KKR said to plan housing development in oil-rich North Dakota

KKR & Co. (KKR), the buyout firm that started a real estate unit last year, plans to invest as much as $150 million with two partners to develop housing in Williston, North Dakota, to meet demand from an influx of workers in the state’s booming oil industry, a person briefed on the plan said.

KKR’s partners in the project are Pfeffer Capital Advisers LP, formed last year by former KKR partner John Pfeffer, and CP Realty LLC, said the person, who asked not to be identified because the briefing was private. Steve Okun, a spokesman for KKR, declined to comment.

North Dakota’s economy outpaced every other U.S. state in 2011, with the fastest growth in home prices, jobs and personal income, according to Bloomberg Economic Evaluation of States, or BEES, index data. The oil boom fueling the nation’s lowest unemployment rate also has pushed rural North Dakota’s housing, electric, water, police and emergency services to breaking point.

The plans for Williston call for building a community on 164 acres (66 hectares), including as many as 810 apartments and 737 single-family homes, a park and a sports field, according to the person briefed. The development would provide housing for more than 3,000 people, the person said. Williston had a population of 16,006 in 2011, according to an estimate from the U.S. Census Bureau.

New York-based KKR and its partners plan to build apartments and get land parcels ready to sell to homebuilders. KKR would invest its own money and that of its finance unit, KKR Financial Holdings LLC (KFN), the person said.

Boom Town

The oil-rich rock layers of the Bakken formation have turned rural Williston into a boom town and helped North Dakota surpass Alaska as the U.S.’s No. 2 oil producer after Texas.

The Williston investment is the latest deal for KKR’s Ralph Rosenberg, a former Goldman Sachs Group Inc. partner who joined the firm in March 2011 as its first head of real estate. KKR has made about six real estate investments since he was hired, investing about $350 million.

The pace of KKR’s real estate deals is heightening the prospect the 36-year-old firm, led by founders Henry Kravis and George Roberts, might raise outside capital for its property unit next year. KKR is working on deals that “could easily consume another $200 million or $300 million of equity in the next quarter,” Rosenberg said in an interview.

‘Natural Evolution’

“The natural evolution of our business model should be to give our investor base access to real estate opportunities,” Rosenberg said. “That can come through a club, a large separately managed account or two separately managed accounts that work together, or a larger commingled vehicle.”

Rosenberg said KKR will make property deals in industries it knows through the roughly 80 companies the firm owns, including energy, hospitality, retail, health care and telecommunications.

KKR is among the most active investors in the energy industry. The firm has a group dedicated to energy and infrastructure deals led by Marc Lipschultz.