TPG, DivcoWest buy bulk of REIT portfolio

A joint venture between the Texas private equity firm and the San Francisco-based real estate investment firm has acquired a portfolio of R&D properties from a liquidating REIT for nearly $800 million.

A joint venture between TPG Capital and DivcoWest has purchased a portfolio of commercial R&D properties located primarily in California’s Silicon Valley for nearly $800 million. The venture is buying the portfolio from Mission West Properties, a Cupertino, California-based REIT that is liquidating its business. 

According to a statement from Mission West, the venture purchased the properties for approximately $400 million in equity and $398 million in assumed debt and other obligations. The sale is expected to close at the end of the year. Officials at DivcoWest and TPG declined to comment.

This sale is part of Mission West’s plan to liquidate and sell off its more than 100 properties under management. In addition, the REIT has agreed that certain operating partnerships will retain their remaining assets and liabilities with an approximate net value of $525 million and non-converting limited partners will retain an ownership interest in those operating partnerships. 

This transaction marks the third investment by TPG in a REIT this year. In January, the Fort Worth, Texas-based firm agreed to acquire Flagler, a Coral Gables, Florida-based private REIT, for $1.2 billion. In June, it purchased a 43 percent stake in Parkway Properties, an Orlando-based REIT, for $200 million. 

Prior to starting up its real estate platform at the beginning of last year, TPG invested in real estate through its buyout funds, the $15 billion TPG Partners V fund and TPG Partners VI, which closed on $18.8 billion in 2008. It has yet to raise a dedicated real estate fund.

Meanwhile, DivcoWest was founded in 1993 has acquired more than 22 million square feet of real estate across the US since its inception. Nearly one year ago, the firm closed on more than $871 million in equity for its DivcoWest Fund III, the latest in a series of real estate funds focusing on investments in technology-oriented growth markets in the US such as San Francisco, Austin and Boston. Although it is unclear whether or not this recent acquisition was made on behalf of Fund III, it is in-line with the vehicle’s investment strategy.