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KKR Files For $835M REIT IPO

NEW YORK — Kohlberg, Kravis Roberts & Co., a private equity firm said to be making a play to acquire the Neiman Marcus Group, filed an initial public offering for $835 million with the Securities and Exchange Commission for a real estate...

NEW YORK — Kohlberg, Kravis Roberts & Co., a private equity firm said to be making a play to acquire the Neiman Marcus Group, filed an initial public offering for $835 million with the Securities and Exchange Commission for a real estate investment trust Monday. It will offer 79.6 million shares at $10.50 a share.

The REIT, KKR Financial Corp., will be managed by KKR and expects to be listed on the New York Stock Exchange under the ticker “KFN.” KKR Financial will continue operating as a specialty finance company. It currently has $6.3 billion invested in residential mortgage loans and mortgage-backed securities; corporate leveraged loans and high-yield securities; commercial real estate debt, and asset-backed securities.

According to its IPO prospectus, the firm will continue focusing on its core areas, but also will “invest opportunistically in other types of investments from time to time, including investments in equity securities.” This opportunistic strategy echoes that of its parent, which specializes in leveraged buyouts. Kohlberg, Kravis Roberts is said to be bidding against The Blackstone Group in a $5 billion play for Neiman Marcus. It recently completed a $6 billion-plus acquisition of Toys ‘R’ Us.

As a REIT, KKR Financial will not be charged a federal income tax on the income it distributes to its stockholders, but it will be subject to tax on net income or capital gains not distributed to its stockholders.

As reported, KKR is said to be teaming with Bain Capital Partners in a bid for Neiman’s. Thomas H. Lee and The Blackstone Group is the other team of bidders. KKR’s current portfolio of investments include: A.T.U. Auto-Teile-Under Holding Inc.; Masonite International Inc.; Primedia Inc.; Sealy Corp.; Texas Genco; and Zumtobel AG, among others.

This story first appeared in the April 20, 2005 issue of WWD.  Subscribe Today.