Form 4: KKR Real Estate Select Trust Inc. Issues Shares to KKR Alternative Assets LLC as Payment for Management Fees

KKR Real Estate Select Trust Inc. issued 51,468.705 shares of common stock to KKR Alternative Assets LLC at a price of $25.21 per share as payment for management and/or incentive fees.

Summary

• On October 31, 2024, KKR Real Estate Select Trust Inc. issued 51,468.705 shares of its common stock to KKR Alternative Assets LLC.
• The shares were issued as payment for management and/or incentive fees, as per the investment advisory agreement between KKR Real Estate Select Trust Inc. and KKR Registered Advisor LLC.
• The price per share was $25.21.
• Following the transaction, KKR Alternative Assets LLC indirectly holds 10,056,786.73 shares of KKR Real Estate Select Trust Inc. common stock.
• The reporting persons, including KKR entities and individuals like Henry R. Kravis and George R. Roberts, disclaim beneficial ownership except to the extent of their pecuniary interest.

Sentiment

Score: 7

Explanation: The sentiment is neutral to slightly positive. The transaction is a routine payment for services rendered, indicating a healthy ongoing relationship between the company and its advisor. The complex ownership structure adds a layer of complexity but is typical for KKR.

Positives

• The issuance of shares reflects ongoing management and advisory services provided to KKR Real Estate Select Trust Inc.
• The transaction provides transparency into the compensation structure between KKR Real Estate Select Trust Inc. and its advisor.

Industry Context

This type of transaction, where shares are issued as payment for services, is common in the investment management industry, particularly for REITs and other investment vehicles managed by external advisors.

Comparison to Industry Standards

• Similar arrangements are seen with other externally managed REITs, such as those managed by Blackstone (BX) or Apollo Global Management (APO), where management fees are often paid in a combination of cash and equity.
• The specific terms of the investment advisory agreement, including the fee structure and the method of payment, would be benchmarked against industry standards for similar real estate investment trusts.

Related Party Transactions

• The issuance of shares to KKR Alternative Assets LLC, an affiliate of KKR Registered Advisor LLC, constitutes a related party transaction.

Stakeholder Impact

• The issuance of shares could slightly dilute existing shareholders, although it is part of the agreed-upon compensation structure.
• The transaction ensures continued management and advisory services, which benefits shareholders by maintaining the fund's operations.

Key Dates