KKR & Co. is raising its bet on fixer-uppers.
The investment house known for corporate takeovers has agreed to pump another $250 million into Toorak Capital Partners LLC, which buys short-term loans made to real-estate investors who purchase, renovate and resell residential properties.
already has $250 million invested in New Jersey-based Toorak. By borrowing from banks on top of KKR’s investment, Toorak currently holds about $1.5 billion of so-called flip loans on its books. Now, with $500 million in total equity from KKR, Toorak can effectively double the volume of loans that it purchases from regional and online lenders, said John Beacham, Toorak’s chief executive.
Flip loans, which usually have a maturity of a year, have become sought after on Wall Street for the big yields that they pay, often between 8% and 11%. A one-year U.S. Treasury yields around 2.055%.
Since many house flippers repay their loans before a year, money dedicated to them can earn even more on an annual basis. Dan Pietrzak, a portfolio manager for KKR’s private credit funds, said KKR has told investors the arrangement with Toorak has produced annualized returns in the midteens.
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