KREST Q4 Redemptions Fall Below Cap for First Time in a Year as NAV Continues to Slip

KKR Real Estate Select Trust Inc., a nontraded fund registered under the Investment Company Act of 1940 and taxed as a real estate investment trust, fully satisfied redemption requests in its fourth-quarter tender offer as investor demand fell below the fund’s 5% quarterly cap for the first time in a year, even as net asset value per share continued to slide.

Shareholders tendered 2,285,571 shares in the offer, which expired Oct. 16, against the 3,116,841 shares the fund had offered to repurchase. KREST, as the fund is known, accepted all of them at $22.75 per share, its NAV as of the expiration date, for a total of about $52 million, or 3.67% of NAV. The fund did not need the provision that lets it buy back up to an additional 2% of NAV when an offer is oversubscribed.

It was the lightest demand since Q4 2025, when the fund’s tender closed below its cap with 1,751,423 shares tendered, or approximately 3.1% of NAV. In the three quarters that followed, requests ran at or above the limit. KREST prorated its Q1 2026 offer at 81% and its Q2 offer at 74%. In Q3, shareholders tendered 3,155,949 shares against a 3,116,157-share cap, and the fund used its overflow provision to fill every request. That brought Q3 repurchases to 5.06% of NAV, or about $72 million, at $22.82 per share.

The Q4 results are the first since KKR moved up part of its shareholder support commitment and added a 2% fee on shares held less than a year. On Sept. 16, KKR Alternative Assets LLC, an affiliate of the fund’s adviser, contributed approximately 1.9 million Class I shares to the fund, which canceled them. The contribution is about 25% of the roughly 7.7 million shares committed under KREST’s shareholder priority plan. KKR said it expects, but is not obligated, to make comparable contributions in each of the next three quarters, with the full commitment fulfilled by June 1, 2027.

According to the fund, the share cancellation was intended to be accretive to NAV per share. When the plan was amended, the fund estimated that the contribution would lift NAV to approximately $23.31 based on its Aug. 31 valuation. After the Sept. 16 contribution, the fund estimated NAV at approximately $23.26 per share. The Q4 tender price of $22.75 is below both estimates and below each NAV AltsWire has reported for the fund this year. NAV stood at $23.16 in February, $23.22 in May, and $23.27 in June. That leaves KREST $4.25 per share short of the $27 NAV the shareholder priority plan is designed to support. NAV slipped further to $22.71 for all share classes as of Oct. 19, according to the fund’s website.

The 2% early repurchase deduction applies only to shares purchased on or after Oct. 1, so in the Q4 offer it could have reached only shares bought between then and the offer’s Oct. 16 expiration.

In a letter to shareholders, Julia Butler, chief executive officer of the fund, said property fundamentals remain stable, with the portfolio approximately 98% leased, while higher interest rates continue to weigh on property valuations. She said KKR believes reduced construction starts across multifamily, industrial, and senior living will tighten those markets over time.

KREST’s Class I annualized net distribution rate was 5.43% as of Sept. 30, according to the fund. The fund said 100% of its 2025 distributions were classified as return of capital. KKR’s incentive fee waiver remains in effect through June 30, 2027.

KREST first limited redemptions in January 2023, when it fulfilled 62% of requests.

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