Distressed Investor Mavik Bets on KKR Mortgage REIT Liquidation Play
Mavik, a commercial real estate distress specialist, disclosed a 5.4% stake in KKR Real Estate Finance Trust Inc., a mortgage REIT that announced last month it was exploring strategic alternatives including a merger or sale. KREF has traded at a steep discount to book value since 2022, when rising interest rates pressured commercial real estate. Mavik CEO Vik Uppal told investors in a letter Tuesday that he expects the strategic review to result in a sale or liquidation at or near the value of the underlying loans.
Uppal pointed to a transaction earlier this year in which Apollo Global Management sold loans from one of its commercial mortgage REITs to Athene Holding, an Apollo-owned insurer, for just under book value. If KREF executes a similar transaction at 95 cents on the dollar, Mavik expects to earn an internal rate of return exceeding 30%. Uppal said KREF stands out among mortgage REITs for the quality of its loan portfolio. KREF is working to resolve troubled legacy loans while repositioning its holdings.
Mavik’s investment reflects growing interest in mortgage REITs trading below book value as strategic reviews and portfolio sales become more common. Last month Bloomberg reported that Mavik was seeking to raise $1 billion to invest in distressed commercial real estate assets across the capital stack, including first mortgages, mezzanine loans, and preferred equity. Representatives for both Mavik and KKR declined to comment on the investment.
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