KKR Snaps up Merchants Mortgage Trust & Corporation

Global investment firm KKR & Co. Inc. (NYSE:KKR) has acquired a real estate lending platform, Merchants Mortgage Trust & Corporation (MMTC).

The financial terms of the deal have been kept under wraps. Notably, shares of the company have gained 61% over the past year.

Synergies from the Deal

Founded in 1961, MMTC specializes in short-term mortgage products for experienced private residential real estate investors, mainly used for property rehabilitation with a focus on one-to-four unit residential properties.

It has a strong  presence in growing markets across the western United States, especially in Colorado, Arizona and California. In 2021, MMTC originated loans of over $500 million to 500 different borrowers.

The addition of MMTC will compliment KKR’s portfolio of asset-based finance investments, and further add exposure to a pool of directly originated, primarily short-term residential real estate loans given to high-quality borrowers.

KKR’s long-term capital will support MMTC to grow its origination activity and aid the expansion of its product offerings, geographic reach as well as financing capabilities.

Other Details

Aligning with the firm’s Asset-Based Finance (ABF) investment strategy, KKR will invest in MMTC through its private credit funds and accounts. The strategy pursues privately originated investments backed by diversified pools of hard and financial assets.

According to the terms of the deal, MMTC will also acquire outstanding interests in its affiliate, Orchard Funding.

Management Weighs In

Partner and Co-head of Private Credit at KKR, Daniel Pietrzak, commented, “By enabling entrepreneurs to invest in residential real estate, MMTC is contributing to the long-term resilience of the U.S. housing market, which we are excited to support through our ABF strategy.

Wall Street’s Take

On January 18, Wells Fargo analyst Christopher Harris decreased its price target on KKR to $86 (28.6% upside potential) from $90 and reiterated a Buy rating.

Consensus among analysts is a Strong Buy based on 8 Buys and 2 Holds. The average KKR price target of $90.25 implies upside potential of 34.9% to current levels.

Bullish Bloggers

TipRanks data shows that financial blogger opinions are 100% Bullish on KKR, compared to the sector average of 71.

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