The big story in private equity right now is the record cash flowing into the industry’s biggest firms such as Blackstone, Apollo and KKR, who all now have tens of billions of new investor dollars to put to work. But amid this money gush, some investors are cutting the other way and looking for niche markets where they can build large portfolios of assets before the big money inevitably arrives.
Take Los Angeles-based Kayne Anderson, best known on Wall Street for institutionalizing investments in the oil and gas sector and the associated energy infrastructure master limited partnerships that are the backbone of today’s drilling boom. During the 1990s and 2000s, while many investment firms chased mega leveraged buyouts, Kayne Anderson built a leading presence in un-sexy pipelines and storage hubs. Once niche assets on Wall Street, these businesses are now prized in today’s low-interest-rate world because of the stable cash flows they generate by transporting growing hauls of oil and gas from shale basins across North America.
Quietly, the vaunted energy investor is building a new investing niche, this time in real estate. Over the past decade, Kayne Anderson’s real estate private equity investing platform has grown from virtually nothing to $5 billion in assets. The business, Kayne Anderson Real Estate Advisors (KAREA), has built a toehold in markets like senior housing and medical office properties that are beginning to attract the world’s biggest pools of pension and sovereign wealth money, as they hunt for safe yields.
Leading Kayne Anderson’s real estate push is Al Rabil, 54, a niche-obsessed real estate investor who’s spent the past 15 years canvassing America in search of under served markets with strong demographic tailwinds.