TPG flies under radar to win £450m battle for Arlington

The US property firm beat bids from Europa Capital and Fortress Investment Group, among others, to buy Arlington Properties, which owns 1.4m sq ft of office space in and around London. 

TPG Real Estate has beaten two private equity rivals to acquire business park specialist Arlington Properties for a reported £450 million ($579.6 million; €488.7 million).

Arlington’s assets comprise a portfolio of six business parks, largely located in London and the south-east of England; a number of developments under construction; and one of the largest consented land banks in the UK.

The portfolio has 57 office assets, totaling 1.4 million square feet, with around 80 tenants, including the headquarters of Centrica, Harley Davidson, Bristol-Myers Squibb and Emirates Airlines. It also has around 250 acres of developable land.

The potential sale of Arlington, which had been valued at around £1.1 billion in 2011, was first announced in November after the company’s owners, Goodman Group and Legal & General, appointed brokers Cushman & Wakefield and Strutt & Parker to sell its assets.

Europa Capital and Fortress Investment Group were reported to be the frontrunners in January after Tristan Capital, Ares, Harbert and Greenoak were understood to have withdrawn their interest. It was not until April that TPG was first reported to have an interest in Arlington.

Krysto Nikolic, partner at TPG, said the portfolio represented a “compelling value add investment opportunity.” The firm did not disclose its exact returns target for the deal, though value-add investments typically generate returns in the high teens, or whether it used balance sheet or institutional capital to fund the purchase.

TPG said its investment strategy for Arlington would include expanding the business through acquisitions, developing the landbank and asset managing the existing portfolio.

The firm added that the business would be restructured and managed as a standalone property company, owned by TPG and headed by managing director James Raven. A team of Goodman executives have been transferred to manage the portfolio.

TPG said it had targeted business parks because of the quality and location of the assets.

“This transaction highlights TPG’s ability to undertake complex corporate transactions, and we believe that the new operating structure we have implemented will allow the company to flourish as a leading UK property platform,” added Nikolic.

Despite selling a large portfolio of UK office assets, Goodman’s chief executive Greg Goodman reiterated that the firm was still committed to the UK market and had numerous projects in development, including a site for Amazon in Coventry.