KKR & Co. is acquiring a lending platform that caters to home-flippers, giving the investing giant an opportunity to eventually invest $1 billion a year in small real estate loans.
KKR is buying Denver-based Merchants Mortgage & Trust Corp. through private credit funds and accounts as part of the firm’s asset-backed finance strategy. It plans to help the lender grow by providing a steady source of capital.
“What got us interested early on in this asset class is that it had not historically had access to institutional capital,” said Daniel Pietrzak, co-head of private credit at KKR. “Where we have found an advantage is bringing our large footprint as a firm and long-dated capital into play.”
The deal comes as a prolonged surge in housing demand pushes Wall Street to find new ways to invest in residential real estate. Money has flooded into into rental homes and apartments, which provide a source of long-term income streams. By contrast, lending to flippers, who buy outdated homes to fix and resell them, offers a way to make shorter-duration bets, limiting exposure to shifts in the market.
KKR isn’t new to small-balance real estate loans. It first invested in Toorak Capital Partners, which acquires such loans, in 2016, and later
Merchants, founded in 1961, originated $500 million in loans last year. The lender may double in size over the next three years as it expands into new geographies and loan products. It’s also poised to benefit from the need to renovate America’s aging housing stock, Pietrzak said.
