KKR and Urban Exposure platform targets ‘underserved’ UK housing

The firms aim to address a ‘shortage of debt capital’ in mainstream residential developments with their joint venture vehicle, which has an initial size of £165m.

Investment firm KKR and UK residential development finance provider Urban Exposure have formed a joint venture to finance mainstream housing across the UK.

The partnership has launched a £165 million (€185 million) lending platform, with KKR contributing capital from its credit funds, which currently have assets under management of $60.7 billion. Meanwhile, Urban Exposure has provided capital from its balance sheet lending funds.

“We might choose to grow the initial capital [of £165 million] substantially. We don’t have a specific target, but we might do two, three or four times the amount of the initial capital in time,” Randeesh Sandhu, chief executive of Urban Exposure, told Real Estate Capital.

“Both partners are happy to put in more equity in time and also take leverage,” he added.

The joint venture will take advantage of the “attractive” fundamentals of development finance, it said, while meeting a need for housing development in the context of increasing mainstream housing supply in the UK, with the government committing to build 300,000 new homes per year.

“Through this partnership, we will provide debt capital to local residential developers operating mainly across towns and cities and seeking funding for mainstream housing projects,” Sandhu said.

“There’s a shortage of debt capital in this space. The traditional banks, primarily on regulatory pressures, are retreating from the development finance market and they have been more and more replaced by non-bank lenders such as us,” he explained.

The partnership will target regional developers providing loans with terms between 24 and 30 months and leverage up to 75 percent. Loans will be priced from around 5 percent to around 9 percent, depending on the risk profile of the project.

In May, Urban Exposure launched a listing on the London Stock Exchange’s junior Alternative Investment Market, with the aim to raise £150 million. The firm went public with the aim of continuing to grow its strategy, focused on providing development finance for SME developers around the UK.