KKR Purchase of Philadelphia Apartment Complex Sets City Record
Nov. 1, 2022 5:30 am ET
The investment firm KKR & Co., Inc. is raising its bet on the apartment market with the $357 million purchase of a Philadelphia housing complex, the most expensive apartment property sale in the city’s history.
KKR’s acquisition of Presidential City, which consists of four 12-story buildings on the edge of Philadelphia, was more than $100 million higher than the previous top price paid for an apartment complex in the city.
The sale comes as the multifamily market is showing signs of cooling off after nearly two years of blistering performance that drove rents to record highs. Rents are now falling from their peaks.
Demand is easing and vacancies are rising amid growing concerns about affordability and the economy, leading some renters to take on roommates or move in with family.
Still, KKR said the renters at the Philadelphia complex are primarily well-paid professionals who spend less as a percentage of their income on rent compared with similar tenants living in properties closer to downtown. That leaves their finances in better shape to navigate a recession, which is becoming a greater priority for many investors as the U.S. economy shows signs of slowing.
“It provides a lot of stability,” said KKR chief operating officer Billy Butcher.
Rents for one bedroom apartments at Presidential City start around $1,800, compared with a high-end building in the city’s center where one-bedroom rents can start above $3,000, according to real-estate services company JLL
KKR also purchased a 365-unit apartment building in July in Downtown Brooklyn for $190 million, and it bought a multifamily project last year in Jacksonville, Fla. Overall, the KKR fund that bought the apartments has 19% of its equity in residential buildings.
The Philadelphia market hasn’t in recent years been considered a primary target of institutional investors. Such buyers have tended to gravitate toward higher-growth cities in the Sunbelt, where costs can be lower and there is more opportunity to raise rents. Compared with some other large cities, Philadelphia also has fewer of the newly built, glass-facade luxury apartment towers that are popular with large investment funds.
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