office markets: New office assets are growing 1 New, Trophy Proper
Slide 31: Macro Case: Private Real Estate Credit
Macro Case: Private Real Estate Credit Defensive income, where the collateral and structural seniority provide a level of downside protection and a floating rate structure may hedge against inflation and rising rates SASB CMBS (Single Asset Single Borrower) has experienced Alternative Lenders and CM
Slide 32: KREST Performance
KKR KREST Performance
Slide 33: KREST Performance Summary – February 28, 2023
KREST Performance Summary – February 28, 2023 1-MONTH 3-MONTH YTD ITD NAV / SHARE NET RETURN NET RETURN NET RETURN NET RETURN(1) Class I (0.96% ) (1.45%) (0.42%) 14.43% $30.01 Class U (1.02%) (1.69%) (0.59%) 11.94% $30.00 (No Sales Load) Class U (3.99%) (4.63%) (3.58%) 9.90% $30.00 (With Sales Load)
Slide 34: Summary of REIT Taxation
KKR Summary of REIT Taxation
Slide 35: Summary of REIT Taxation
Summary of REIT Taxation KREST’s structure as a 1940 Act REIT Illustrative example of $100,000 investment allows for efficient taxation with a pre-tax yield of 5.0% ($5,000 annualized distribution)5 • Under the “Tax Cuts & Jobs Act of 2017,” REIT $4,630 ordinary dividends paid to investors benefit $
Slide 36: Summary of KREST Terms and Structure
Summary of KREST Terms and Structure
Slide 37: Term Sheet
Term Sheet Fund Name ▪ KKR Real Estate Select Trust Inc. (“KREST”) Fund Structure ▪ Non-listed, U.S. registered closed end fund with REIT taxation (’40 Act REIT) Investment Advisor ▪ KKR Registered Advisor LLC, a subsidiary of KKR Investor Eligibility1 ▪ None Subscriptions/NAV2 ▪ Daily2 Management F
Slide 38: Investor-Friendly, 1940-Act REIT Structure
Investor-Friendly, 1940-Act REIT Structure 01 Provides access to tax-advantaged income backed by high quality real estate Low minimum investment, no investor lock-up1, no investor accreditation requirement and not 02 subject to Direct Participation Program concentration limits 03 Innovative ’40-Act
Slide 39: KREST Portfolio Detail
KKR KREST Portfolio Detail
Slide 40: KREST Portfolio – February 28, 2023
KREST Portfolio – February 28, 2023 Acquisition # of Size Investment Name Strategy Property Type Location Date Properties (SF/Units) Industrial - AIP-PMR 3-Pack Stabilized Real Estate Industrial Q3 '20 Various, US 3 1,528,580 SF Industrial - Lambert Farms Stabilized Real Estate Industrial Q3 '21 Atl
Slide 41: Glossary of Terms and Important Information
Glossary of Terms and Important Information
Slide 42: Glossary of Terms
Glossary of Terms Assets Under Management or AUM: represent the assets as to which KKR Registered Advisor LLC (the “Adviser”) or its affiliates (collectively “KKR”) is entitled to receive a fee or carried interest. KKR’s calculation of AUM may differ from the calculations of other asset managers and
Slide 43: Important Information
Important Information The Fund is a non-diversified, closed-end management investment company designed primarily as a long-term investment and not as a trading vehicle. An investment in the Fund is not intended to be a complete investment program and, due to the uncertainty inherent in all investmen
Slide 44: Important Information: Reliance on the Adviser
Important Information Reliance on the Adviser and Investment Professionals As of the date of this prospectus, the Fund has made a limited number of investments and the success of the Fund will therefore depend on the ability of the Adviser and its respective affiliates to identify and consummate sui
Slide 45: Important Information: Illiquid Investment Risk
Important Information Illiquid Investment Risk Many of the Fund’s investments will be illiquid, including the Fund’s private commercial real estate investments. A variety of factors could make it difficult for the Fund to dispose of any of its illiquid assets on acceptable terms even if a dispositio
Slide 46: Important Information: Epidemics and Pandemics Risk
Important Information Epidemics and Pandemics Risk Many countries have experienced outbreaks of infectious illnesses in recent decades, including swine flu, avian influenza, SARS and COVID-19 (the “Coronavirus”). In December 2019, an initial outbreak of the Coronavirus was reported in Hubei, China.
