Robert Lewin : Why don’t I start with the deployment and realization and Craig will take up on some of the private credit related questions. So Mike this quarter, we’re roughly $300 million of deployment and $300 million monetization of our balance sheet. Say, on the deployment side, it’s pretty broad-based across our platform on the monetization side, maybe a little bit heavier weighting towards real assets.
Craig Larson : And Mike, it’s Craig. Just in terms of on the bank topic. Look, I think our team remains very active as it relates to finding opportunities with the banks. You would have seen a press release in Q3 focused on the acquisition of a portfolio from a regional bank through our ABF platform, and that activity will continue. When you take a step back and look at our platform, excuse me, we’re over $80 billion of private credit AUM, $47 million in asset based finance and $36 million in direct lending. And if you think of asset-based finance for a moment, it’s a $5 trillion market opportunity, and there are real secular tailwinds at play here. And in our view, against this really enormous opportunity, you’ve got a lack of scale capital. At the same time, as you know, many traditional providers are even further retrenching. So it’s an area that I think we would highlight we just think we’re really well positioned to continue to drive real long-term growth here.
Scott Nuttall: Yes. Mike, and you asked if there’s any gaps. There’s nothing that I would point to in terms of a gap. We’ve got a big organic build opportunity here.
Operator: The next question comes from Chris Kotowski with Oppenheimer. Please proceed with your question.
Chris Kotowski: Yes. Good morning. I guess I wonder if you could spend a minute or two talking about your approach to the real estate businesses, both in the United States and globally. I mean your latest flagship fund in the United States has been mostly invested already. And on the one hand, I guess it just doesn’t feel like we are anywhere near the end of the cycle in office or in the — concerns about the impact of rising rates. But on the other hand, every commercial bank in the world is trying to reduce their exposure to real estate. So this is usually the kind of environment where private equity sponsors can thrive. So what’s your general view on real estate? Is it still time to be cautious and defensive or is this the time to lean in?
Craig Larson : Yes. Why don’t I start with the platform overall, and then I’m sure Scott will add on as it relates to opportunities and the tone of the team and the environment. Just to level set, we’re $65 billion of AUM today with a very good balance between real estate equity and real estate credit. So we have round numbers, $30 billion in equity, $35 billion in credit. We have opportunistic strategies across the U.S., Europe, Asia. In the U.S., we have a core plus vehicle that’s now expanded into Europe. We have half dozen or so credit vehicles. So it’s a global business across multiple strategies, fully integrated that can create solutions up and down the capital structure across equity and debt in the U.S., Europe and Asia.
And that’s how we’re situated against the opportunity. Now your point on the current environment is one that’s really interesting because we think in the go forward looking over the coming 12, 24 months, we’re very constructive on those opportunities. I think, as it relates to a couple of those. I think, first, look there is a wave of maturities and capital needs that are coming, and this is not U.S. office. These are assets that are in very strong performing sectors. I think excellent assets but excellent assets with very levered capital structures. And this is going to take some time to work through, but this is an example of an opportunity that we’re very actively talking about with our limited partners as we see and think through opportunities ahead in terms of our opportunistic pools of capital.
And the second I’d mention again would be real estate credit. So the dislocations that in our view, are creating really interesting opportunities. You have high base rates, spreads have widened meaningfully for new credit originations, terms have tightened. And so today’s CRE loans have lower LTVs, better interest coverage, higher interest rates with more lender-friendly covenant and structures. So if you were to look back two plus years ago, at those subordinated tranches, pricing would have moved up from the low to single mid digits two years ago to low double digits today. And again, in our view, taking less risk with more LCVs and better terms. So I think as we think of how we’re situated, we’re very constructive and think we’re in a position to be forward-leaning.
I’ll let you pick it up from there.
Scott Nuttall: Sure. Thanks for the question, Chris. Look we started our real estate platform, probably 10 to 12 years ago, somewhere in there, call it, 2011, ’12, Chris. And we’ve been building that business over a period of time where obviously, rates were dropping. We are seeing a significant move in cap rates in one direction. I think our team has been incredibly thoughtful about how they built the business. It’s been very thematically focused, perhaps our most thematic investing business across the firm. As a result, very careful about where they were deploying capital as a result. We don’t really have much U.S. office exposure. That’s just one example. But we’ve been building across opportunistic equity, to your point about the fund table, core plus real estate, and we have a very large real estate credit business.
So in terms of kind of where we stand, we’re continuing to raise capital. I think the real estate credit opportunity is showing up, to Craig’s point, before the opportunity gets really interesting. But we think that will be even more interesting with time. And so we are continuing to raise capital, deploying selectively all around the world and getting ready for things to get even more attractive as we head into the next several quarters. And one of the ways we’ve been able to grow this business is through Global Atlantic, which we expect to continue to be the case. So we’re really optimistic about what this business can be. And I think you’re right. It’s periods of time like this where you can grow significantly especially if we continue to see valuations under pressure.
Operator: Thank you. [Operator Instructions] The next question comes from the line of Brian McKenna with JMP Securities. Please proceed with your question.
Brian Mckenna: Thanks for the follow-up. Just two quick items for Rob, interest income and dividend line kicked up in the quarter. What drove this? And is the $120 million quarterly run rate level a good starting point moving forward? And how the $400 million plus of monetization slated for the fourth quarter how much of that is tied to Marshall Wace?
Robert Lewin : Yes. Great. Thanks for the question. Some of the interest in dividends is just honestly, a function of rates coming up and where beneficiaries at on our cash balances and some of our floating rate exposure on the balance sheet. As it relates to $400-plus million, I would say, call it, 80% of that is more carried interest and 20% of that would be balance sheet income and our incentive fee from Marshall Wace in the quarter.
Operator: Thank you. At this time, we’ve reached the end of our question-and-answer session. And I’ll turn the floor back to Craig Larson for closing remarks.
Craig Larson : Rob, first, thank you for your help. Thank you, everybody for your interest in KKR. We know this is a very busy earnings period for everybody. If you have any additional questions, please follow-up with us directly. Otherwise, we’ll speak with everybody in 90 days. Thanks so much.
Operator: Thank you, everyone. This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.
