Private equity firm TPG Capital has made a final offer to buy ING Real Estate Investment Management, as rivals Kohlberg Kravis & Roberts and Vornado Realty Trust pull out of the running, sources have confirmed to PERE.
Commercial property brokers Richard Ellis and Jones Lang LaSalle, as well as private equity and debt investment firm Ares Capital Management, also have submitted bids for the ING REIM platform, which was put up for sale earlier this year as part of the Dutch insurance group’s efforts to exit the property business. Spokespeople for CBRE, Jones Lang LaSalle and TPG declined to comment.
In a unexpected move, KKR dropped out of the race, alongside US REIT Vornado. KKR has been trying to hire a real estate team since late 2008 and was thought to be a strong contender for ING REIM. Spokespeople for ING and KKR were unavailable for comment at press time.
Several industry veterans voiced “some surprise” at TPG’s bid for ING REIM. The Dallas-based firm already has established its real estate credentials, with many of its property deals led by former Colony Capital co-founder and current TPG head of North America buyouts Kelvin Davies. James Gates is another TPG partner with a real estate background, having worked at Barry Sternlicht’s Starwood Capital Group between 1992 and 1995 as an executive vice president responsible for all capital raising functions.
In May, TPG was part of the Starwood-led consortium of investors that lost out on the bidding for the bankrupt hotel chain, Extended Stay. Following a tense auction, The Blackstone Group, Centerbridge Capital Partners and Paulson & Co won the deal for the 664-hotel group, bidding $3.925 billion – around $20 million more than TPG and Starwood.
Last October, however, TPG was part of Starwood’s successful bid to acquire 101 commercial construction loans from the failed Chicago bank, Corus. The consortium, which also includes Perry Capital and WLR LeFrak, paid $551 million for the loans, which had a face value of $4.45 billion.
Sources familiar with the bidding process said final bids were expected at the end of November, with a final decision due before the end of the year. One area of contention, the sources said, was the request by ING Group for any third party to buy its GP co-investments in the real estate funds.
Platform sales or management buyouts, such as Lehman Brothers Real Estate Private Equity, have seen GP co-investments remain in the hands of the parent company. In the recent sale of Citi Property Investors to Apollo Global Management, a deal was struck that saw Citigroup benefit from a pre-determined earn-out structure that would allow the bank to share in future positive performances.