Slide 47: Important Information: Emerging Markets Risk
Important Information Emerging Markets Risk The Fund may invest in emerging markets. These markets tend to be very inefficient and illiquid as well as subject to political and other factors to a heightened degree relative to non-emerging markets. Many emerging markets are developing both economicall
Slide 48: Important Information: Joint Venture Risk
Important Information Joint Venture Risk The Fund may in the future enter into joint ventures with third parties to make investments. The Fund may also make investments in partnerships or other co-ownership arrangements or participations. Such investments may involve risks not otherwise present with
Slide 49: Important Information: Valuation Risk
Important Information Valuation Risk The price the Fund pays for its private commercial real estate investments will be based on the Adviser’s projections of market demand, occupancy levels, rental income, the costs of any development, redevelopment or renovation of a property, borrower expertise an
Slide 50: Important Information: Mezzanine Loan Risk
Important Information Mezzanine Loan Risk The Fund may invest in mezzanine loans that take the form of subordinated loans secured by a pledge of the ownership interests of either the entity owning the real property or the entity that owns the interest in the entity owning the real property. These ty
Slide 51: Important Information: Below Investment Grade Securities Risk
Important Information Below Investment Grade (High Yield or Junk) Securities Risk The Fund’s investments in traded real estate-related securities (including both direct and indirect investments) may consist of below investment grade securities. Lower grade securities may be particularly susceptible
Slide 52: Important Information: Derivatives Risk
Important Information Derivatives Risk The Fund may invest in derivative instruments, such as options contracts, futures contracts, options on futures contracts, indexed securities, credit linked notes, credit default swaps and other swap agreements for investment, hedging and risk management purpos
Slide 53: Important Information: Conflicts of Interest Risk
Important Information Potential Conflicts of Interest Risk The Adviser will experience conflicts of interest in connection with the management of the Fund, relating to the allocation of the Adviser’s time and resources between the Fund and other investment activities; the allocation of investment op
Slide 54: Important Information: Non-U.S. Investment Risks
Important Information Non-U.S. Investment Risks We may invest in real estate located outside of the United States and real estate debt issued in, and/or backed by real estate in, countries outside the United States, including Asia and Europe. Non-U.S. real estate and real estate-related investments
Slide 55: Important Information: REIT Status Risks
Important Information Risks Related to the Fund’s REIT Status (continued) Our charter does not permit any person or group to own more than 9.8% in value or number of shares, whichever is more restrictive, of our outstanding Common Stock or of our outstanding capital stock of all classes or series, a
Slide 56: Important Information: Tax Risks
Important Information Tax Risks of Investing in the Fund (continued) You may have current tax liability on distributions you elect to reinvest in our Common Stock. If you participate in our distribution reinvestment plan, you will be deemed to have received, and for U.S. federal income tax purposes
Slide 57: Important Information for Non-US Residents
Important Information This document contains important information regarding KKR Real Estate Select Trust Inc. and should be read in connection with your Prospectus. Please read carefully both the notice to non-U.S. residents and the jurisdiction-specific notices provided below. IMPORTANT INFORMATIO
Slide 58: Important Information: Caribbean and Cayman Islands
Important Information IMPORTANT INFORMATION FOR RESIDENTS OF THE CARIBBEAN The presentation and any other document or material issued in connection with the offer or sale of Shares of the Fund does not constitute or form part of any investment advice or an offer or solicitation of an offer to buy an
Slide 59: Important Information: EEA Residents
Important Information IMPORTANT INFORMATION FOR ALL EEA RESIDENTS The Fund is an alternative investment fund for the purpose of the European Union Alternative Investment Fund Managers Directive (Directive 2011/61/EU) (“AIFMD”). The Adviser is the alternative investment fund manager (“AIFM”) of the F
Slide 60: Important Information: Japan, Jersey, Korea
Important Information IMPORTANT INFORMATION FOR RESIDENTS OF JAPAN This presentation is not, and under no circumstances is to be considered as, a public offering of securities in Japan. No registration pursuant to Article 4 paragraph 1 of Japan’s Financial Instruments and Exchange Act has been or wi
Slide 61: Important Information: Peru
Important Information IMPORTANT INFORMATION FOR RESIDENTS OF PERU Shares will not be subject to a public offering in Peru. The Shares described herein have not been and will not be approved by or registered with the Peruvian Superintendency of Capital Markets (Superintendencia del Mercado de Valores
Slide 62: Kohlberg Kravis Roberts & Co. L.P.
Kohlberg Kravis Roberts & Co. L.P. 30 Hudson Yards New York, New York 10001 +1 (212) 750.8300 www.kkr.com @KKR_Co /company/kkr New York ∙ Houston ∙ Menlo Park ∙ San Francisco ∙ Dubai ∙ Dublin ∙ Frankfurt ∙ London ∙ Luxembourg ∙ Madrid ∙ Paris ∙ Riyadh ∙ Beijing ∙ Hong Kong ∙ Mumbai ∙ Seoul ∙ Shangha
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